2012 Annual Results

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First year of transformation ahead of objectives

2012 Annual Results Key Figures

Debt reduction target for the end of 2013 already exceeded and raised
2012 ending net financial debt of €11.3 billion
More than €3.7 billion in divestments completed in 20121
Adjusted net financial debt objective between €6 billion and €7 billion at the end of 20132
Operational improvement throughout the second half of 2012
Improvement in adjusted operating cash flow in the second half
€142 million in gross cost savings, above the 2012 objective
Positive cash flow before financial divestments and dividend payment3
Net income of €394 million

Antoine Frérot,
Chairman and CEO of Veolia Environnement:

“In 2012, Veolia achieved significant improvements, which enabled the Company to favorably alter its trajectory and accelerate the achievement of its transformation objectives. Divestments were completed under very good conditions. The Company’s net financial debt was reduced to €11.3 billion, a year in advance of our original objective. At the end of 2013, the Company’s adjusted net financial debt should reach between €6 billion and €7 billion. The implementation of the Convergence Plan contributed €142 million in gross cost savings, and after implementation costs, contributed €60 million to operating income. We have achieved a number of commercial successes in economically dynamic geographies with offerings from new business models. The progress achieved in 2012 will enable Veolia to start 2013 with a strong base, ahead of our objectives. Veolia is on the right path. We are ahead of our debt reduction targets and we are confident in the success of our strategic plan, despite an economic environment that remains uncertain. As such, Veolia expects an absolute dividend level in 2014 equal to that which will be paid in 2013.”

2012 Highlights

Implementation of the company’s transformation is proceeding faster than expected:
  • €3.7 billion in divestments were completed in 2012, while the change in accounting method for the Berlin water contract resulted in the deconsolidation of €1.4 billion in additional net financial debt, for a total of €5.1 billion in asset portfolio optimization. The restructuring of the Company is well underway.
  • Net financial debt was reduced by €3.4 billion to €11.3 billion at the end of 2012, compared to an initial target of less than €12 billion by the end of 2013, which is a year ahead of schedule.
  • A leverage ratio “Net financial debt / (operating cash flow before changes in working capital + repayments from operating financial assets)” of 3.26x vs. 3.88x at the end of 2011.
  • Positive cash generation after payment of financial expense and taxes and before net financial divestments of €89 million in 2012.
  • Cost reductions were achieved faster than expected, in particular a reduction in SG&A expense of €82 million (-2.7%). A positive contribution from the Convergence Plan was achieved in its first year due to gross cost savings of €142 million versus an estimated €100 million, and resulting in a net impact on operating income of €60 million. The objectives of the Convergence Plan are confirmed.
  • Good resilience in the Environmental Services division, with waste volumes stable compared to the prior year and resilient operating cash flow, despite a difficult economic environment.
  • Growth in adjusted operating cash flow in the third quarter, which continued in the fourth quarter.


Veolia Environnement consolidated revenue increased 1.5% at constant consolidation scope and exchange rates (+3.0% at current consolidation scope and exchange rates) to €29,439 million compared to represented €28,577 million in 2011. Water division revenue grew 1% at constant consolidation scope and
exchange rates. Environmental Services division revenue declined 1.9% at constant consolidation scope and exchange rates, mainly due to lower recycled raw material prices. However, the revenue improvement seen in the third quarter continued, with a return to organic growth during the fourth quarter of +3.0%, while volumes were stable for the full year. In the Energy Services division, revenue growth continued throughout the year, with 5.8% growth at constant consolidation scope and exchange rates, due to higher energy prices and a favorable weather effect.

Adjusted operating cash flow declined 4.6% (-6.2% at constant exchange rates) to €2,723 million, compared to the 2011 re-presented figure, due in part to the following developments:
  • In Italy, the impact in the first half of 2012 of the receivables write down and accrued other charges in Energy Services for €82 million.
  • Contractual erosion in France in the Water division and the impact of only 10 months proportional consolidation of the Berlin water contract versus 12 months proportional consolidation in 2011, partially compensated by revenue growth in Central and Eastern Europe.
  • The decline in recycled raw materials prices in the Environmental Services division.
  • A favorable impact of the reversal of operational difficulties experienced in 2011.
Adjusted operating income declined 23.4% (-24.5% at constant exchange rates) to € 1,194 million compared to the 2011 re-presented figure.

The annual contribution to the operating income of the Company’s Efficiency and Convergence Plans was €251 million, net of implementation costs, including €60 million from the Convergence Plan. SG&A costs declined by €82 million (-2.7%).

Excluding the difficulties in Dalkia Italy, adjusted operating cash flow would have declined by 3.3% at constant exchange rates and adjusted operating income would have declined by 19.2% at constant exchange rates. Excluding the impact of the change to equity method accounting for the Berlin water contractas of October 31, 2012, adjusted operating cash flow would have posted a second consecutive quarter of growth in 2012 with +2.9% growth in the fourth quarter, after +1.9% growth in the third quarter.

