Veolia Cuts Loss, Ups Sales in 1H12 (CTWS) (VE) (WTR)

Zacks

Veolia Environnement (VE) announced its financial results for the first half of 2012. The company’s operating loss per share in the first half of 2012 was €0.18 (23 cents), narrower than a loss of €1.11 ($1.40) incurred in the first half of 2011.

Total Revenue

In the first half of 2012, the total revenue of the company was €14.78 billion ($18.59 billion) versus €14.30 billion ($17.98 billion) in the first half of 2011, reflecting growth of 3.4%.

The top-line growth was aided by positive contributions from its Water and Energy Services segments, while lower contribution from Environmental Services marginally dragged down results.

Segment Results

Water:Total revenue from this segment in the first half of 2012 was €6.09 billion ($7.65 billion) versus €5.92 billion ($7.44 billion) in the first half of 2011, up 2.9%. The growth was attributable to healthy performance in Europe and Asia.

Enviornmental Services:Total revenue from this segment in the first half of 2012 was €4.48 billion ($5.63 billion) versus €4.6 billion ($5.78 billion) in first half of 2011, down 1.6%. The marginal dip in the revenue was due to the challenging macroeconomic environment.

Energy Services:The segment generated total revenue in the first half of 2012 of €3.9 billion ($4.9 billion) versus €3.6 billion ($4.52 billion) in the first half of 2011, up by 9.0%. The growth in this segment was attributable to higher energy prices.

Operational Update

Selling, general and administrative expenses (SG&A) decreased 0.6% to €1.79 billion ($2.25 billion). The marginal decline is an effect of the cost reduction initiatives undertaken by the company.

Adjusted operating income in the first half of 2012 was €523.1 million ($657.9 million) versus €179.9 million ($226 million) in the first half of in 2011.

Finance cost during the first half of 2012 decreased to €397.2 million ($499.5 million) from €405.3 million ($509.7 million) in the first half of in 2011

Financial Update

Cash and cash equivalents of the company as of June 30, 2012 were € 4.5 billion ($5.5 billion) versus € 5.7 billion ($7.4 billion) as of December 31, 2011.

Net cash from operating activities in the first half of 2012 was € 820 million ($1.03 billion) versus € 864 million ($1.09 billion) in the first half of 2011.

Net financial debt of the company as of June 30, 2012 was €14.73 billion, unchanged from the 2011 year-end level.

Guidance

Veolia Environnement provided a combined outlook for 2012 and 2013. The company has decided to sell assets worth €5 billion and bring the net financial debt level to €12 billion within the next two financial years.

The company also provided a business outlook beyond 2013. The company forecasts organic revenue growth of 3% per year from 2013, while adjusted operating cash flow is expected to be over 5% per annum. The company has also taken the initiative to reduce costs and aims for a gross reduction of €500 million in 2015.

Zacks Rank

Veolia Environnement retains a Zacks #4 Rank, which translates into a short-term Sell rating. Veolia’s peers Connecticut Water Service Inc. (CTWS) and Aqua America, Inc. (WTR) currently retain a Zacks #2 Rank, which translates into a short-term Buy rating.

Based in France, Veolia Environnement is a provider of environmental management services to its worldwide consumers. It operates through three segments, which are Water, Environmental Services, and Energy Services.

CONN WATER SVC (CTWS): Free Stock Analysis Report

VEOLIA ENVIRON (VE): Free Stock Analysis Report

AQUA AMER INC (WTR): Free Stock Analysis Report

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