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2004, First Half Results
 

2004, First Half Results

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2004-09-17

2004-09-17

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    2004, First Half Results 2004, First Half Results Presentation Transcript

    • H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 1
    • DisclaimerVeolia Environnement is a corporation listed on the NYSE and Euronext Paris. This documentcontains "forward-looking statements" within the meaning of the provisions of the U.S. PrivateSecurities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees offuture performance. Actual results may differ materially from the forward-looking statements as aresult of a number of risks and uncertainties, many of which are outside our control, including butnot limited to: the risk of suffering reduced profits or losses as a result of intense competition, therisks associated with conducting business in some count ries outside of Western Europe, the UnitedStates and Canada, the risk that changes in energy prices and taxes may reduce VeoliaEnvironnements profits, the risk that we may make investments in projects without being able toobtain the required approvals for the project, the risk that governmental authorities could terminateor modify some of Veolia Environnements contracts, the risk that our long-term contracts may limitour capacity to quickly and effectively react to general economic changes affecting our performanceunder those contracts, the risk that Veolia Environnements compliance with environmental lawsmay become more costly in the future, the risk that currency exchange rate fluctuations maynegatively affect Veolia Environnements financial results and the price of its shares, the risk thatVeolia Environnement may incur environmental liability in connection with its past, present andfuture operations, as well as the risks described in the documents Veolia Environnement has filedwith the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nordoes 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 Environnementwith the U.S. Securities and Exchange Commission from Veolia Environnement.This document contains "non-GAAP financial measures" within the meaning of Regulation Gadopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes-Oxley Act of2002. These "non-GAAP financial measures" are being communicated and made public inaccordance with the exemption provided by Rule 100(c) of Regulation G.H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 2
    • First half 2004 highlights:Continued earnings improvement Internal growth Ramp-up in contracts signed over past few years Impact of Veolia 2005 efficiency plan > €45m EBIT: €975m, up 15% at constant exchange rates under the new consolidation scope (1) Recurring net income: €205m, up 54%(1) Excluding FCC and US assets sold in 2003 or in the process of being sold: Surface Preparation, Ev erpure, Culligan, US Filiter equipment and short-ter m services bus inesses.H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 3
    • Execution of disposal program and debtreduction Disposal of US non-core assets for over $2 bn, in line with the stated targets (USF equipment and short-term services in Q3 and Culligan in Q4) Sale of stake in B-1998 SL, the holding company controlling FCC: debt reduction of over €1.1 bn expected in the second half of the yearH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 4
    • Execution of disposal program and debt reduction In €m 13 500 Change in net debt 13 000 12 500 12 000 11 500 13 066 Target €10.5/11bn (*) 11 000 11 804 10 500 (*) 10 000 Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2004 estimated(*) Inc luding the reconsolidation of a €325m w ater securitization program and €378m deriv ing from the Berlin operating lease in accordance w ith the LSF ( French Financial Security Act) of August 1, 2003. H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 5
    • Validation of the financial modelSubstantial improvement in free cash flow In €m 400 +540 2002 +168 -100 2003 H1 2004 -600 Improvement > €2bn -1 525 -1100 Free cash flow (*) before dividend payment greater than €500 million at -1600 30/06/2004(*) Free cash flow = cash flow from operations +/- change in the w orking capital requirement - effect of the variation of the securitization and Dailly (i.e. receivables discounting) programs + asset disposals (excluding non-core asset disposals) - capital expenditures and financial investments +/- changes in the scope of consolidation. H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 6
