SUEZ ENVIRONNEMENT (EPA:SEV) A SOLID FIRST-QUARTER 2019 - DEFINITIVE RESOLUTION OF ARBITRATION WITH ARGENTINA ON BUENOS AIRES

Transparency directive : regulatory news

26/04/2019 07:30

press release

Paris, 04/26/2019 - 7:30 am

                           A SOLID FIRST-QUARTER 2019
      DEFINITIVE RESOLUTION OF ARBITRATION WITH ARGENTINA ON BUENOS AIRES

- Brisk business activity: organic revenue growth of 3.7% to EUR4,210m
- Strong sales momentum across all divisions
- EBIT up 3.3% in organic terms to EUR293m, in line with the expected
  trajectory
- 2019 outlook confirmed

                                                                    Change at
                     March 31,  March 31,  Gross   Organic           constant
In millions of euros  2018(1)    2019(2)   change  change  FX change   FX(3)

Revenue                4,055      4,210     +3.8%   +3.7%    +0.9%     +3.0%
EBITDA                   633        709    +12.1%   -0.8%    +0.6%     -0.5%
EBITDA / Revenue       15.6%      16.9%
EBIT                     278        293     +5.3%   +3.3%    +0.3%     +3.9%
EBIT / Revenue          6.9%       7.0%

In millions of euros  Dec 31, 2018   Mar. 31, 2019   Mar. 31, 2019   Change
                                      ex. IFRS 16                  ex. IFRS 16

Net debt                 8,954           9,031          10,367       +0.9%
Net debt / EBITDA        3.23x           3.26x           3.37x

* SUEZ reported revenue of EUR4,210m in first-quarter 2019, up 3.7% in organic
terms. Group growth continues to be driven by increased business activity for
the Water Technologies and Solutions (WTS) and International divisions, which
posted organic revenue growth of 8.5% and 4.5%, respectively. In a favorable
tariff environment, the Recycling & Recovery Europe division posted solid
organic revenue growth of 4.7%. Volumes treated decreased slightly, the result
of continued greater contract selectivity as to paper and certain plastics.
Waste volumes in Europe are nevertheless expected to rise 1.5% in 2019. Water
Europe business was stable as expected.

* EBIT stood at EUR293m at March 31, 2019, up 3.3% in organic terms.

* On a like-for-like accounting basis, debt remained practically stable from
December 31st at EUR9,031m compared with EUR8,954m (+0.9%), and the debt ratio
came out at 3.26x EBITDA on a 12-month rolling basis. This stability factors in
the following three key items: seasonal growth in the WCR for EUR337m, an
unfavorable currency effect for EUR124m and net proceeds from the disposal of a
20% stake in SUEZ Water Resources Inc. (USA) for EUR524m.

(1) Figures at end-March 2018 include the impact of the allocation of the
acquisition price of GE Water, for -EUR3m, -EUR2m and -EUR10m on revenue,
EBITDA and EBIT, respectively.
(2) Data at end-March 2019 include the impact of the first application of IFRS
16, for +EUR76m and +EUR3m on EBITDA and EBIT, respectively.
(3) Change at constant FX in this press release exclude the impact of the
initial application of IFRS 16

* The Argentine government and SUEZ have concluded and implemented a
transactional settlement agreement on Aguas Argentinas. For the SUEZ group, the
cash amount received in April is EUR220m.

Commenting on the first-quarter 2019 results, Chief Executive Officer
Jean-Louis Chaussade said: "With organic revenue growth of 3.7% and organic
EBIT growth of 3.3% in the first quarter, we are off to a strong start in 2019.
At each division, the strong mobilization of the teams is producing numerous
commercial successes and bolstering business activity. For example, we were
appointed preferred bidder by the City of Manchester for the treatment of waste
of 2.3 million inhabitants, or one million tons of waste a year. In China, SUEZ
has won three contracts in water management and recovery for a total of nearly
EUR250m. In addition, I am delighted with the definitive resolution of
arbitration with the Argentinian government in respect of the Buenos Aires
water and sanitation concession.
Overall, the performance achieved in the first quarter is in line with our
forecast trajectory and we are confirming our guidance for 2019."

