2021 FIRST HALF RESULTS

¹ i.e. €20.5 per share including the €0.65 dividend detached on July 6th 2021
² Variation at constant exchange rates

Antoine Frérot, Veolia’s Chairman & CEO commented:

Veolia achieved record results in the first half of 2021. All our operational and financial indicators have registered outstanding growth, both compared to 2020 and to 2019. At the beginning of the year, I had announced that Veolia’s performance in 2021 would be above 2019. With revenue up by +4.6%, EBITDA growth of +6.2% and current net income increasing by +49% compared to the 1st half of 2019, we are very much ahead of this objective and are starting the second semester at full speed, thanks to the adaptation measures put in place early on to overcome the effects of the sanitary crisis as quickly as possible These absolutely remarkable results and the much better than expected level of activity notably thanks to our innovation capabilities, allow us to raise our 2021 objectives and to now target an EBITDA of more than €4.1 billion for the full year. I am therefore very confident for the second part of the year. I am also very proud of the Group’s collective capacity to bounce back strongly, and I want to warmly thank all Veolia employees for their unfailing commitment. It is this collective strength that has enabled us over the past few years to raise Veolia’s performance ever higher. Just as Veolia is about to acquire Suez, the Group has never been in better shape. On July 29th, a new step forward was taken with the opening of our tender offer for Suez shares. By the end of the year, the operation should be finalized and we will give birth to the undisputed world champion of ecological transformation.

• Very strong growth of revenue in H1 2021 : revenue of €13 645M compared to €12 412M in H1 2020, an increase of +9.9% at current exchange rates, of +11.2% at constant exchange rates and of +10.4% at constant scope and exchange rates.

Compared to H1 2019, revenue increased by +4.6% at constant exchange rates.

In the first half of 2021, Veolia’s activity progressed significantly and continued to benefit from the adaptation measures put in place in March 2020 to face the sanitary crisis. 

At constant exchange rates, Q2 revenue growth vs. 2020 accelerated to +19.7 %, after +4.0 % in the 1st quarter, due to the lower comparison basis of Q2 2020, most penalized by the sanitary crisis.

Compared to 2019, at constant exchange rates, after +2.8% in Q1, revenue increased by +6.5% in Q2, with notably an acceleration in Global business (Hazardous waste activities, Water technology and networks), in Europe (UK, Germany) and in the US.   

Exchange rates variations unfavorably impacted revenue growth by -1.3% (-€160M). 

Scope effect was +€108M. Growth in Central and Eastern Europe (Czech Republic and Hungary mainly) and in Global Business (Osis acquisition) more than offset the divestiture of Sade Telecom and of the cleaning business in Singapore.  

Energy prices (heat and electricity) had a favorable impact on revenue of +€68M, and recycled material prices of +€206M, of which +€144M for paper and cardboard. 

Weather effect was a positive of +€83M 

The Volumes/Commerce was very positive, +€761M, or +6.1% on the Group’s revenue growth, thanks to the strong commercial momentum, the recovery of waste volumes, both hazardous waste and commercial and industrial, and the rebound of works.

Service prices continued to be well oriented, leading to a favorable impact of +€167M on the Group’s revenue, or +1.3%.

By geography and at constant exchange rates, the evolution over the 1st half is as follows

• In France, revenue grew strongly, by +14.2 % vs. H1, 2020, and by +3.1 % vs. H1, 2019, to €2 844M. Both Water and Waste activities recorded a strong growth. Water revenue increased by +6.5%, thanks to works recovery. Water works had in effect been significantly penalized in H1 2020 due to the sanitary crisis. Water volumes were up +0.6% and tariffs +0.7%. 

  Waste revenue grew sharply, by +23.5% vs. H1, 2020, including a catch-up effect as H1 2020 was penalized by the lockdown impact on commercial and industrial activities in France (mid-March to end of May 2020). Waste volumes were up +9.5% in H1 and prices up +3.6%. Waste activities also benefited from the strong increase of recycled materials prices (+8.0 % impact on H1 waste revenue in France, with average recycled cardboard prices of €144/ton in H1 2021 vs. €49/ton in H1 2020). Revenue growth was also very significant vs. H1 2019, +6.9%.
   
• Europe excluding France also exhibited strong growth, with a revenue of €5 278M, up +14.2 % vs. H1, 2020 and up +11.4 % compared to H1, 2019. This progression is mostly attributable to Central and Eastern Europe, up by +25.6 %, mainly in the Energy business, thanks to favorable weather, increased heat and electricity prices and the integration of new assets in Prague et Budapest. UK (and Ireland) grew by +6.6%: PFI facilities performed very well, showing an average availability rate of 93,1 %, C&I volumes picked up strongly and recycled materials prices increased significantly. Germany waste activity rebounded thanks to C&I volume catch up and recyclate prices. Scandinavia and the Netherlands recovered as well, thanks to good commercial performance with industrial clients and strong plastic recycling activity. Italy and Spain grew by +11.8% with new contracts and works recovery.
   
