Veolia Environnement Sa · EURONEXT:VIE
Veolia Environnement Sa — FY2016 Earnings Presentation
56 slides from Veolia Environnement Sa's earnings presentation, Feb 23, 2017
Slide 1: 2016 Annual Results
2016 Annual Results February 23, 2017
Slide 2: Disclaimer
Disclaimer Veolia Environnement is a corporation listed on the Euronext Paris. This document 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 performan
Slide 3: 2016 objectives achieved
2016 objectives achieved 2016 Annual Results Antoine Frérot, CEO VEOLIA 2016 ANNUAL RESULTS 3
Slide 4: 2016 objectives achieved
2016 objectives achieved Revenue nearly stable and 2016 results exceeded objectives o Revenue of €24,390M: -0.4% at constant FX o EBITDA* of €3,056M: +4.3% at constant FX o Current EBIT* of €1,384M: +8.5% at constant FX o Current net income* of €610M: +10.8% at constant FX, and +19.3% excluding FX
Slide 5: Continued ROCE improvement, to 7.2%
Continued ROCE** improvement, to 7.2% Current EBIT** after taxes (€M) Average capital employed** (€M) Post-Tax ROCE** (%) 2014 2015 2016 2014 2015 2016 2014 2015 2016 897 1,108 1,173 16,311 16,313 16,207 5.5% 6.8% 7.2% Pre-Tax ROCE Post-Tax ROCE 9,2% 8,6% 7.2% 6.8% 6,9% 6,0% 5.5% 4,9% 5.0% 4.4% 2012
Slide 6: Continued development momentum in 2016
Continued development momentum in 2016 Especially outside of Europe… …which accelerated at the end of the year… …reinforced by small and medium-sized acquisitions o Municipal 2016 Revenue o Prague left bank district heating network 55% Municipal o Pedreira landfill in Brazil 45% Industrial o I
Slide 7: 2016 Main commercial successes Municipal market
2016 Main commercial successes Municipal market Q2 Q3 Q2 Hampshire County Council, UK St Albans City & District Council, UK Hertfordshire County Council, UK Municipal collection Management of 26 Household Solid waste- circular economy Q3 London Borough of Camden, UK Duration: 8 years Waste Recycling
Slide 8: 2016 Main commercial successes Industrial market
2016 Main commercial successes Industrial market Q4 Q4 Q1 Kilpilahti Power Plant, Finland Q1 Ecomobilier, France BAE Systems, UK BMS, Europe (partnership with Neste & Borealis) Collection & sorting of Industrial waste Multi utility contract – Pharma & DBO of steam boiler: Energy – Ind. furniture was
Slide 9: Revenue growth in 2017
Revenue growth in 2017 Traditional activities give way to: o New offers Industrial pollution treatment Recycling and circular economy Energy efficiency and renewable energies o Within dynamic geographies Asia Latin America North America ~700 projects in our commercial pipeline o 46%
Slide 10: Cost savings 20% above expectations in 2016
Cost savings 20% above expectations in 2016 €245M in gross savings in 2016 2016-2018 EBITDA 2016 2016 cumulative Impact (€M) objective achievement objective Gross savings 600 200 245 5% France 31% 12% 23% Purchasing 35% Europe excluding France Rest of the Operations World 26% Global Businesses SG&A
Slide 11: 2017: a transition year
2017: a transition year Reinforcement of commercial efforts o Incremental impact on EBITDA: -€40M Impact of local political changes (example Lithuania) o Incremental impact on EBITDA: -€30M to -€50M Weaker price indexation in Europe o Incremental impact on EBITDA: -€20M to -€40M o Favorable im
Slide 12: Increase of 2016-2018 cost savings target from €600M to more than €800M