Operating income increased 32.1% to €1,095 million from re-presented €829 million in 2011, given a favorable base effect, with the 2011 fiscal year recording goodwill and other asset impairments in the represented amount of €470 million (vs. €86 million in goodwill and asset impairments in 2012).

Net income from discontinued operations amounted to €386 million, including €442 million in capital gains, net of tax and transaction costs, and the results from activities divested in 2012, primarily the U.K. regulated water and U.S. solid waste businesses.

Net income amounted to €394 million compared to a re-presented loss of €490 million in 2011. Adjusted net income amounted to €60 million compared to re-presented €195 million in 2011.

Cash flow before net financial divestments and dividends amounted to €89 million in 2012. Including divestments and after dividend payment Veolia generated significant positive free cash flow of €3,673 million.

Net financial debt at December 31, 2012 was €11,283 million, a significant reduction from €14,730 million as of December 31, 2011.


The Board of Directors will propose to the Annual General Shareholder Meeting to be held May 14, 2013 a dividend payment of €0.70 per share in respect of the 2012 fiscal year, payable in cash or in shares of Veolia Environnement. These new shares will be issued at a price equivalent to 90% of the average opening price on the Euronext Paris of the shares over the twenty trading days prior to the day of the Annual General Shareholders Meeting, less the amount of the dividend. The ex-dividend date (for ordinary shares only) has been set as May 20, 2013. The period during which shareholders may choose the option of the payment of dividend in cash or in shares will begin on May 20, 2013 and end June 4, 2013. The 2012 dividend will be paid, in cash or in shares, in either case from June 14, 2013.

2013 is the second year in the Company’s Transformation, which will enable the Company to expand upon the progress achieved in 2012, with major projects. Productivity improvement and management of investments should enable the Company to generate positive cash flow before net financial divestments in 2013. In addition, in January 2013, Veolia issued €1.5 billion of perpetual hybrid debt callable beginning April 2018, benefitting from favorable rates and confirming the Company’s financial strength. With the continuation of the Company’s restructuring program, and in particular the dilution of the Company’s stake in the Veolia Transdev joint venture, Veolia envisions a further significant decrease in debt, which began in 2012. The Company therefore expects to achieve adjusted net financial debt at the end of 2013 between €6 billion and €7 billion, with a leverage ratio of approximately 3x (+/-5%) in 2014. Veolia will be better able to capitalize on development opportunities in its priority growth markets given this new reduced debt level and internal cash generation potential.

Given the significant reduction in net financial debt and initial success from the company’s transformation plan, Veolia will propose a dividend of €0.70 per share in respect of the 2013 fiscal year, payable in 2014.

Objectives Confirmed

The results of the first year of the Company’s 2012-2015 Transformation Plan, enable confirmation of the objectives set during the December 6, 2011 Investor Day and revised on the date of the publication of Veolia’s first half 2012 results.

The significant improvement achieved during the second half of 2012 will be reinforced in 2013 by continuation of the Company’s transformation, supported by the appointment of a new Chief Operating Officer in December 2012.

New IFRS accounting standards related to entity consolidation (IFRS 10, IFRS 11 and IFRS 12) were adopted by the European Union on December 29, 2012. These standards require consolidation of joint ventures by the equity method. Given the Company’s stock listing in the United States, Veolia Environnement has opted to apply these standards from January 1, 2013.

Excluding debt associated with joint ventures accounted for under the equity method, Adjusted Net Financial Debt should reach between €6 billion and €7 billion by the end of 2013 due to the company’s divestment program and generation of cash, compared to Net Financial Debt of €16.5 billion at the end of 2008.
Given the application of these new IFRS standards, and the advancement of the divestment program, the Company’s objectives are revised as follows:

For the 2012-2013 period:
  • Asset divestments of €6 billion, including repayment of loans to joint ventures related to divestments.
  • To reduce net financial debt to between €8 billion and €9 billion and adjusted net financial debt to between €6 billion and €7 billion, excluding closing exchange rate impacts.
  • To reduce gross costs in 2013 by €270 million, or €170 million net of implementation costs, at the operating income level, of which approximately 20% associated with joint ventures.
  • To pay a dividend in 2013 and 2014 of €0.70 per share, in respect of the 2012 and 2013 fiscal years.
After 2013, the company aims, in a mid-cycle economic environment:
  • Organic revenue growth >3% per year.
  • Adjusted operating cash flow growth >5% per year.
  • A leverage ratio ((Adjusted net financial debt / (Operating cash flow before changes in working capital + repayments from operating financial assets) of the order of 3x, ±5%.
  • A payout ratio in line with the historic average payout ratio.
  • Gross cost reductions in 2015 of €500 million and net cost reductions of €470 million at the operating income level, of which approximately 20% associated with joint ventures.

Important Disclaimer

Veolia Environnement is a corporation listed on the NYSE and 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 risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. 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 a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.
The review of results by auditors is still in progress.
Additional information is available on the company's IR web site: