Veolia Environnement (VE) announced its fiscal 2010 financial results. The company’s 2010 operating earnings per share declined 6.4% to €1.24 from €1.29 in 2009.
Earnings per share, as per GAAP, during the year were €1.21 in 2010 versus €1.24 in 2009. The difference between GAAP and operating earnings was due to the impact of discontinued operations.
Total Revenue
In 2010, the total revenue of the company was €34.78 billion versus €33.95 billion in 2009, reflecting a growth of 2.5%.
The growth in revenue was aided by an improvement in the global economy, the increase and maintenance of recycled raw material prices and energy prices, a positive climate effect both within and outside France, as well as the benefits of successful commercial development.
Segment Results
Water: Total revenue from this segment was €12.12 billion versus €12.31 billionin 2009, down 1.6%. The decline was primarily attributable to lower works activities in the three large construction contracts, which were in Marafiq, Fujairah and Ras Laffan.
Enviornmental Services: Total revenue from this segment was €9.3 billion versus€ 8.7 billion in 2009, up 6.7%. The growth was due to good progression of certain activities in the United States, and the ramp-up and growth of integrated contracts in the United Kingdom.
Energy Services: The segment generated total revenue of €7.6 billion versus €7.04 billion in 2009, up 7.7%. The growth in this segment was attributable to steeped up works activities and a moderate effect from energy prices.
Transportation: Total revenue from this segment, at€ 5.7 billion, declined 1.6% from €5.86 billion in 2009. The decline in revenue was ascribed to non-renewal of the Stockholm, Melbourne and Bordeaux contracts.
Operational Update
Fiscal 2010 saw higher costs that were softened by a growth in revenue, thus benefiting the operating results of the company.
Operating income in 2010 was €2.1 billion versus €1.9 billion in 2009, growing 7%.
Finance costs in 2010 were €888.7 million, up by €24.6 million from 2009 levels.
Financial Update
Cash and cash equivalents of the company as of December 31, 2010 were €5.4 billion versus €5.6 billion in December 31, 2009.
Net cash from operating activities in 2010 was €3.45 billion versus €3.6 billion in 2009.
Capital expenditure in 2010 was €2.08 billion, marginally lower than the 2009 level of €2.10 billion.
Divestment and Acquisition
During the year the company continued with its planned divestment of its financial and industrial assets. The total assets divested in 2010 amounted to €1.24 billion, while acquired new assets were worth €653 million in the year, a ploy in line with its long term business strategy.
Dividend
The board of directors of the company has decided to pay dividends to shareholders, given its strong financial position. The board is expected to propose a dividend of €1.21 per share for the 2010 fiscal year, payable either in cash or in shares.
Guidance
For 2011, Veolia Environnement expects the adjusted operating income to grow in the range of 4% to 8%, excluding the impact of the combination of Veolia Transport and Transdev.
The company also expects to implement cost control measures and trim expenses by €250 million in 2011. The company wishes to divest assets worth €1.3 billion in 2011.
Veolia is focused on improving its net income over 2010 levels and generating positive cash flows after payment of dividend.
The company also provided a business outlook beyond 2011. The company forecasts adjusted operating income for the 2011–2013 period to increase in the range of 4% to 8%. The assets to be divested in this period are expected to amount to €4 billion. The company will continue with its cost saving measures and has targeted to save €300 million annually by 2013.
Our View
Veolia Environnement is bent on reducing costs in the forthcoming years, which can potentially boost margins. It would be interesting to see whether the company can execute on its promises.
Veolia Environnement retains a Zacks #3 Rank (short-term Hold rating). Veolia’s peers Connecticut Water Service Inc. (CTWS) and York Water Co. (YORW) also retain a Zacks #3 Rank (short-term Hold rating).
Based in France, Veolia Environnement is a provider of environmental management services to its worldwide consumers. It operates through four segments, which are Water, Environmental Services, Energy Services, and Transportation.
CONN WATER SVC (CTWS): Free Stock Analysis Report
VEOLIA ENVIRON (VE): Free Stock Analysis Report
YORK WATER CO (YORW): Free Stock Analysis Report
Zacks Investment Research