Increase of 2016-2018 cost savings target from €600M to more than €800M Initial Plan: €200M/year 20% 35% €40M €70M Purchasing Operations €90M G&A 45% Incremental Plan 2016 2017 2018 10% 20% 20% €5M 30% 30% €9M 47% €10M €30M €30M €21M €15M €35M €40M 70% 33% 40% Total: +€45M Total: +€50M Total: +€
Slide 13: Medium-term outlook
Medium-term outlook(1) 2016: Results exceeded objectives: Proposed 10% dividend increase to €0.80 per share 2017: A transition year Resumption of revenue growth Stable EBITDA, or moderate EBITDA growth Increased efforts to reduce costs: more than €250M in cost savings 2018: Continuatio
Slide 14: Annual results ending December 31, 2016
2016 Annual results Annual results ending December 31, 2016 Philippe Capron, CFO VEOLIA 2016 ANNUAL RESULTS 14
Slide 15: Changes in IFRS interpretation regarding Concessions: IFRIC 12
Changes in IFRS interpretation regarding Concessions: Application of clarifications to the IFRIC 12 interpretation as of 1/1/2015 o Under concession contracts with local authorities, infrastructure is accounted, as appropriate, as an intangible asset, a financial receivable, or a combination of the
Slide 16: Net FCF of nearly €1bn, significantly above the objective
Overall 2016 results improvement Net FCF of nearly €1bn, significantly above the objective 2015 2016 Δ constant In €M excluding excluding Δ IFRIC 12 IFRIC 12 FX Revenue 24,965 24,390 -2.3% -0.4%(1) EBITDA 2,997 3,056 +2.0% +4.3%(2) Current EBIT(3) 1,315 1,384 +5.2% +8.5% Current net income – Group s
Slide 17: Quarterly revenue trend: rebound in Q4
Quarterly revenue trend: rebound in Q4 New developments, improved construction trend and positive weather effect Δ at constant FX 1st quarter 2nd quarter 3rd quarter 4th quarter France +0.2% -0.7% -1.3% -2.1% Europe excluding France -0.9% +0.3% -0.6% +1.5% Rest of the World -2.4% +1.9% +6.3% +9.1% G
Slide 18: Revenue down 0.4% at constant FX to €24,390M
Revenue down 0.4% at constant FX to €24,390M, but up 2.0% at constant FX excluding impact of construction and energy prices Slight revenue decline in France Water: Revenue stabilized due to Lille contract; volumes -1.5% and very weak price indexation (+0.2%) REVENUE IN €M Waste: Revenue down 2
Slide 19: Breakdown of revenue growth
Breakdown of revenue growth +2.0% FX: mainly UK pound sterling, Argentine peso, Polish zloty and Chinese renminbi Construction: impact of -1.9%, including -€345M at VWT & SADE and - €80M related to the end of construction of UK incinerators Energy prices: impact of -0.5% mainly in the US and Central
Slide 20: Good resilience in Waste
Good resilience in Waste: revenue up 1.6% at constant FX and excluding construction and energy prices 2016 Raw materials volumes and prices +0.1% Volumes / activity levels +0.6% Service price increases +0.8% Other (including construction revenue) -1.5% Currency effect -3.8% Scope +0.4% France revenu
Slide 21: Strong growth in EBITDA: +4.3% at constant FX
Strong growth in EBITDA*: +4.3% at constant FX EBITDA EN M€ Significant favorable impact from cost reductions: +€245M Unfavorable FX effect of €71M 2,997 3,056 Decline in France Water: Net decline in EBITDA despite the benefit of cost reductions: volumes down by 1.5% (-€20M), margin pinching (-€
Slide 22: Breakdown of EBITDA growth: +4.3% at constant FX
Breakdown of EBITDA* growth: +4.3% at constant FX * Excluding IFRIC 12 Negative overall effect of price, net of cost inflation: mainly in France, related to weak contract price indexation Impact of French Water contract renegotiations: -€31M Volumes, commerce and scope effect of +€38M: Lower volumes
Slide 23: Good Current EBIT growth: +8.5% at constant FX
Good Current EBIT growth: +8.5% at constant FX 2015 2016 Δ at constant In €M excl. IFRIC 12 excl. IFRIC 12 FX EBITDA 2,997 3,056 +4.3% Depreciation & Amortization(1) -1,550 -1,566 Renewal expenses -278 -272 Provisions, fair value adjustments & other(2) +47 +72 of which provision reversals associated
Slide 24: Current net income up 10.8% at constant FX to €610M
Current net income up 10.8% at constant FX to €610M In €M 2015 2016 Δ at constant FX excl. IFRIC 12 excl. IFRIC 12 Current EBIT(1) 1,315 1,384 +8.5% Cost of net financial debt -446 -424 Other financial income and expense(2) +28 -30 Income tax expense -207 -211 Non-controlling interests -110 -109 Cur
Slide 25: Non current items include €163M in restructuring charges
Non current items include €163M in restructuring charges 2015 2016 excl. IFRIC 12 excl. IFRIC 12 Current net income – Group share 580 610 Non current items, net of tax Non current provisions and impairments (1) -81 -103 Restructuring charges, primarily related to departure -80 -163 plans (2) Share o
Slide 26: Net financial debt down following €156M in net financial investments
Net financial debt down at constant FX following €156M in net financial investments 1,484* 1,485* o Stable capex 267 205 Maintenance and contractual capex stable Discretionary capex (new Discretionary capex declined to €205M, related to the end of the PFI projects) construction program in the UK,
Slide 27: Record Net FCF of €970M, above €591M in dividends paid
Record Net FCF of €970M, significantly above €591M in dividends paid NET FCF BEFORE DIVESTMENTS: +€970M Leverage ratio at Dec. 31, 2016: 2.56x VEOLIA 2016 ANNUAL RESULTS 27
Slide 28: Continued Pre-tax ROCE improvement
Continued Pre-tax ROCE* improvement Average Capital Employed* (€M) Pre-tax ROCE* (%) 2014 2015 2016 2014 2015 2016 France 1,936 1,891 1,797 9.7% 10.4% 7.2% Europe excluding France 7,612 7,537 7,232 5.4% 7.1% 8.7% Rest of the World 3,910 4,005 4,311 8.1% 10.0% 9.3% Global Businesses 1,022 995 1,088 1
Slide 29: Medium-term outlook
Medium-term outlook(1) 2016: Results exceeded objectives: Proposed 10% dividend increase to €0.80 per share 2017: A transition year Resumption of revenue growth Stable EBITDA, or moderate EBITDA growth Increased efforts to reduce costs: more than €250M in cost savings 2018: Continuatio
Slide 30: Appendices
Appendices
Slide 31: Summary
Summary Currency movements Appendix 1 Changes in the IFRIC 12 interpretation on Concessions Appendix 2 Quarterly revenue by segment Appendix 3 Quarterly revenue by business Appendix 4 Revenue by business Appendix 5 Waste : Quarterly volume trends Appendix 6 Waste: Breakdown of revenue by activity Ap
Slide 32: Appendix 1: Currency movements
Appendix 1: Currency movements Main currencies 1 € = xxx foreign currency Δ 2016 vs. 2015 2015 2016 US dollar Average rate 1.110 1.107 +0.3% Closing rate 1.089 1.054 +3.2% UK pound sterling Average rate 0.726 0.819 -12.7% Closing rate 0.734 0.856 -16.7% Australian dollar Average rate 1.477 1.489 -0.
Slide 33: Income statement impacts
Appendix 2: Changes in IFRS interpretation regarding Concessions (1/5) Income statement impacts 2016 IFRIC 2016 In €M excluding 12 including IFRIC 12 IFRIC 12 • In the income statement, re- EBITDA 3,056 +202 3,258 presentations related to this clarification Depreciation & -1,394 -110 -1,504 drive an
Slide 34: Balance sheet and cash flow statement impacts
Appendix 2: Changes in IFRS interpretation regarding Concessions (2/5) Balance sheet and cash flow statement impacts • On the balance sheet, the liability related to the fixed 2016 IFRIC 2016 In €M excluding including payments is classified within concession liabilities and IFRIC 12 12 IFRIC 12 brok
Slide 35: EBITDA by segment
Appendix 2: Changes in IFRS interpretation regarding Concessions (3/5) EBITDA by segment 2015 2015 2016 2016 Variation vs. 2015 In €M excluding including excluding including including IFRIC 12 IFRIC 12 IFRIC 12 IFRIC 12 IFRIC 12 At constant FX France 816 829 751 763 -7.9% Europe excluding 1,104 1,27
Slide 36: Current EBIT by segment
Appendix 2: Changes in IFRS interpretation regarding Concessions (4/5) Current EBIT by segment 2015 2015 2016 2016 Variation vs. 2015 In €M excluding including excluding including including IFRIC 12 IFRIC 12 IFRIC 12 IFRIC 12 IFRIC 12 At constant FX France 197 201 130 133 -33.8% Europe excluding 559
Slide 37: Statement of cash flows
Appendix 2: Changes in IFRS interpretation regarding Concessions (5/5) Statement of cash flows In €M 2016 excl. IFRIC 12 2016 incl. IFRIC 12 EBITDA(1) 3,056 3,258 Net industrial investments -1,399 -1,511 WCR variation +270 +270 Dividends received(2) +93 +93 Renewal expenses -272 -272 Restructuring a
Slide 38: Appendix 3: Quarterly revenue by segment
Appendix 3: Quarterly revenue by segment 1st quarter 2nd quarter 1st half In €M Δ at Δ at Δ at 2015 2016 constant 2015 2016 constant 2015 2016 constant scope & FX scope & FX scope & FX France 1,320 1,323 -0.5% 1,374 1,365 -1.2% 2,695 2,688 -0.9% Europe excl. France 2,312 2,265 -0.7% 1,994 1,938 -1.1
Slide 39: Appendix 4: Quarterly revenue by business
Appendix 4: Quarterly revenue by business 1st quarter 2nd quarter 1st half In €M Δ at Δ at Δ at 2015 2016 constant 2015 2016 constant 2015 2016 constant scope & FX* scope & FX* scope & FX* Water 2,704 2,635 -2.1% 2,765 2,702 -0.3% 5,470 5,336 -1.2% Waste 2,079 2,014 +1.2% 2,232 2,160 -0.8% 4,311 4,1
Slide 40: Appendix 5: Revenue by business
Appendix 5: Revenue by business Revenue up 2.0% excluding construction and energy prices to €24,390M REVENUE (€M) • Water: +1.8% at constant FX excluding construction & energy prices 24,965 24,390 Stability in Operations activities: • France: Stable revenue due mainly to the Lille contract; volume
Slide 41: Appendix 6: Quarterly waste volumes
Appendix 6: Quarterly waste volumes Quarterly revenue growth at constant scope & FX +3.3% +2.5% +2.8% +3.5% +1.2% +1.3% -0.2% -0.9% -0.2% -0.8% -1.0% -0.7% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Y-Y Quarterly Volume Trends +2.8% +1.0%+0.7%+0.8
Slide 42: Appendix 7: Waste – Breakdown of revenue by activity
Appendix 7: Waste – Breakdown of revenue by activity Breakdown of Waste revenue by activity was stable between 2016 and 2015. 2016 Revenue: €8.4bn 2015 Revenue: €8.7bn 10% 11% 16% 16% Municipal collection & Street cleaning 16% Commercial & Industrial 17% collection Sorting & Recycling & MBT 21% Ener
Slide 43: Appendix 8: Waste – Revenue vs. Industrial Production
Appendix 8: Waste – Revenue vs. Industrial Production Weighted average industrial production indices for 4 key countries including SARP & SARPI : France, UK (excluding PFI), Germany, North America (excluding US Solid Waste since 2012) Sources : OECD for all countries VEOLIA 2016 ANNUAL RESULTS 43
Slide 44: Appendix 9: Waste – Evolution of raw materials prices