                      BREAKDOWN OF ACTIVITY, END-MARCH 2019

                                                                     Change at
Revenue              March 31,  March 31,  Gross   Organic           constant
In millions of euros  2018(4)     2019     change  change  FX change   FX(3)

TOTAL                 4,055      4,210      +3.8%   +3.7%    +0.9%     +3.0%
O/w:
Water Europe          1,115      1,092      -2.1%   -0.4%    -0.4%     -1.6%
Recycling &
recovery Europe       1,537      1,588      +3.3%   +4.7%    -0.2%     +3.5%
International           882        945      +7.1%   +4.5%    +2.6%     +4.5%
Water
technologies &
solutions(4)            493        556     +12.7%   +8.5%    +4.0%     +8.6%
Others                   27         29      +8.2%   +8.2%      -       +8.2%

The gross revenue change of +3.8% (+EUR156m) versus March 31, 2018 breaks down
as follows:

* Organic change of +3.7% (+EUR151m):
  - Water Europe revenue was down slightly by -0.4% (-EUR5m). More advantageous
    tariffs in France offset in part the less favorable commercial balance
    over the period. The change in water volumes sold to Chile was impacted by
    an unfavorable base effect owing to an exceptionally warm and dry
    first-quarter 2018.
  - Recycling & recovery Europe revenue increased 4.7% (+EUR72m), notably owing
    to the increase in tariffs on services for industrial clients.
  - The international division posted a 4.5% increase in revenue (+EUR40m)
    through dynamic business activity in almost all the regions.
  - WTS continues to generate solid organic growth, up 8.5% (+EUR42m), driven
    by Engineered Systems activity.

* Currency effect of 0.9% (+EUR35m), resulting primarily from the appreciation
of the US dollar (+EUR35m) and, to a lesser extent, the pound sterling
(+EUR3m), while the Australian dollar and the Chilean peso both fell (by EUR5m)
against the euro.

* Scope effect of -0.8% (-EUR31m), stemming in particular from the 2018
disposal of a pallet recycling and medical waste collection activity in
France.

(4) Figures at end-March 2018 include the impact of the allocation of the
acquisition price of GE Water for -EUR3m on WTS and Group total revenue

EBITDA totaled EUR709m, down 0.8% on an organic basis, and EBIT EUR293m, up
3.3% on an organic basis. They include the exceptional bonus for the lowest
wages in France, for EUR7m. The technical effects resulting from the initial
application of IFRS 16 amounted to EUR76m on EBITDA and EUR3m on EBIT.

                        PERFORMANCE BY DIVISION

WATER EUROPE

                                                                     Change at
                     March 31,  March 31,  Gross   Organic           constant
In EURm                2018       2019     change  change  FX change    FX

Revenue               1,115      1,092     -2.1%    -0.4%    -0.4%    -1.6%

* Revenue in France was down 4.4% (-EUR23m) on an organic basis.
The increase in water volumes sold (up 1.6%) owing to more favorable weather
conditions this winter and tariff increases (also up 1.6%) partly offset the
effect of the end of the contracts in Bordeaux (January 2019) and Valenton
(April 2018).

* Revenue in Spain increased 0.7% (+EUR3m) on an organic basis.
As in France, water volumes sold benefited from favorable weather, rising 0.9%.
Tariffs continued to be impacted by the 1.65% decline implemented in May 2018,
in Barcelona, and by the deferment on tariff increases on the rest of the
contracts owing to upcoming elections in the second quarter. As a result,
tariffs fell 1.1%. There will be no tariff change in Barcelona in 2019.

* Revenue in Latin America grew 6.5% (+EUR16m) on an organic basis.
The Business Unit benefited from tariff increases in Chile, up 2.8% for the
period. Water volumes sold rose slightly, by 0.5%, owing to an unfavorable base
effect, with the summer of 2018 in Chile (first-quarter 2018) proving
particularly warm and dry. The strong organic growth in Latin America can also
be attributed to considerable momentum in construction, notably in Salvador and
Panama, and to the development of our activity relative to the optimization and
efficiency of the water distribution networks in Brazil.

* EBIT was down on an organic basis due to the tariff decrease in Barcelona and
the phasing of the commercial balance in France.

RECYCLING & RECOVERY EUROPE

                                                                     Change at
                     March 31,  March 31,  Gross   Organic           constant
In EURm                2018       2019     change  change  FX change    FX

Revenue               1,537      1,588      +3.3%   +4.7%    -0.2%     +3.5%

Performance in the Recycling & Recovery Europe division was driven mainly by
increases in service tariffs across all business segments, notably with
industrial clients. Treated volumes fell slightly, by 0.8%, a result of the
Group's stated aim to reduce its exposure to the sorting of paper and certain
plastics given the particularly low price levels of these recycled materials.
Treated volumes are nevertheless expected to rise 1.5% for the year as a whole.
In a further noteworthy development, average electricity sale tariffs increased
in 2019 across all regions.

* Revenue in the Industrial Waste Specialties segment increased by a full 18.8%
(EUR20m) on an organic basis.
The segment was bolstered in particular by robust momentum in soil remediation,
and by tariff increases for the Chemicals business in Europe.

