SUEZ ENVIRONNEMENT - 2012 Annual Results

PARIS, February 14, 2013 /PRNewswire/ --

- A solid performance in a challenging context in europe

- Dividend^[1] of €0.65 per share for the 2012 results

2012 results in line with objectives

• Revenues: €15,102m, + 1.8% gross, growing in all divisions
• EBITDA: €2,450m, -2.5% gross, stable at constant scope
• EBIT: €1,146m, + 10.3% gross
• Net Income Group share: €251m, affected by non-recurring charges during the first half of the year, the second semester's Net Income is €211m
• Net financial debt (NFD): down to €7,436m, with a stable Net Debt to EBITDA ratio of 3.0x
• Free Cash Flow: up +58% to €1,358m
• Final take-over of the Melbourne desalination plant on December 17th, 2012

Positive outlook for 2013^[2]

• 2013 EBITDA of ≥ €2,550m
• Stable NFD/EBITDA ratio of around 3x
• Dividend ≥ €0.65 per share for 2013^[1]

The Board of Directors, which met on February 13^th, 2013, approved the 2012 financial statements of SUEZ ENVIRONNEMENT which will be submitted for the approval of the Shareholders General Meeting on May 23^rd, 2013. The consolidated financial statements have been audited and certified by the auditors.

Commenting on these results, Jean-Louis Chaussade, CEO, stated: 

"In 2012, SUEZ ENVIRONNEMENT achieved a solid operational performance, notably in water and internationally, in a challenging economic context in Europe. These results confirm the relevance of its business model.

Throughout the year, SUEZ ENVIRONNEMENT implemented a double approach focusing on continuous performance improvement while building its future growth. Therefore, the Group continues its transition towards more new added value services in the water sector, more waste recovery, more international growth and more industrial water.

We have maintained a strong commercial dynamic and have also strengthened our competitiveness efforts through COMPASS, our performance optimization program. The combination of this cost optimization policy and satisfactory results of our International & Water Europe divisions enabled us to offset the difficulties of the Waste in Europe. These elements led to a sharp increase of the operational performance in the second semester. These actions, combined with SUEZ ENVIRONNEMENT's strong fundamentals, comfort us on the growth prospects of the Group as early as 2013, and this despite an uncertain macroeconomic environment in Europe^[2].

SUEZ ENVIRONNEMENT adapts itself, indeed, with the evolutions in water and waste markets to capture new growth opportunities. The group proceeded for changes since years, in particular in the contract models including progressive pricing or environmental performance.

SUEZ ENVIRONNEMENT looks therefore at the future with confidence and ambition."

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2012 Results  

SUEZ ENVIRONNEMENT posted solid results in a challenging economic context in Europe.

• Revenues

The Group reported revenues of €15,102m as at 31 December 2012, up +1.8% (€272m) on a gross basis compared with 31 December 2011; this growth breaks down between:

• Organic growth of 0.3%:
• Water Europe: +3.3% (+€137m)
• Waste Europe: +0.1% (+€8m)
• International: -2.4% (-€100m)
• The scope impact was -0.6% (-€83m), and related mainly to the disposals of Bristol Water in the United Kingdom and Eurawasser in Germany, which were respectively completed in late 2011 and early 2012.
• There was a favourable currency impact of +2.1% (+€306m) due primarily to the decrease of euro against the Australian dollar (+€87m), the US dollar (+€62m), the Pound Sterling (+€64m) and the Chilean peso (+€46m).

• Operating performance

The Melbourne plant successfully passed all the performance and reliability tests, and therefore obtained its final reception certificate on 17 December 2012. Versus June estimates, SUEZ ENVIRONNEMENT has released €20m of provision and accounted an additional cash out of €29m, initially scheduled in 2013.

EBITDA amounted to €2,450m in 2012, a gross variation of -2.5% (-€63m), and stable at a constant scope. The EBITDA of the Water Europe and International divisions grew by +1.0% and +3.3% respectively, on an organic basis. The Waste Europe division reported a decrease of -11.0%, due notably to the slowdown in European industrial production.