    • Strong profitability improvement: EBIT margin trends (1) ∆ ConstantIn €m EBI T EBI T margin exchange rate 30/06/04 30/06/03 30.06.04/30.06.03 30/06/04 30/06/03Water 385 353 +9.4% 8.3% 7.7%Waste 212 179 +22.1% 7.0% 6.1%Energy Services 200 179 +12.3% 7.8% 7.5%Transportation 57 41 +41.6% 3.2% 2.2%Holding -40 -36 n.s n.s n.sFCC 132 119 +10.3% 8.8% 8.3%Total (1) including FCC 945 836 +14.3% 7.0% 6.4%Total (1) excluding FCC 813 716 +15.0% 6.8% 6.1%(1) Excluding US assets sold in 2003 or in the process of being sold. . H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 7
    • Our commitment to sustainable developmenthas been recognizedIn 2004, Veolia Environnement has been included in the2 main international sustainability indexes Veolia Environnement is included in the FTSE4Good, an index with rigorous standards, which selects companies having incorporated sustainable development as a true governance tool. Only 24 French companies are part of this index. Veolia Environnement has again been included in the Dow Jones Sustainability IndexH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 8
    • Outlook for 2004 confirmed Double-digit growth in EBIT Very strong increase in recurring net income Significant reduction in net debt: €10.5bn - €11bn after asset disposals (1) Positive free cash flow Maintain ROCE (2) target of at least 8% after tax in 2005 despite the disposal of FCC Significant increase in dividend(1) Inc luding the reconsolidation of a €325m w ater securitization program and €378m deriv ing from the Berlin operating lease in accordance w ith the LSF ( French Financial Security Act) of August 1, 2003.(2) See 2003 Annual Report For m 20- F for a description of the methodology used to calculate ROCE.H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 9
    • Medium-term outlook:Strong visibility Continued profitable growth Through the award of less capital-intensive long-term contracts (operating and maintenance contracts, public- private partnerships, etc.) In Europe, in North America and in Asia (a few targeted countries, i.e. China, South Korea, Taiwan and Singapore) Growth in positive free cash flow after increasing dividend ROCE target of over 10% by 2008H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 10
    • Key figures at June 30, 2004 In €m 30/06/04 30/06/03 30.06.2004/30.06.2003 change At current At constantRevenue 14,243 14,048 +1.4% +2.8%Excluding revenue from US assets sold in 2003or in the process of being sold in 2004 (1) 13,507 13,143 +2.8% +3.7%Under new consolidation scope excl. FCC (2) 11,989 11,682 +2.6% +3.6%EBITDA 1,875 1,824 +2.8% +4.1%Excluding EBITDA from US assets sold in 2003or in the process of being sold in 2004 (1) 1,806 1,731 +4.3% +5.3% (2)Under new consolidation scope excl. FCC 1,608 1,551 +3.7% +4.7%EBIT 975 884 +10.2% +11.6%Excl. EBIT from US assets sold in 2003or in the process of being sold in 2004 (1) 945 836 +13.1% +14.3% (2)Under new consolidation scope excl. FCC 813 716 +13.6% +15.0% (1) Surface Preparation and Everpure, w hich w ere sold in 2003, as w ell as Culligan, equipment and short- ter m ell short- services (2) After the aforementioned disposals and the sale of FCC.H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 11
    • From revenue to net incomeIn €m 30/06/04 ∆ 30/06/03 30.06.04/30.06.03Revenue 14,243 14,048 +1.4%EBITDA 1,875 1,824 +2.8% Depreciation and long-term provisions (755) (790) Renewal expenses (145) (150)EBIT 975 884 +10.2% Recurring financial expense (342) (370) Notional tax charge (224) (182) Recurring earnings of equity method companies 30 26 Minority interests (143) (112)Recurring net income before goodwill 296 246 +20.3% Recurring goodwill amortization (91) (113)Recurring net income after goodwill 205 133 +54.4%Non-Non-recurring income (1) (24) (2,233)Net income 181 (2,100) (1) See "2004 First Half Year Results" press release for reconciliation of recurring net income reconciliation to net income.H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 12
    • Revenue at June 30 (excluding US assets sold in 2003 or in the process of being sold) (1) In €m 14 000 13 507 13 143 30/06/2004 12 000 30/06/2003 10 000 8 000 6 000 4 634 4 592 3 050 4 000 2 553 2 914 1 782 2 388 1 489 1 821 2 000 1 429 0 Water Waste Energy S vcs. Transport FCC Total At const. exch. rates +1.8% +6.8% +7.1% -1.6% +4.5% +3.7% At current exch. rates+0.9% +4.6% +6.9% -2.1% +4.2% +2.8%(1) Excluding Surface Prepar ation and Everpure sold in 2003 and Culligan, equipment and short-ter m services H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 13
    • EBITDA contribution (excluding US assetssold in 2003 or in the process of being sold) (1) In €m ∆ 30.06.04/30.06.03 30/06/04 At current At constant EBITDA margin exch.rates exch. rates June 30, 2004Water 679 2.1% 2.8% +14.6%Waste 451 4.4% 6.9% +14.8%Energy Services 366 2.5% 2.9% +14.3%Transportation 157 12.4% 13.0% +8.8%FCC 194 10.8% 10.9% +13.0%Holdings -39Total 1 806 +4.3% +5.3% +13.4%(1) Excluding Surface Preparation, Everpure sold in 2003 and Culligan, equipment and short-ter m servicesH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 14
    • Change in EBIT at June 30, 2004 (1) In €m 1 000 30/06/2004 945 30/06/2003 900 836 800 700 600 500 385 400 353 300 212 200 179 200 179 132 119 57 100 41 0 Water Waste Energy Sces Transportation FCC Total +41.6% +10.3% A constant exch. rate +9.4% +22.1% +12.3% +14.3% At current exch. rates +8.9% +18.5% +11.7% +40.5% +10.6% +13.1%(1) Excluding Surface Preparation and Everpure, w hich w ere sold in 2 003, as w ell as Culligan, equipment 2003, and short- ter m services. short- H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 15
    • Continued commercial successExamples of contracts won or renewed in 2004 In €m Estimated cumulative revenue Eastern Moravia (V.A.K. Zlin) 30 yrs Czech Republic 360 Zun Yi (Guizhou province) 35 yrs China 210 Rennes 10 yrs France 150 US Virgin Islands 20 yrs USA 110 St. Petersburg (construction) - Russia 52 Fernwasser 40 yrs Germany 40 Johnson Matthe y (industrial) 10 yrs UK 21 Beijing 20 yrs China 20 Grand Paroisse 10 yrs France 19 MD Papier GmbH 12 yrs Germany 15 Sheffield 5 yrs UK 450 Lao Gang 20 yrs China 260 Pontiac, Michigan 20 yrs USA 205 Dunkerque 11 yrs France 66 Marseille Provence Métropole 5 yrs France 42 La Rochelle 8 yrs France 33 Ku Ring Gail 10 yrs Australia 32 BP (Industrial) 3 yrs USA 25 SAFI 7 yrs Morrocco 20 Abu-Dhabi 5 yrs United Arab Emirates 20 Water Waste Energy Services Transportation Multi-servicesH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 16
    • Continued commercial successExamples of contracts won or renewed in 2004 In €m Estimated cumulative revenue Lyon Villeurbanne 25 yrs France 500 Poznan -- Poland 75/yr Druskininkai 30 yrs Lithuania 110 Richter Gedeon Rt (industrial) 6 yrs Hungary 80 Montluçon 20 yrs France 62 Brezno 20 yrs Slovakia 50 CHU Nancy 10 yrs France 31 Prince Charles Hospital 25 yrs Wales 20 Heinz (industrial) 15 yrs UK (near Manchester) 18 Melbourne 5 yrs Australia 1 500 Nice 7 yrs France 595 St Etienne 8 yrs France 345 Toulon 8 yrs France 314 Appeldoorn 6 yrs The Netherlands 210 Göthenburg 7+3 yrs Sweden 90 Denver 5 yrs USA 55 Koper - Slovenia 50 PSA Peugeot Citroën 10 yrs France 1 000 Visteon Deutschland GmbH 10 yrs Germany 60 Water Waste Energy Services Transportation Multi-servicesH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 17
    • Divisional EBIT contributionsWater: €385m, +10% at constant exchange rates (1) Good level of contribution from France despite high level of comparison (heatwave effect in June 2003) Excellent performance in Europe, strong increase in margins not only in Germany but also in Eastern Europe and Morrocco North America: new organization of the continuing business Asia: strong increase in contracts signed over the past fe w years Significant profitability improve ment from VWS(1) Excluding US assets sold in 2003 or in the process of being sold: Surface Preparation and Everpure sold in 2003 and Culligan and the equipment and short-term services businesses; and excluding water acti vities of Proacti vaWaste: €212m, +22% at constant exchange rates Strong effect of restructuring me asures and productivity improvement in France, in particular in the incineration and urban waste business (1 point increase in margins) Strong increase from Scandinavia and the UK which continue to grow both economically and commercially. Good performance in Asia – volume effect in Hong Kong – and growth in the USA, despite difficult competitive environment for hazardous waste and industrial servicesH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 18
    • Divisional EBIT contributions (continued)Energy Services: €200m, +12% at constant exchange ratesDouble-digit growth in French business activities despite unfavorable pricing(recovery of engineering activities)Outside France, good contribution from the UK, very good growth in income inSouthern Europe due to the integration of Giglio and sustained internal growth,as well as a good level of contribution from Eastern EuropeTransportation: €57m ,+42% at constant exchange rates In France, significant growth in income and commercial success with the renewal of contracts (Nice, Saint-Etienne, Toulon) Outside France, growth in Europe (Germany and Netherlands), the USA (very positive impact from the Boston contract) and in Australia (increased effect of the new Melbourne contract) H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 19
    • Veolia 2005 efficiency plan:Target of €300m in recurring savings for 2006 In €m 350,0 €300m 300,0 250,0 €200m Operations 200,0 Support functions Assets 150,0 Purchasing €100m 100,0 50,0 €45m 0,0 H1 2004 Target Target Target 2004 2005 2005H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 20
    • Veolia 2005 efficiency plan: over €45 m inrecurring savings accounted for during the first half of2004 H1 04 Examples of projects underway Operations Savings Diagnostic analysis and optimization of e fficiency from On yx• Operational pr ocesses Frances incinerators/Use of new technologies to optimize mobile• Risks/Ins urance €13.1m representative route planning at Dalkia and in the Water di vision Group-wide redefinition and negotiation of property and casualty• WCR insurance premiums Optimization of billing and collection processes at On yx and in the Water di vision Purchasing Implementation of 50 framework agreements that were• Gr oup-wide purchases €7.4m renegotiated by the Veolia En vironnement group paving the wa y• Bus iness-line for the pooling of volumes. purchases e.g. temporary staffing, fi xed-line and mobile telephony, car rental, chemical products Supports functions• Structures Optimization of head o ffice costs (Communications, Marketing, €14.0m• Financial and tax Ta x and Legal, Administration and Finance) optimization Optimization of financing and liquidtiy• Information s ystem Streamlining of investments and IT de velopment savings Assets• Real estate €10.9m Streamlining of real estate portfolio b y increasing the office• Bus iness portfolio occupancy ra te Clean-up of On yx Frances waste collection contract portfolio H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 21
    • Veolia 2005 efficiency planTarget: more than €100 m in savings during 2004 The Veolia 2005 plan includes over 300 individual projects The results for the first half of 2004 and the most current outlook confirm the minimum targets of: €100m in recurring savings in 2004 €300m in recurring savings in 2006H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 22
    • Change in financial expenseIn €m June 30, 2004 June 30, 2003 Cost of financing (304) (314) Provisions and other 16 (137) o/w • USFilter assets - (72) • Amortization of Océane pre mium (15) (15) • Treasury stock 2 (10) • Foreign exchange gains/(losses) - (16) • Capital gains on sale of mktble sec. 52 - • Other (23) (24) Net financial expense (288) (451) Average interest rate: stable at 4.3% H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 23
    • Control of capital expenditures and investments In €m Maintenance Growth Total 30/06/04 Water 310 193 503 Brussels, The Hague Waste 110 162 272 Major projects in France and the UK Energy Services 67 136 203 Poland (Poznan) Transportation 45 50 95 Other projects in Germ any, Denm ark, Australia FCC + Proactiva 60 79 139 Total capex/investments 592 capex/ 620 1,212Total at June 30, 2003 597 663 1,260H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 24
    • Cash flow from operations at June 30, 2004 In €m1 500 +9% + 1 4711 450 + 1411 400 1 346 - 13.51 350 - 3.7 + 0.61 3001 2501 200 Cash flow from ops Impact Impact Interest Impact Exchange Performance Cash flow from ops 30/06/2003 disposals Rates Rate 30/06/2004H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 25
