Key figures as of March 31, 2013
Conference call May 3, 2013
Pierre‐François RiolacciChief Financial Officer
François BertreauChief Operating Officer
Investor Relations Key Figures as of March 31, 2013
Disclaimer
Veolia 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‐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 risks associated with conducting business in some countries outside of Western Europe, the United States and Canada, the risk that changes in energy prices and taxes may reduce Veolia Environnement's profits, the risk that we may make investments in projects without being able to obtain the required approvals for the project, the risk that governmental authorities could terminate or modify some of Veolia Environnement's contracts, the risk that our long‐term contracts may limit our capacity to quickly and effectively react to general economic changes affecting our performance under those contracts, the risk that acquisitions may not provide the benefits that Veolia Environnement hopes to achieve, 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.
This document contains "non‐GAAP financial measures" within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes‐Oxley Act of 2002. These "non‐GAAP financial measures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) of Regulation G
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Highlights and key figures as of March 31, 2013
Investor Relations Key Figures as of March 31, 2013
Commercial business success
Water• Australia: industrial contract awarded by Queensland Gas Company in the coal gas
sector. Cumulative revenue of €650M over 20 years
• Canada: industrial contract awarded by K+S Potash Canada
Environmental Services• France: contract renewal for municipal waste management in the Grand Nancy urban
community. Cumulative revenue over 7 years: €91M
• France: inauguration of the Osilub used oil regeneration plant (in partnership with Total)
• Singapore: contract awarded for the collection and management of municipal waste and recycling in the Clementi Bukit Merah district. Cumulative revenue of roughly €138M over 7 ½ years
Energy Services• Contract renewal for the management of heat generation and distribution in Bratislava.
Cumulative revenue of €1.1bn over 20 years
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Investor Relations Key Figures as of March 31, 2013
Key figures for the three months ended March 31, 2013In €M March 31,
2012 published
March 31, 2012 re‐presented(1)
March
31, 2013
Δ Δ at constant
FX
Revenue 7,826 5,991 5,757 ‐3.9% ‐3.2%(2)
Adjusted operating cash flow 900 581 542 ‐6.7% ‐6.3%
Operating income 544 303 290 ‐4.3%
Operating income after share of net income of equity‐accounted entities(3) ‐ 412 403 ‐2.0%
Adjusted operating income(4) 544 411 405 ‐1.5% ‐1.2%
Gross investments 656 472 335
Free cash flow ‐519 ‐339 +594
Net Financial Debt 15,021 12,746 10,106
Loans granted to joint ventures ‐ 3,587 3,304
Adjusted Net Financial Debt ‐ 9,159 6,802
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(1) Q1 2012 re‐presented for IFRS 5, 10 and 11 (IFRS 5 adjustment applies only to the income statement, see Appendix 1)(2) ‐3.0% at constant consolidation scope and exchange rates(3) Including the share of net income of joint ventures and associates(4) Including the share of adjusted net income of joint ventures and associates
Investor Relations Key Figures as of March 31, 2013
Water Revenue declined by 3.8% at constant scope and exchange rates to €2,494M Operations: Revenue declined 2.4% at constant scope & FX to €1,702M • France: decline of 3.5% at constant scope
Construction revenue downContinued contractual erosionLower volume trend by ‐1.5% in Q1Continued favorable price indexation
• Outside France: decline of 1.5% at constant scope & FXTiming of the end of certain contracts resulting in a slowdown in Construction activity (UK, Korea)Favorable impact of higher tariffs (Asia, Central & Eastern Europe)
Technologies and Networks: Revenue declined 6.9% at constant scope & FX to €792M• Completion of D&B municipal and industrial contracts• Good performance in Solutions activity with industrial clients
Decline in adjusted operating cash flow and adjusted operating income(1)
• Contractual erosion in France• Decline in Construction margins • Favorable impact of net income from Chinese joint ventures and the Convergence Plan 6
Operations
Technologies and Networks
4 243
Revenue (in €M)
2,6112,494
‐3.1%
‐7.3%
‐4.5%
(1) Including the share of net income of joint ventures and associates
Investor Relations Key Figures as of March 31, 2013
Environmental ServicesRevenue declined by 4.6% at constant scope & exchange rates to €1,932M
• Price and volumes of recycled materials ‐2.5%• Waste volumes / activity levels ‐3.5%• Service price increases +0.9%• Other +0.5%• Currency effect ‐0.6%• Scope ‐1.2%
Revenue variation 3M2013 / 3M2012: ‐6.4%
Evolution of Revenue by country:• France: decline in activity (difficult macro‐economic environment and repeated bad weather in the first quarter of 2013) and unfavorable impact of recycled raw material prices