The Compass program cost reductions amounted to €150m in 2012, and came mostly from the Waste Europe division. The acceleration of this program contributed to the increase in the EBITDA margin that rose from 15.5% in the 1^st half of the year to 16.9% in the 2^nd.

The Group's EBITDA margin therefore amounted to 16.2% for the full year.

Current Operating Income amounted to €1,146m, a gross increase of +10.2% and an organic increase of +12.7%. This increase was partly due to the contribution improvement of the Melbourne plant.

Meanwhile, Income from Operational Activities decreased by €40m, as it included firstly, less gains on disposals (€69m in 2012 compared with €166m in 2011), and secondly, an impairment due to the market value of the Group's interest in ACEA (€60m).

• Net Income

Net financial income amounted to -€419m in 2012, compared with -€405m in 2011. The cost of debt reached 5.08% versus 5.19% in 2011, despite the extension of the debt's maturity to 6.5 years.

Tax amounted to -€186m in 2012 compared with -€174m in 2011. The effective tax rate increased, rising from 25.4% in 2011 to 29.3% in 2012. This increase was primarily explained by the non-deductibility of the impairment charged on the ACEA shares in 2012.

Minority interests were down €9m to -€218m.

Net Income Group share therefore amounted to €251m.

• Free Cash Flow and Balance Sheet

SUEZ ENVIRONNEMENT continued to pursue a policy of cash generation and selective investments during the year.

Free Cash Flow was up sharply to €1,358m. It benefited from a reduction in the working capital requirement, which was primarily due to a €317m deconsolidating securitisation programme. Excluding this impact, Free Cash Flow would have amounted to €1,041m compared with €860m in 2011.  

Net investments amounted to €1,177m, in line with the €1.2 billion envelop planned for 2012. SUEZ ENVIRONNEMENT gave priority, in 2012, to the development of its international activities and the construction of waste recovery infrastructures in Europe.

SUEZENVIRONNEMENT maintained the strong profile of its balance sheet. Net financial debt decreased to €7,436m compared with €7,557m^[3] as at the end of December 2011. The net financial debt/EBITDA ratio remained unchanged during the financial year and amounted to 3.0x. In December 2012, Moody's, the financial rating agency, reiterated the A3, stable outlook rating assigned to the Group.

The Group's ROCE was 6.9% for a weighted average cost of capital of 6.6%.

• Dividend

As a result of these solid performances and because of its confidence in its future outlook, SUEZ ENVIRONNEMENT will propose a dividend on 2012 results of 0.65 euros per share, paid in cash, at the General Meeting of Shareholders on 23 May 2013.

• Governance

The shareholder agreement expiring on 22/07/2013 has not be renewed; the governance of
SUEZ ENVIRONEMENT will be adapted accordingly. SUEZ ENVIRONEMENT and GDF SUEZ have already signed a cooperation framework agreement aiming to continue their industrial and commercial cooperation. Nonetheless, GDF SUEZ has indicated that they will remain a strategic long term partner and the reference shareholder of SUEZ ENVIRONNEMENT.

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2012 Highlights

SUEZ ENVIRONNEMENT pursued a dual approach in 2012, which consisted, on one hand, to reinforce its positions in its traditional businesses and abroad, and on the other hand, to extend the scope of its activities in water and waste towards four strategic priorities.

Strengthening the business Base in water and waste

SUEZ ENVIRONNEMENT pursued in 2012 its growth strategy of its positions, from areas where the Group is already established and where the growth in its businesses is the most significant.

In water in Europe, the Group was able to continue to rely on strong commercial activity in France and Spain, and to benefit from price increases and from the development of its new businesses. In France, Lyonnaise des Eaux successfully renewed almost all of its contracts, like in Bordeaux, while the term of AGBAR's contracts in Spain remained long, with an average of 19 years.

In Waste in Europe, despite the challenging economic context, SUEZ ENVIRONNEMENT was able to take advantage of its positioning on the full waste value chain, and specifically on the recovery market, where volumes increased by over 3% during the year.  The Group is benefiting from the development of recovery units, which has been on-going since several years.

In the International division, the factoring of the water and waste sector challenges, the infrastructure needs, and the adoption of demanding environmental standards in many countries, all amount to opportunities for growth. SUEZ ENVIRONNEMENT now generates 31% of its revenues outside Europe, compared with 29% in 2011, which confirms the progression engaged since several years.