• Rest of the World revenue came out up +4.0% compared to H1 2020, to €3 310M. All geographies progressed, except Pacific, slightly down (-3.0%) due to asset divestitures in Energy. China-Hong- Kong revenue increased by +5.6% with a strong performance of all the businesses. Japan was stable due to the end of some construction contracts, but exhibited a strong commercial momentum  with the signing of many significant contracts of which the 1st potable water concession in Miyagi for a total backlog of close to €800M over 20 years. Latin America grew sharply, by +16.3%, driven by well oriented volumes and prices in water and waste. North America resumed growth, +2.2% in H1 after a decrease of 2.9% in Q1, thanks to good hazardous volumes and price increases. Africa Middle East growth accelerated in Q2 to +9.2%, after +1.6% in Q1, with good volumes throughout the entire region.
   
• Global businesses recorded a very strong rebound in the 2nd quarter, reaching a total revenue of        €2 211M in H1, up +17.5 % at constant scope. Construction activities were up +17.5 %, including +14.1% for Veolia Water Technologies and +21.7% for SADE at constant scope (restated of the divestiture of SADE Telecom). Indeed Q2 2020 was harmed by several construction works stops, in the peak of the sanitary crisis. Construction activities are also up compared to 2019, by +5.2%.  Hazardous waste continued to progress strongly, up +25.9 % vs. H1 2020 and +9.8 % vs. H1 2019. This activity continued to deliver strong growth in all our geographies which confirms the validity of our strategic choices. Industrial and energy services have recovered after the trough of H1 2020 and are up +17.8%.   

By business, at constant scope and exchange rates, the evolution over the 1st half is as follows:

Water revenue increased by +3.5%: volumes were up by 0.6% in France and stable in Central and Eastern Europe and works activity resumed in France. Water Technology and networks grew sharply, by 17.5%, thanks to commercial momentum and a favorable comparison basis. Waste revenue increased by +13.7%, including volumes up +6.3%, continued well oriented prices (up 2.6%), and the impact of higher recycled material prices (+4.4% effect). By quarter, volumes were about stable in Q1 (-0.9%), accelerated in Q2 (+14.5%), including a favorable comparison basis. The effect of higher recyclate prices was amplified in Q2 to +5.7%, after +3.2% in Q1. Energy revenue increased by 19.5% and by 10.3% at constant scope and exchange rates, with a favorable weather impact of +2.4%, and a heat and electricity prices impact of +2.7%.

• Strong growth of EBITDA to €2 081M vs. €1 599M in H1 2020, an increase of +31.4 % at constant exchange rates vs. H1 2020 and of +6.2% vs. H1 2019.

• Exchange rates variations unfavorably impacted EBITDA by -€20M (-1.3%) while scope had a positive effect of +€66M (+4.1%). 

• Solid growth of revenue vs. H1 2019 translated into a good operating leverage effect at the EBITDA level with an EBITDA margin increase of 0.3 point vs. 2019 and of 2.4 point vs. H1 2020. The strong growth of EBITDA was driven by higher volumes and activity level for +€272M (+17% impact),  by efficiency gains for €204M, ahead of the annual objective of €350M (+12.8% impact on EBITDA growth in H1), by favorable weather impact of +€28M (+1.8%), by higher recyclate and energy prices for +€50M (+3.1%) and finally by a price cost squeeze effect of -€119M (-7.4%).

• Current EBIT more than doubled to €901M vs. €438M in H1 2020. 

• Exchange rates variations weighed in for -€10M.

• Current EBIT growth of €473M at constant FX came entirely from EBITDA growth. Depreciation and amortization (including operating financial assets reimbursement) increased by €41M to €1 095M. Provisions, fair value adjustments and industrial capital gains amounted to +€10M vs. -€16M in H1 2020, but are stable compared to 2019. Provisions had temporarily increased in H1 2020 due to sanitary crisis. Current net income from joint ventures and associates progressed by €8M to reach €48M, mainly due Chinese concessions JV.  

• Current net income group share of €516M vs. €7M in H1 2020 and €352M in H1 2019. 

• Current net income group share reached €516M, thanks to:

  • Very strong increase of Current EBIT

  • Cost of financing down sharply, by €64M to -€152M, due to very favorable Euro debt refinancing (Euro bond average borrowing rate of 1.93% vs. 2.21% in H1 2020), higher cash remuneration and strictly controlled WCR throughout the semester (despite activity rebound), as well as the unwinding of a portfolio of interest rates derivatives which generated a €20M income.

  • Other financial income and expense +€58M vs. -€84M in H1 2020 include Suez dividend corresponding to our 29.9% stake for +€122M.

  • Net financial capital gains of -€5M in H1 2021 vs. 0 in H1 2020 and +€18M in H1 2019.  

  • Higher income tax expense of -€188M vs. -€64M in H1 2020 and -€121M in H1 2019. Current tax rate was 25%.

  • Non-controlling interest increased to -€98M vs. -€67M in H1 2020 and -€89M in H1 2019.  

• Net income group share was €301M, including €31M of specific COVID costs, €35M of restructuring charges and €63M of Suez acquisition costs.  