• Germany: impact of the decline in prices and volumes of recycled raw materials and decline in the industrial and commercial sector
• UK: increase in PFI construction revenue and higher tonnages incinerated• USA: increase in hazardous waste treatment and decline in industrial services• Asia Pacific: good performance in AustraliaDecline in adjusted operating cash flow and adjusted operating income(1), despite the impact of the Convergence Plan, related to:• Decline in volumes• The unfavorable impact of lower prices and volumes of recycled raw materials
7(1) Including the share of net income of joint ventures and associates
Investor Relations Key Figures as of March 31, 2013
Energy ServicesRevenue increased 0.4% at constant scope and exchange rates to €1,268M
Stable revenue in France (‐0.7% at constant scope)• Favorable impact of higher energy prices (+€25M) and weather
• Progressive end of gas cogeneration contracts
• Competitive business environment
In the United States, significant revenue increase at constant scope and FX
Slight increase in adjusted operating cash flow and adjusted operating income(1), due to growth in Dalkia International, driven by:
• Weather impact
• Favorable evolution of volumes in Poland, the Czech Republic and Lithuania
• Positive impact of Italy restructuring
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United States
France
Revenue (in €M)
1,276 1,268 ‐0.6%
+17.2%
‐1.8%
(1) Including the share of net income of joint ventures and associates
Investor Relations Key Figures as of March 31, 2013
Implementation of Convergence: Q1 2013 results
Cost reductions/ Convergence 1: €39M net savings at March 31, 2013 (before application of IFRS 10‐11)
Impact before IFRS 10‐11 (in €M)
Year endedDecember 31, 2012
Quarter endedMarch 31, 2013
Gross savings 142 49
Implementation costs ‐82 ‐10
Net savings 60 39
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Post IFRS 10‐11 VE contribution
•Operating income impact: €31M
Investor Relations Key Figures as of March 31, 2013
Continued reduction in Net Financial Debt
Net financial debt reduction of €716M• CAPEX of €335M, versus €472M€ in Q1 2012• Variation in working capital of ‐€675M• Hybrid +€1,470M
Adjusted net financial debt of €6.8bn versus re‐presented €7.8bn at December 31, 2012
Divestments: €5bn completed in 2012(1) & €1bn objective in 2013(2)
• Mars 7, 2013: Signature of purchase agreement for the divestment of Moroccan Water activities to the Actis investment fund (€370M)
€88M in associated debt reduction expected in 2013
• March 21, 2013: Signature of purchase agreement for the divestment of Portuguese Water activities to Beijing Enterprise Water Group (€95M)
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(1) Before application of IFRS 10 & 11 and including the debt reduction of €1.4bn related to the change to equity method accounting for the Berlin Water contract on October 31, 2012
(2) Including repayments of loans granted to joint ventures related to divestments
Update on Convergence Plan
Investor Relations Key Figures as of March 31, 2013
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In €M
Implementation of Convergence: continued growth in savings
(1) Of which due to the new accounting treatment of joint ventures, ~80% will benefit adjusted operating income
(1)
Investor Relations Key Figures as of March 31, 2013
New cost reductions targets (1/2)
A €750M(1) NET COST SAVINGS PLAN IN 2015
(1) Net of implementation costs, of which due to the new accounting treatment of joint ventures, ~80% will benefit adjusted operating income
In €M
750
400
Net impact(1)
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Investor Relations Key Figures as of March 31, 2013
New cost reductions targets (2/2)
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300 350
170
+100
+70+50
+60
400
2015objective
Purchasing Mutualization& IT
Business projects HQEfficiency
Raised2015
objective
Transverse projects
Business projects
750
470
(1) Net of implementation costs, of which due to the new accounting treatment of joint ventures, ~80% will benefit adjusted operating income
Net Impact(1) in €M
Additional savings identified
+€280M
Investor Relations Key Figures as of March 31, 2013
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Mid‐term objectives confirmed
(1) Including the debt reduction of €1.4 billion related to the change to equity method accounting for the Berlin Water contract and repayment of loans to joint ventures
(2) Before closing exchange rate impact(3) Net of implementation costs, of which due to the new accounting treatment of joint ventures, ~80% will benefit adjusted operating income(4) Subject to the approval of Veolia’s Board of Directors and the Annual General Shareholders Meeting(5) In cash or shares(6) Adjusted net financial debt/ (Operating cash flow before changes in working capital + OFA Repayments)(7) 5%
2012‐2013:Transformation
Period
• €6 billion in divestments (1)
• 2013 net financial debt, under new IFRS standards:Net Financial Debt between €8bn and €9bn(2)
Adjusted Net Financial Debt between €6bn and €7bn(2)