Appendix 9: Waste – Evolution of raw materials prices (paper, cardboard, scrap metals) Evolution of raw materials prices (€/t) VEOLIA 2016 ANNUAL RESULTS 44
Slide 45: Appendix 10: EBITDA by segment
Appendix 10: EBITDA by segment In €M 2015 2016 Δ at Δ at constant excluding excluding Δ IFRIC 12 IFRIC 12 constant FX scope & FX* France 816 751 -8.1% -8.1% -9.5% Europe excluding France 1,104 1,160 +5.0% +9.1% +8.3% Rest of the World 805 861 +7.0% +10.0% +6.4% Global Businesses 226 263 +16.4% +17.5
Slide 46: Appendix 11: Further details related to provisions
Appendix 11: Further details related to provisions In €M 2015 2016 Provisions, fair value adjustments & other 47 72 Of which Provisions for landfill site remediation +36 +41 Pension Provisions +27 +8 Provisions for Loss at Completion -2 +11 Provisions for asset impairments (current) -28 -26 Provisio
Slide 47: Appendix 12: Gross investments by segment (1/2)
Appendix 12: Gross investments* by segment (1/2) In €M Maintenance Discretionary TOTAL Industrial and contractual growth Investments capex France 328 4 332 Europe excluding France 504 74 578 Rest of the World 311 127 438 Global Businesses 114 0 114 Other 23 0 23 Total 2016 gross investments* 1,280 2
Slide 48: Appendix 12: Gross investments by segment (2/2)
Appendix 12: Gross investments* by segment (2/2) In €M TOTAL Industrial Maintenance New OFAs Growth Investments France 161 13 158 332 Europe excluding France 334 58 186 578 Rest of the World 184 36 218 438 Global Businesses 93 6 15 114 Other 23 0 0 23 Total 2016 gross investments* 795 113 577 1,485
Slide 49: Appendix 13: Statement of cash flows
Appendix 13: Statement of cash flows In €M 2015 excl. 2016 excl. 2016 including IFRIC 12 IFRIC 12 IFRIC 12 EBITDA(1) 2,997 3,056 3,258 Net industrial investments -1,379 -1,399 -1,511 WCR variation +203 +270 +270 Dividends received(2) +90 +93 +93 Renewal expenses -278 -272 -272 Restructuring and othe
Slide 50: Appendix 14: Variation of FCF 2015-2016
Appendix 14: Variation of FCF 2015-2016 WCR declined once again in 2016 VEOLIA 2016 ANNUAL RESULTS 50
Slide 51: Appendix 15: Debt management (1/2)
Appendix 15: Debt management (1/2) o Issuance in March 2016 of an OCEANE for a nominal amount of €700 million, maturing in March 2021, bearing no interest and issued at a price of 102.75% of par, corresponding to an annual gross yield to maturity of -0.54% o Issuance in September 2016 of a 1 billion
Slide 52: Appendix 15: Debt management (2/2)
Appendix 15: Debt management (2/2) Veolia Bond Maturity Schedule VEOLIA 2016 ANNUAL RESULTS 52
Slide 53: Appendix 16: Gross debt and net financial debt
Appendix 16: Gross debt and net financial debt Net financial debt down by €359M as of December 31, 2016 In €M 2016 2015 Closing net financial debt(1) 7,811 8,170 Average net financial debt (2) 8,548 8,950 13,104 12,027 RATING Closing gross debt • Moody’s: P-2/ Baa1 stable Average gross debt (3) 12
Slide 54: Appendix 17: Net liquidity
Appendix 17: Net liquidity In €M December 2015 December 2016 Veolia Syndicated credit lines 3,000.0 3,000.0 Bilateral credit lines 925.0 925.0 Lines of credit 49.3 8.2 Cash and cash equivalents 3,297.6 4,648.4 Total Veolia 7,271.9 8,581.6 Subsidiaries Cash and cash equivalents 878.7 873.0 Total Subs
Slide 55: Appendix 18: Consolidated statement of financial position
Appendix 18: Consolidated statement of financial position In €M December 31, 2015 December 31, 2016 including IFRIC 12 including IFRIC 12 Intangible assets 9,457 9,639 Property, Plant & Equipment 6,820 7,177 Other non-current assets 4,734 4,094 Operating financial assets (current and non-current) 1,
Slide 56: Contacts
Contacts Analyst & Investor Relations Ronald Wasylec Senior Vice President, Investor Relations Telephone : +33 1 85 57 84 76 Media Relations e-mail : ronald.wasylec@veolia.com Laurent Obadia Ariane de Lamaze Telephone : +33 1 85 57 89 43 Vice President, Investor Relations e-mail: laurent.obadia.@veo