    • Strong increase in positive free cash flowIn €m 30/06/2004 30/06/2003 ∆ 30.06.04/30.06.03Cash flow from operations +1,471 +1,346 +9%Capital expenditures / investments (1,212) (1,260)Impact of changes in consolidation scope (33) +33Change in the WCR (1) +159 (57)Disposal of assets +155 +109 Free cash flow before disposals of non-core assets +540 +171 X3(1) Not including the change in the securitization and receivables discounting programsH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 26
    • Strong increase in positive free cash flow ∆ In €m 30/06/2004 30/06/2003 30.06.04/30.06.03Cash flow from operations +1,471 +1,346 +9%Capital expenditures / investments (1,212) (1,260)Impact of changes in consolidation scope (33) +33Change in the WCR (1) +159 (57)Disposal of assets +155 +109Free cash flow before disposals ofnon-core assets +540 +171 X3 (1) Not including the change in the securitization and receivables discounting programs H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 27
    • Change in net debt during the first half 2004 In €m 30/06/2004 Net debt at start of period 11,804 Change in receivables discounting program +262 Reclassification of securitization & special purpose entities +703 Net debt after above changes in receivables disc. program and reclassification during the 1st half-year 2004 (1) 12,769 Cash flow available before disposal of non- core activities non- -540 Disposal of non- core activities non- -66 Dividend payments +315 Impact of foreign exchange and other +248 Net debt at end of the 1st half 2004 12,726 (1) Inc luding changes in receivables discounting program and reclassification impact of the LSF ( French Financial Security Act)H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 28
    • Disposal of North American Water activities in 2003 and 2004 Target met Sale price Everpure USD 215m Farmlands in California USD 77m USF equipment & short term services (1) USD 993m Culligan (2) USD 610m Sub- Sub-total USD 1,895m i.e.: €1,550m (4) Surface Preparation (3) USD 130m Total USD 2,025m i.e.: €1,656m (4)(1) (3) Received on August 2, 2004 Sold dur ing the 3rd quarter of 2003(2) (4) To be received dur ing the 2nd half Based on verage exchange rate in H1 2004 used H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 29
    • Disposals completed in 2003 and in progress during 2004 Sale price Total disposals in the US €1,656m FCC (1) €916m Other disposals in 2003 (2) €408m €155m Disposal of operating assets during H1 2004 €3,135m Total(1) Received in the 2nd half of 2004(2) Total 2003 asset disposals: €720m (retreated for the sale of Everpure of €191m in December 2003 and of Surface Preparation for €121m in September 2003) H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 30
    • First-half contribution of activities sold since the beginning of 2004 in €m North American FCC (1) Total Water activities Revenue 736 1,489 2,225 EBITDA 68 194 262 EBIT 29 132 161 Capital expend. / investments 30 129 159 Cash flow from operations 60 165 225(1) Not including the 50% interest in Pr oactiva ow ned by FCC: Proact iva is to be consolidated proportionately once Proactiva the sale of FCC becomes effective during the second half of 2004. 2004. H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 31
    • OutlookScope of consolidation at June 30, 2004 after disposalsin US (1) and sale of FCC (2)Breakdown of revenue at June 30, 2004 Breakdown of revenue at June 30, 2004 by division after disposals in US and by region after disposals in US and sale sale of FCC of FCC RoW 4% Transportation Water39% Asia/Pacific 4% 15% France 55% Rest of Europe 29%Energy Serv. 21% North America8% Waste 25% June 30, 2004 June 30, 2003 Consolidated revenue (€bn) 12.0 11.7(1) Excluding the North A merican businesses sold during 2003 (Surface Preparation and Ev erpure) or in the process of being sold ( Culligan, equipment and short-ter m services).(2) FCC w as consolidated proportionately until June 30, 2004 H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 32
    • Veolia Environnement today : a group Refocused on its strategic businesses in targeted geographic zones Offering long and sustained visibility With a strengthened financial situation (control of indebtedness and generation of free cash flow) A steady rise in profitability founded upon rigorous management (Veolia 2005)H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 33
    • 2000-2004 Review of four years of transformationH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 34