Adapting its businesses permanently in order to make our clients leaders of environmental performance

Against the backdrop of an economic downturn and the increasing scarcity of resources, SUEZ ENVIRONNEMENT'S traditional markets have changed. Its businesses have become more complex, and customers' expectations are increasingly focused on technology and service optimisation, coupled with increasing demand for performance-based contacts. After the "Contract for Water Health", original value-based model, Lyonnaise des Eaux was once again a pioneer in 2012, by offering in Dunkerque a progressive pricing contract with an environmental component. Meanwhile, AGBAR has made its new offers a strategic priority by setting up Aqualogy in 2011, a division dedicated to new businesses in the water sector.

To make its customers leaders in environmental performance, SUEZ ENVIRONNEMENT is pursuing an ambitious research and innovation policy, and is offering technological solutions for managing and treating waste, protecting water resources, and reducing customers' environmental footprint.  
Blue Orange, the SUEZ ENVIRONNEMENT investment fund, therefore supported a start-up this year, in order to develop a solution that enables to monitor the fill-rate of waste containers, and to optimise their management and collection by waste collection services. In 2012, SUEZ ENVIRONNEMENT research centres' expertise in terms of micropollutants allowed Lyonnaise des Eaux to quickly propose a solution for the detection and treatment of perchlorates in Bordeaux and Lille.

Four strategic priorities for conquering new growth territories  

In 2012, SUEZ ENVIRONNEMENT prioritised four major strategic priorities upon which the Group firmly established a position.

Continuing to develop smart water services is one of the Group's strategic priorities, and it has developed a range of higher value-added services, by offering its customers solutions for preserving water resources, and for the predictive and dynamic management of rain water, as well as services to managers of real estate complexes, farmers and individuals. In particular, SUEZ ENVIRONNEMENT is pursuing the development of its remote metering offer with 1.5 million smart meters already sold.

SUEZ ENVIRONNEMENT has also continued to develop its waste activities towards recovery businesses, while maintaining a strong presence in traditional elimination and collection activities. SUEZ ENVIRONNEMENT has achieved a ratio of 1.4 tonnes of recovered waste for 1 tonne of eliminated waste, in line with its target of 2 tonnes recovered for every tonne eliminated by 2016.

Internationally, SUEZ ENVIRONNEMENT has established operations in new high-growth territories via selective investments and the development of new contract models. In fact, the Group has been awarded an operation and maintenance contract in New Delhi to improve the water supply service in the Malviya Nagar District, as well as a Public Private Partnership contract for the construction and operation of an energy recovery plant in Poznan, Poland.

Finally, to meet the challenges of the industrial water sector, SUEZ ENVIRONNEMENT has created a new dedicated entity, Degrémont Industry, which signed contracts in 2012 with ENI in Italy and BP in the Netherlands. On this market, SUEZ ENVIRONNEMENT is targeting an average annual growth of 10% by 2016, thanks to the development of new service offers that primarily focus on engineering, equipment, operation and maintenance. In Brazil, the Group is already one of Petrobras' major partners for the treatment of processing and industrial wastewater at several of its refineries.

Performance by division

Water Europe

                                           Gross   Organic
                                                               Scope
    in EURm        31/12/2011 31/12/2012  change    change    change
    Revenues         4,206      4,325      +2.8%    +3.3%      -1.6%
    EBITDA           1,212      1,183      -2.5%    +1.0%      -5.7%

                                           Gross   Organic
                                                               Scope
    in EURm        31/12/2011 31/12/2012  change    change    change
    Revenues         6,417      6,542      +2.0%    +0.1%      +0.8%
    EBITDA[4]          886        804      -9.2%   -11.0%      +1.0%

                                           Gross   Organic
                                                               Scope
    in EURm        31/12/2011 31/12/2012  change    change    change
    Revenues         4,197      4,220      +0.5%    -2.4%      -1.6%
    EBITDA             471        504      +7.1%    +3.3%      -0.5%

SOURCE SUEZ ENVIRONNEMENT