• Net financial debt of €13 767M at June 30, 2021 vs. €13 217M at December 31 , 2020.

• Net industrial capex controlled and slightly down to €834M vs. €873M in H1 2020, while maintaining growth capex.

• Strict WCR management and cash collection control over the past 3 years has led to a continuous improvement, particularly marked this 1st half, with a WCR reduction of €302M vs. H1 2020, despite the unfavorable seasonal effect.

• Net free cash flow generation therefore increased significantly to reach +€270M vs. -€515M in H1 2020.

• Net financial investments amounted to €245M and including mainly the closing of the acquisition of Osis from Suez which had been initiated prior to the launch of the offer on the entire Suez Group.

• Exchange rates variations had an unfavorable impact on net financial debt of -€145M.

• 2021 Prospects* raised (before Suez integration)

Following the excellent H1 performance, EBITDA objective for 2021 was raised. New 2021 prospects are the following

• Revenue above  2019
• More than €350M of efficiency gains : €250M recurring efficiencies and €100M of complementary savings from the Recover & Adapt plan
• EBITDA target raised from more than €4bn to more than €4.1bn, a growth >12% vs. 2020
• Net financial debt below €12bn at the end of  2021 and a leverage ratio below 3 times
• Objective to recover the pre-crisis dividend policy in  2021

* At constant forex

Tender offer on Suez Group

• On October 6th 2020, Veolia has acquired 29.9% of Suez capital from Engie in view of launching a tender offer on the whole Suez Group.

• On May 14th 2021, Veolia and Suez Boards of Directors have concluded a final combination agreement by which Veolia will launch a Tender Offer on Suez Group at €20.5 per share coupon included, in order to create the world champion of the ecological transformation

• On June 29th 2021, Suez Board of Directors has recommended the Offer of Veolia at €20.5 per share coupon included. On the same day, Meridiam, GIP and CDC/CNP consortium of investors remitted a binding offer of €10.4bn to Veolia and Suez to acquire « New Suez » assets.

• This transaction carries out a very ambitious project. By combining the very solid Suez and Veolia competencies, this transaction will significantly accelerate the development of the new entity facing growing competition, and enable the sector in France, in Europe and worldwide to tackle the environmental challenges of the 21st century.
• Veolia will retain the majority of Suez activities outside France and will significantly strengthen its footprint in Spain, the US, Latin America, Australia and the UK
• The new Group will generate a combined revenue of €37bn, with 230 000 employees
• This operation will create value for Veolia shareholders as from 2022 notably through operational and procurement synergies estimated at €500M and will increase net current income per share (including hybrid coupon and before PPA- purchase price allocation amortization) by 40% in 2024

• On July 20th, a step forward was reached. The French Stock Exchange Authority (AMF) declared Veolia’s proposed tender offer on the remaining 70.1% stake in Suez, previously filed on June 29th, compliant. 

• Tender Offer has been opened since July 29th
• Veolia’s objective is to close the operation by the end of 2021.
• The Tender Offer will be closed after EU anti-trust clearance.

Veolia group aims to be the benchmark company for ecological transformation. With nearly 179,000 employees worldwide, the Group designs and provides game-changing solutions that are both useful and practical for water, waste and energy management. Through its three complementary business activities, Veolia helps to develop access to resources, preserve available resources, and replenish them. 

In 2020, the Veolia group supplied 95 million people with drinking water and 62 million people with wastewater service, produced nearly 43 million megawatt hours of energy and treated 47 million metric tons of waste. Veolia Environnement (listed on Paris Euronext: VIE) recorded consolidated revenue of €26.010 billion in 2020. www.veolia.com

Important disclaimer

As the changes in the health crisis are difficult to estimate, we draw your attention to the “forward-looking statements” that may appear in this press release and relating to the consequences of this crisis which may affect the future performance of the Company.

Veolia Environnement is a corporation listed on the Euronext Paris. This press release contains “forward-looking statements” within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risk that changes in energy prices and taxes may reduce Veolia Environnement’s profits, the risk that governmental authorities could terminate or modify some of Veolia Environnement’s contracts, the risk that acquisitions may not provide the benefits that Veolia Environnement hopes to achieve, the risks related to customary provisions of divesture transactions, the risk that Veolia Environnement’s compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnement’s financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the other risks described in the documents Veolia Environnement has filed with the Autorité des Marchés Financiers (French securities regulator). Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward looking statements. Investors and security holders may obtain from Veolia Environnement a free copy of documents it filed (www.veolia.com) with the Autorités des Marchés Financiers.

This document contains "non‐GAAP financial measures". These "non‐GAAP financial measures" might be defined differently from similar financial measures made public by other groups and should not replace GAAP financial measures prepared pursuant to IFRS standards.

Contacts

Group Media Relations
Laurent Obadia
Edouard de la Loyère
Tél : + 33 (0)1 85 57 85 23

Investor & Analyst Relations
Ronald Wasylec - Ariane de Lamaze 
Tél. : + 33 (0)1 85 57 84 76 / 84 80