    • Changes in the business portfolio Major commercial success Contracts renewed on the same, if not better business terms Strategic contracts awarded Positions consolidated in Central Europe Major presence being established in AsiaH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 35
    • Strategic contracts won around the world Principal municipal outsourcing contracts won and renewed since 2001 Western Europe Brussels, Camden, Dublin, Central and Eastern Europe East Sussex, Gera, Marne, Lyon, Metz, Rennes, The Czech Rep. (Prague, Moravia). Lithuania, Poland Hague, Weisswasser (Saxony) (Poznan), Slovenia, Estonia Westminster… Asia US China (Baoji, Beijing, Guangzhou, LaoIndianapolis, Atlanta, Boston, Gang, Pudong/Shanghai, Shenzhen,Pontiac (Michigan), Tampa, Tianjin, Zuhai …), Singapore, TaichungOklahoma City, Washington DC, (Taiwan) …US Virgin Islands … Africa & Middle East Al exandria, Jerusalem, Rabat … Australia/New Zealand Auckland, Melbourne, Woodlawn… H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 36
    • And highly successful in the development of industrial outsourcing contracts… Western Europe Arcelor, ATM Milan, BP Lavera, L’Oréal, Manuli Films, Novartis, PS A Citroën, Pigna, Renault, Central and Eastern Europe Visteon… Setuza (Czech Rep.), Richter Gideon Rt (Hungary) … USBP, ConocoPhilips, Ford,General Motors, Kerr McGee,3M… Asia Hynix, Michelin, Petronas… H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 37
    • Changes in the business portfolio Strategic contracts awarded: Prague, Budapest, Bucharest, Baltic countries, Sheffield, Indianapolis, Boston, Shanghai, Shenzhen, Melbourne, etc. Industrial investments Major expansion plans launched Water BOTs: The Hague, Brussels, Chengdu, Ashkelon Incinerators in France and the UK Acquisitions Significant success through targeted acquisitions in line with the Group’s strategy: Pacific Waste, Siram, VerneyH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 38
    • Heightened control over investments(in €m) Total investment Of which maintenance capex4500 4 0524000 3 739 3 5383500 2 973300025002000 1 21215001000 1331 1 382 1 323 1 325 500 591 0 2000 2001 2002 2003 H1 2004H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 39
    • Free cash flow after investments and changes in theWCR, before dividends and non-core asset disposals(in €m) Very favorable trend reversal since the beginning of 20031000 540 500 171 2000 H1 2001 H2 2001 H1 2002 H2 2002 -3 0 H1 2003 H2 2003 H1 2004 -500-1000 -672 -854 -1 008-1500 -1 221 -1 384-2000 H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 40
    • Strategic management of the business mix €5 billion in strategic asset disposals US Filter disposals 2000-2004: $3.5 billion Exit from the equipment and short-term services activities, retail and commercial activities Sale of FCC stake 2004: €1.1 billion Partnership terminated owing to strategic differences Stake in Dalkia sold to EdF for €1.1 billion Partnership with a primary energy producer And over €1 billion in “recurring” disposals Sale of minority shareholdings: PSC 2002, UK Asset disposals: Barraqueiro 2000, Wyuna 2003 Optimization of industrial assetsH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 41
    • Changes in the business portfolio Balanced revenue contribution from divisions Water Waste Energy serv ices 9% €2.1 billion Tra nspor tation FCC 15% 11% €2.5 billion 39% 12% 51% 21%€2.8 billion €11.8 billion (1) 17% €4 billion 25% Pro forma 1999 revenue Estimated 2004 revenue €23.2 billion After announced US disposals and sale of FCC (including 1999 US acquisitions ~€24 billion on a full year basis) (1) incl. 42% in the US H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 42
    • Changes in the business portfolio USA: strategic refocusing Europe: consolidation of a domestic market Asia: start-up of activities start- 4% incl. 1% in Asia-Pacific 8% incl. 4% in Asia-Pacific 23% 8% 42% 55% 29% 31% Pro forma 1999 Estimated 2004 After announced US disposals France Rest of Eur ope and sale of FCC USA RoWH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 43
    • Financial structure strengthened (in € bn)17 16.6 Significant reduction in consolidated net debt16 15.015 14.814 13.113 12.7 0,7 (*)12 Target €10.5 - 11.0 bn1110 Pre-IPO June 30, 2001 June 30, 2002 June 30, 2003 June 30, 2004 Dec. 31, 2004e (July 2000) (*) Inc luding consolidation of €325m for w ater securitizations and €378m of special pur pose entities (application of French Financial Security Act) H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 44