• Cost reductions:in 2013: €170M net impact(3)
• Extended dividend commitment of €0.70 (4) per share in 2013(5) and 2014
Beginning in 2014:New Veolia
• Organic revenue growth > 3% per year (mid‐cycle)• Adjusted operating cash flow growth >5% per year (mid‐cycle)• Leverage ratio(6) of 3.0x(7) beginning in 2014• Mid‐term: Payout ratio in line with historic level• Cost reductions in 2015: €750M net impact(3)
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Appendices
Investor Relations Key Figures as of March 31, 2013
Summary of appendices
Appendix 1: Main Q1 2012 figures re‐presented for IFRS 5 and IFRS 10‐11‐12Appendix 2: Impact of exchange rate variationsAppendix 3: Breakdown of revenue by divisionAppendix 4: Net financial debtAppendix 5: Evolution of recycled raw material pricesAppendix 6: Environmental Services revenue versus Industrial Production
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Investor Relations Key Figures as of March 31, 2013
Appendix 1: Main Q1 2012 figures re‐presented for IFRS
In €M3M ended March 31,
2012published
IFRS5 Adjustment (1)
IFRS 10 & 11Adjustment
3M ended March 31, 2012Re‐presented
Revenue 7,826 ‐37 ‐1,798 5,991
Adjusted operating cash flow 900 ‐7 ‐312 581
Operating income 544 ~0 ‐241 303
Operating income after share of net income of equity‐accounted entities(2) ‐ ‐ 412 412
Adjusted operating income(3) 544 ~0 ‐133 411
Gross investments 656 0 ‐184 472
Free Cash Flow ‐519 0 +180 ‐339
Net Financial Debt 15,021 0 ‐2,275 12,746
Loans granted to joint ventures ‐ ‐ ‐ 3,587
Adjusted Net Financial Debt ‐ ‐ ‐ 9,159
(1) Morocco Water and Eolfi(2) Including the re‐presented share of net income of joint ventures and associates for the three months ended March 31, 2012(3) Including the re‐presented share of adjusted net income of joint ventures and associates for the three months ended March 31, 2012
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Investor Relations Key Figures as of March 31, 2013
Appendix 2: Impact of exchange rate variationsDepreciation of the euro 3M 2013 / 3M 2012
Average rate Closing rate• Australian dollar ‐2.4% +4.1%• UK pound sterling ‐2.1% ‐1.4%• U.S. dollar ‐0.7% +4.1%• Czech koruna ‐1.9% ‐4.1%• Chinese renminbi yuan +0.6% +5.3%
Impact on key Company figures • Revenue ‐€41M• Adjusted operating cash flow ‐€2M• Adjusted operating income(1) ‐€1M
• Net debt + €25M19(1) Including the share of adjusted net income of joint ventures and associates
Investor Relations Key Figures as of March 31, 2013
Δ
Δ constant
FXΔ excl. FX &
scope
Water ‐4.5% ‐3.5% ‐3.8%Environmental Services ‐6.4% ‐5.8% ‐4.6%
Energy Services ‐0.6% ‐0.6% +0.4%
Other +62.4% +62.4% +20.3%
TOTAL ‐3.9% ‐3.2% ‐3.0%
in €M
Appendix 3: Breakdown of revenue by division
5,9915,757
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Investor Relations Key Figures as of March 31, 2013
Appendix 4: Net financial debt
In €bn
(1) Net financial debt/ (Operating cash flow before changes in working capital + OFA repayments)21
Investor Relations Key Figures as of March 31, 2013
Appendix 5: Evolution of recycled raw materials prices
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0
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120
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jan 08
mar 08
may 08
jul 08
sept
08no
v 08
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sept
2012
nov 2
012
jan 20
13mar
s 201
3
0
50
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Cardboard (ref. 1.05) Paper (Ref. 1.11) Metals (E40)
Investor Relations Key Figures as of March 31, 2013
Appendix 6: Environmental Services revenue versus Industrial Production
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Industrial Production and Veolia Environmental Services Organic Growth
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Q12008
Q22008
Q32008
Q42008
Q12009
Q22009
Q32009
Q42009
Q12010
Q22010
Q32010
Q42010
Q12011
Q22011
Q32011
Q42011
Q12012
Q22012
Q32012
Q42012
Q12013
Veolia Enviromental Services Organic GrowthIndustrial Production
Y-Y Growth Rate (in %) vs. previous year's quarter
Weighted average industrial production indices for 4 key countries, including SARP and SARPI: France, UK (excluding PFI contracts), Germany, and North America (excluding U.S. solid waste beginning in 2012)
Sources : OECD Extract Database; INSEE (France, February 2013); Federal Ministry of Economics and Technology (Germany, February 2013); average of January‐February when March figures not available (France, UK, Germany)
Investor Relations Key Figures as of March 31, 2013
Ronald Wasylec, Senior Vice President, Investor RelationsTéléphone +33 1 71 75 12 23
e‐mail [email protected]
Ariane de LamazeTéléphone +33 1 71 75 06 00
e‐mail ariane.de‐[email protected]
38 Avenue Kléber – 75116 Paris ‐ FranceFax +33 1 71 75 10 12
Terri Anne Powers, Director of North American Investor Relations200 East Randolph Street, Suite 7900
Chicago, IL 60601Tel +1 (312) 552 2890Fax +1 (312) 552 2866
e‐mail [email protected]
http://www.finance.veolia.com
Investor Relations contact information
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