* Revenue in the Benelux/Germany region rose 8.2% (EUR30m) on an organic
basis.
The services activities benefited from major tariff increases, particularly in
the industrial and commercial segment. We note the continued solid growth of
Belland Vision (licensing packaging) in Germany. Waste volumes treated fell
slightly in the region, notably in Belgium and the Netherlands.

* The United Kingdom/Scandinavia region posted organic growth of 4.6%
(EUR12m).
The increase mainly resulted from tariff increases in the services business,
both municipal and industrial. Volumes remained trended positively, notably in
energy recovery in the UK and the industrial and commercial sector in Sweden.
The region also benefited from substantial momentum in construction, notably at
the Surrey site.

* Revenue in France was up 1.2% (EUR10m) on an organic basis.
As in other countries, growth benefitted from tariff increases in the services
business. In addition, sorted volumes were limited by the voluntary reduction
of exposure to the price of paper/cardboard and certain plastics.

* Excluding the one-off impact of the payment this quarter of an exceptional
bonus for the lowest wages in France, and despite a significant increase in oil
prices since the start of the year, the division posted a slight organic
increase in EBIT.

INTERNATIONAL
                                                                     Change at
                     March 31,  March 31,  Gross   Organic           constant
In EURm                2018       2019     change  change  FX change    FX

Revenue                 882        945     +7.1%    +4.5%    +2.6%     +4.5%

* Asia posted organic growth of 31.0% (EUR27m), with positive contributions
from water and waste activities. The region's organic performance was also
positively impacted by the takeover of the water assets Shanghai Chemical
Industrial Park (SCIP) as part of the Group's determination to boost its
presence in industrial parks in China.

* Australia generated organic growth of 5.6% (EUR14m), primarily due to
increased volumes of waste treated and the start-up of new collection
contracts.

* Revenue in the Italy/Central & Eastern Europe region was up 1.7% (EUR2m) on
an organic basis. Business activity continued to trend positively in all the
countries. Organic growth was more modest owing to a high comparison basis,
following a particularly vigorous 2018 period.

* Revenue in North America was up slightly, by 0.4% (EUR1m), on an organic
basis. Regulated water activities posted volumes up very slightly (+0.6%).

* Revenue in the Africa/Middle East/India region was down 1.5% (EUR4m) on an
organic basis. Business momentum remains strong in the region, especially in
India, with the start-up of the Coimbatore and Davengere contracts. However,
organic growth slowed following the end of the Barka construction contract in
Oman in June 2018.

* Considering the phasing of contracts, the construction business backlog stood
at EUR0.6bn for this division, down 6.4% versus end-2018.

* The division posted considerable organic EBIT growth, with positive
contributions from all geographical segments.

WATER TECHNOLOGIES & SOLUTIONS

                                                                     Change at
                     March 31,  March 31,  Gross   Organic           constant
In EURm              2018(5)      2019     change  change  FX change    FX

Revenue                493         556     +12.7%   +8.5%    +4.0%     +8.6%

WTS revenue stood at EUR556m, an organic increase of 8.5% (EUR42m). The
Engineered Systems business achieved organic growth of 11%, driven by solid
growth in product sales, notably analysis and purification tools, and by
promising momentum in service activities. The Chemical Monitoring Solutions
business posted organic growth of 3%, benefiting in particular from tariff
increases in Asia and Latin America.

WTS EBIT is not significant in the first quarter. Excluding non-recurring items
in first-quarter 2018, it grew organically.

                                OUTLOOK

In an environment that has become more volatile, in which the services offered
by SUEZ to its customers have become increasingly necessary, the Group is fully
focused on delivering a significant improvement in its results.

Maintaining a selective investment policy, achieving at least EUR200m in cost
savings, and unlocking WTS integration synergies will help SUEZ to meet the
targets it has set and confirmed for 2019(6):
  - Organic revenue growth of 2% to 3%
  - Organic EBIT growth of 4% to 5%
  - FCF growth of around 7% to 8%
  - Leverage ratio (Net debt/EBITDA) of c.3x in 2019(7)
  - Continued ambition to lower debt ratio in 2020

On this basis, and in accordance with the Board of Directors, the Group intends
to propose a dividend of EUR0.65 per share in respect of 2019 at the Annual
General Meeting in May 2020.

                                GOVERNANCE

The Board of Directors decided unanimously that subject to her reappointment at
the May 14th AGM Mrs Anne Lauvergeon will head the ESG, Innovation, Ethic,
Sustainable Water and Planet committee, and that Mrs Delphine Ernotte-Cunci
will head the Audit and Financial Statements Committee.