    • Solid cash flow from operations in spite of asset disposals and currency effects(in €m) 3 000 2701 26% 2780 2 800 24% 2 600 2455 22.9% 2 400 22% 2 200 21.3% 1 953 20% 2 000 1 800 18% 17.2% 1 600 16% 1 400 14.8% 14% 1 200 1 000 12% 31/12/2000 31/12/2001 31/12/2002 31/12/2003 Cash flow from operations (€m) Cash flow/Net debt (% ) H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 45
    • Financial structure strengthened(in €bn) Profitability improvement 24 10% 23 22 22 21 9% 20 18 /18.5 8% 18 16 7% 7.0% 14 6.4% 6% 12 10 5% 2001 2002 2003 2004 target . Average capital employed (€m) ROCE Group (in %) H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 46
    • AppendicesH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 47
    • IFRS progress report: :Migration program in progress since 2003 IFRS-compliant financial statements are to be published from 2005 with comparative figures for 2004 The IFRS project was launched with the identification of the principal differences between the French and international standards based on the experience gained when US GAAP were adopted in 2001 Implementation of a Steering Committee led by the Sr. Exec VP and a 16-person IFRS working group devoting 100% of its time to the transition to IAS/IFRS; Training was held during the first half of 2004 for over 1,200 employees at the Veolia Campus for an average of two days varying according to the audience: Finance department, accountants, lawyers, sales teams. Accounting principles handbook made available on VEs intranet portal; IT-based consolidation system adapted to IFRS: reporting system adjusted to produce the 2004 and 2005 financial statements. Uncertainty of the interpretation of IFRS standards as they relate to the treatment of concessions. Publication of an IFRIC interpretation expected in the first quarter of 2005. H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 48
    • IFRS project schedule 2003 2004 2005 First quarter 2nd quarter 3rd quarter 4th quarter 1st quarter IRFS training for over 1,200Identification of employees differencesbetween French G AAP/IFRS FTA v2 FTA v3 Quantified FTA (1) v1 Review with 10/09/04 …/../04 impact of auditors Reported on reviewed by reviewed by FTA 14/06/04 auditors auditors Presentation of 2004 financial statements (1) FTA : First Time Adoption. Reconstitution of the consolidated balance sheet at January 1, 2004 H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 49
    • IFRS project report update: principal restatements Standards Restatements carried out Revenue from ordinary activities IAS18 Exclusion of amounts collected on behalf of third parties from revenue and cost of revenue Financial debt IAS39 Consolidation of Veolia Waters securitization programs and of receivables discounting Valuation of financial IAS 32-39 Valuation already completed instruments (FAS133). Option chosen Jan. 1, 2004 Employee benefits IAS 19 Accounting treatment of retirement commitments already in line with IAS 19, especially retaining the corridor approach. Actuarial differences set to zero. Intangible assets and IAS 38 Reclassification of some deferred charges busine ss assets Adjustment of provisions IAS 37H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 50
    • Debt structure Ratings Standard & Poors BBB+ / Stable / A2 Moodys Baa1 / Stable / P2 Average maturity for reclassified debt (1) : ~ 6.5 years 64% of gross debt denominated in euros, 23% of gross debt in US dollars Fixed/variable interest rate (after hedging) : 48% / 52% 73% of net debt excluding Project financing debt concentrated at VE level Liquidity: €8.5bn (Cash : €3.1bn / Credit lines not drawn down: €5.4 bn)(1) Gross debt – ( mar ketable securities + cash and equivalence)H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 51
    • Financial Communication Nathalie PINON, Head of Investor Relations 38 Avenue Kléber – 75116 Paris - France Telephone +33 1 71 75 01 67 Fax +33 1 71 75 10 12 e-mail nathalie.pinon@groupve.com Brian SULLIVAN, Vice President, US Investor Relations 1605 Main Street, Suite 710, Sarasota, FL 34236- USA Telephone (941) 362-2435 Fax (941) 362-2499 e-mail brsullivan@onyxna.com Web site http://www.veoliaenvironnement-finance.comH1, 2004 Results– Paris, September 17th 2004 – Financial Communication 52