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2012 Annual Sharholders’Meeting

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2012-05-16

2012-05-16

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  • 1. 2012General Meeting
  • 2. 2012General Meeting Pierre‐François RIOLACCI Chief Finance Officer
  • 3. DisclaimerVeolia Environnement is a corporation listed on the NYSE and 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 performance. Actual results may differ materially from the forward-lookingstatements 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 ofintense competition, the risks associated with conducting business in some countries outside of Western Europe, the United States and Canada, the risk that changes in energy pricesand taxes may reduce Veolia Environnements profits, the risk that we may make investments in projects without being able to obtain the required approvals for the project, the risk thatgovernmental authorities could terminate or modify some of Veolia Environnements contracts, the risk that our long-term contracts may limit our capacity to quickly and effectively react togeneral economic changes affecting our performance under those contracts, the risk that acquisitions may not provide the benefits that Veolia Environnement hopes to achieve, the riskthat Veolia Environnements compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect VeoliaEnvironnements 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 doesit 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.< (1) To ensure the comparability of periods, the 2010 financial statements have been re-presented to include: - the impact of the reclassification into “net income from discontinued operations” of the Transportation division as a whole, Habitat Services (“Proxiserve”) activities in the Water andEnergy Services divisions, and Citelum activities in the Energy Services division; - the impact of the reclassification into ‘continuing operations of the activities in Gabon in the Water division and the “Pinellas” incineration activities within the Montenay Internationalentities in the United States in the Environmental Services division. - The impact of the fraud discovered during the second quarter of 2011 in the Marine Services business in the United States (a unit of the Environmental Services Division). The impact in2010 was not material, but the adjustment was made in application of IAS8 “Accounting Policies, Changes in Accounting Estimates and Errors”.(2) Of which change in discount rates used for provisions for landfill site remediation (+€26M in 2010 and -€7M in 2011)(1) To ensure the comparability of period, the 2011 financial statements have been re-presented to include:- the impact of the reclassification into “net income from discontinued operations” of Habitat Services (“Proxiserve”) activities in the Water and Energy Services division, Citelum activitiesin the Energy Services division, Solid waste activities in the United States in the Environmental Services division and the regulated activities in the United Kingdom in the Water division;- the impact of the reclassification into “net income from discontinued operations” of the Transportation Division as a whole;- the impact of the reclassification into ‘continuing operations’ of the “Pinellas” incineration activities within the Montenay International entities in the United States in the EnvironmentalServices division
  • 4. 2011Annual ResultS
  • 5. 2011 highlights First year of Transformation – Definition of the target scope – Launch of restructuring – Concentration of investments – Disposals ahead of the target A year focused on cash generation – Revenue of €29.6B – Adjusted operating income of €1.7B – Adjusted net income of €290M. Special items of -€780M, essentially non cash, contributed to a net loss of €490M – Positive free cash flow of €438M – Reduction of net financial debt by €488M, to €14,730M
  • 6. Recovery of organic growth € 7,290 M 25% 2011: € 12 ,617 M €29,647M € 9,740 M 33% 42%  current FX rates  Excl. FX & scope Water +3.0% +1.2% Environmental Services +4.3% +4.9% Energy Services +1.6% -0.5% TOTAL COMPANY +3.1% +2.0%
  • 7. Water DivisionRevenue increased +1.2% at constant scope & Annual revenue (€M)FX 12,617 +3.0% 12,250– Good level of activity in Europe, particularly in Germany and Central and Eastern Europe,– Good performance in Asia (China and Japan), 9,064 +3.6%– Net recovery in industrial client activities, 8,749– Impact of contractual negotiations in France (in Operations particular the new contract with the SEDIF) and Technologies ongoing decline in volumes sold (unfavorable & networks summer weather conditions in 2011). 3,553 +1.5% 3,501Adjusted operating cash flow declined to€1,462M (-4.1%) 2010 2011 re-presented
  • 8. Environmental Services DivisionRevenue: €9,740M in 2011, change of +4.9% at constant scope and FX – improvement in activity level for the treatment of industrial non-hazardous and Change excl. FX & change +4.9 hazardous waste, vs 2010 re-presented (%) – effect of recycled raw material prices that Recycled materials +1.8 remained high in France, (price-volumes) – good contribution of activities in the Waste volumes +1.3 commercial and industrial sector in Price increase +0.9 Germany, Other +0.9 – progress on integrated contracts in United Kingdom.Adjusted operating cash flow declined to €1,197M (-5.9%)
  • 9. Energy Services DivisionChange in revenue: -0.5% at constant scope Annual revenue (€M) and FX 7,290 +1.6%– Positive impact of energy prices, 7,176– Negative impact of less favorable weather conditions across the whole of Europe in 2011 compared to 2010, 3,763 3,775 +0.3%– Acquisition of the Warsaw district heating network Outside France in the last quarter of 2011, France– Lower electric capacity revenue and subsidies received on the sale of cogenerated energy in 3,515 +3.0% Central and Eastern Europe. 3,413Adjusted operating cash flow declined to€598M (-9.2%) 2010 2011 re-presented
  • 10. Reconciliation of adjusted operating cash flow to adjustedoperating income 2010  current Of which 2011 In €M re-presented FX FX Adjusted operating cash flow 3,315 3,152 -4.9% -0.2% Amortization -1,475 -1,550 Net capital gains 118 85 Provisions, fair value adjustments & -67 13 other Adjusted operating income 1,891 1,700 -10.1% +0.2%
  • 11. Evolution of adjusted operating income In €M 2,056 1,910 +3 1,891 -146 -19 +39 1,700 +67 +10 1,692 -202 +22 -91 -39 Adj. Op. VTD Adj Op. IFRS5 Adj Op. FX Operational Total France UK Sofia Asia Holdings Other Adj. Op. income Income & IAS8 Income difficulties Water Water Pacific incomeDec. 2010 Dec. 2010 Dec. 2010 Water Dec. 2011(published) Excl. VTD (re-presented) (published)
  • 12. Net finance costs 5.6% Cost of financial debt 5.4% 5.1% 4.8% -€748M vs -€759M 5.1% 4.3% Closing net financial debt reduced to 4.0% 4.1% €14.7 billion vs €15.2 billion Average gross debt: €19.9 billion Average cash and cash equivalents: 2008 2009 2010 2011 €5.7 billionNet cost of borrowing Gross cost of borrowing
  • 13. Reconciliation of operating income to net income Adjustment Adjusted Total As of December 31, 2011 - In €M Operating income -683 1,700 1,017 Financial expense - -804 -804 Income tax expense -184 -355 -539 Share of net income of associates - 12 12 Net income from discontinued operations -3 - -3 Non controlling interests 90 -263 -173 Net income attrib. to owners of Co. -780 290 -490 In € Net income attrib. to owners of Co. per share 0.58 -0.99
  • 14. Controlled investmentsIn €M 2010 2011Maintenance capital expenditures 1,075 1,094Industrial investments in growth 1,033 1,207(excluding operating financial assets)Financial investments in growth 653 466New operating financial assets 495 -3.7% 367Gross investments 3,256 3,134
  • 15. Free cash flow of €438MIn €M 2010 2011 Operating cash flow before changes in working capital 3,719 3,353 Repayments of operating financial assets 424 441 Total cash generation 4,143 3,794 Gross investments -3,256 -3,134 Variation in working capital 106 -41 Taxes paid -368 -368 Interest expense -808 -771 Dividend -735 -547 Other 86 -39 Divestments 1,241 1,544 Free cash flow 409 438 Impact of exchange rates -465 -64 Other -35 114 Net financial debt at December 31 15,218 14,730 Change in net financial debt 91 -488
  • 16. Divestments: more than €4 billion completed in three years ≥ €5 billion Divestment completed: €4,076M Target revision in March 2011 1,544 300 1,291 1,241 1,000 1,000 1,000 2009 2010 2011 2012 2013 Divestments announced Divestments completed Target: €5 billion of divestments in 2012-2013
  • 17. Additional net financial debt reduction In €bn 16.5 Average maturity of net 15.1 15.1 15.2 financial debt: 8.7 years 14.7 14.7 vs. 9.4 years at the end of 13.9 2010 Ratings <12.0 ‒ Moody’s: P-2 / Baa1 stable outlook (February 7, 2012) ‒ Standard & Poor’s : A-2 / BBB+ stable outlook (September 14, 2011)31-dec- 31-dec- 31-dec- 31-dec- 31-dec- 31-dec- 31-dec- 31-dec- 05 06 07 08 09 10 11 13
  • 18. KEY FIGURES AS OF MARCH 31, 2012
  • 19. Breakdown of revenue by Division1st quarter 2011 re-presented: €7,479M 1st quarter 2012: €7,826M 31% 32%€2,342M €2,907M €2,540M €3,050M 30% 39% 39% 29% €2,230M €2,236M  current FX rates  Excl. FX & scope Water +4.9% +5.3% Environmental Services +0.3% -0.9% Energy Services +8.5% +5.3% TOTAL COMPANY +4.6% +3.4%
  • 20. 1st quarter 2012 key figures Q1 2011 Q1 2011  current Q1 2012 In €M published re-presented FX Revenue 8,159 7,479 7,826 +4.6% Adjusted operating cash flow 997 929 900 -3.1% Adjusted operating income 636 619 544 -12.2% Net financial debt 14,511 14,511 15,021
  • 21. Update on asset divestment program U.K. Regulated Water & U.S. Solid Waste: – An ambitious timeline followed to-date – Strong interest expressed by the market – Non-binding offers received Veolia Transdev: – Continued preparation of VTD as part of withdrawal – Negotiation in process on the basis of an offer received – Interest expressed from a new potential buyer
  • 22. Advancement of cost reduction program 75 100 Implementation costs 6O Gross savings -38 -52 -80 Feb. 17, 2012e Apr. 27, 2012eBreakdown of net savings by Dec. 31, 2012egeographic zone Breakdown of net savings by lever France 1% North America & Australia Purchasing 13% 6% 22% Latin America & Southern Organizational12% Europe 25% Efficiency Asia, Africa & Middle East 10% IT costs Central & Eastern Europe14% 2% Northern Europe External expenses 5% 11% Corporate HQ 66% Insurance costs 13% Others
  • 23. Outlook • 5 Mds€ de cessions • Divestments of €5bn 2012-2013 • Reduce net financial debt below €12bn (before FX change) • Cost reduction in 2013: gross impact of €220M and net impact of Transition €120M on Operating Income period • Commitment on dividend policy  €0.70 per share in 2012, paid in cash or shares  €0.70 per share in 2013 • Organic revenue growth > +3% CAGR (mid-cycle) • Adjusted Operating Cash Flow > +5% CAGR (mid-cycle) 2014 and • Leverage of 3.0x (±5%) beyond: • Mid-term: historical payout ratio New Veolia • Cost reduction in 2015: gross impact of €450M and net impact of €420M on Operating Income