                  FINANCIAL CALENDAR (SUBJECT TO CHANGE)

* May 14, 2019: Annual General Meeting
* May 20, 2019: Detachment of the coupon(8)
* May 22, 2019: Payment of the dividend(8)
* July 26, 2019: Publication of first-half 2019 results (conference call)
* October 30, 2019: Publication of nine-month revenue 2019 (conference call)

(5) Revenue at end-March 2018 include the impact of the allocation of the
acquisition price of GE Water for -EUR3m
(6) Assuming water volumes sold remain in line with historical trends, volumes
of waste treated rise by +1.5% in Europe and raw material prices are stable
relative to December 31,2018.
(7) Excluding impact of application of IFRS 16 accounting standard
(8) Subject to approval by the 2019 Annual General Meeting

                        APPENDIX: REVENUE BY REGION

                    Q1 2018              in %
In EURm            after PPA  Q1 2019  of Total  Variation

FRANCE               1,257     1,214     28.8%     (3.4)%
Spain                  393       399      9.5%      +1.5%
UK                     232       242      5.8%      +4.7%
Germany                151       162      3.9%      +7.5%
Benelux                283       320      7.6%     +13.3%
Others Europe          250       265      6.3%      +6.1%
EUROPE
(excluding France)   1,308     1,389     33.0%      +6.2%
North America          449       474     11.3%      +5.6%
South America          290       312      7.4%      +7.5%
Oceania                276       284      6.7%      +3.1%
Asia                   189       253      6.0%     +33.8%
Africa                 212       208      4.9%     (2.0)%
Others International    75        76      1.8%      +0.4%
INTERNATIONAL
(excluding Europe)   1,491     1,607     38.2%      +7.8%
TOTAL REVENUE        4,055     4,210    100.0%      +3.8%

Disclaimer

This press release contains unaudited financial data. The aggregates presented
are those normally used and communicated on markets by SUEZ.
These statements include financial projections, synergies, estimates and their
underlying assumptions, statements regarding plans, expectations and objectives
with respect to future operations, products and services, and statements
regarding future performance. Such statements do not constitute forecasts
regarding SUEZ's results or any other performance indicator, but rather trends
or targets, as the case may be. No guarantee can be given as to the achievement
of such forward-looking statements and information. Investors and holders of
SUEZ securities are cautioned that forward-looking information and statements
are subject to various risks and uncertainties, which are difficult to predict
and generally beyond the control of SUEZ, and that such risks and uncertainties
may entail results and developments that differ materially from those stated or
implied in forward-looking information and statements. These risks and
uncertainties include, but are not limited to, those discussed or identified in
the public documents filed with the Autorité des Marchés Financiers (AMF),
the French Financial Markets Authority. Investors and holders of SUEZ
securities should consider that the occurrence of some or all of these risks
may have a material adverse effect on SUEZ. SUEZ is under no obligation and
does not undertake to provide updates of these forward-looking statements and
information to reflect events that occur or circumstances that arise after the
date of this document. More comprehensive information about SUEZ may be
obtained on its Internet website (www.suez.com). This document does not
constitute an offer to sell, or a solicitation of an offer to buy SUEZ
securities in any jurisdiction.

About SUEZ
With 90 000 people on the five continents, SUEZ is a world leader in smart and
sustainable resource management. We provide water and waste management
solutions that enable cities and industries to optimize their resource
management and strengthen their environmental and economic performances, in
line with regulatory standards. To meet increasing demands to overcome resource
quality and scarcity challenges, SUEZ is fully engaged in the resource
revolution. With the full potential of digital technologies and innovative
solutions, the Group recovers 17 million tons of waste a year, produces 3.9
million tons of secondary raw materials and 7 TWh of local renewable energy. It
also secures water resources, delivering wastewater treatment services to 58
million people and reusing 882 million m3 of wastewater. SUEZ generated total
revenues of EUR17.3 billion in 2018.

SUEZ contacts
Press                               Analysts / Investors
Isabelle Herrier Naufle             Mathilde Rodié / Cécile Combeau
isabelle.herrier.naufle@suez.com    +33 (0)1 58 81 24 05
+33 (0) 1 58 81 55 62

Ophélie Godard
ophelie.godard@suez.com
+33 (0) 1 58 81 54 73

        Find out more about SUEZ Group on the website & on social media
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SUEZ ENVIRONNEMENT (EPA:SEV) A SOLID FIRST-QUARTER 2019 - DEFINITIVE RESOLUTION OF ARBITRATION WITH ARGENTINA ON BUENOS AIRES

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