Veolia EPS Lags, Revs Rise - Analyst Blog
August 12 2011 - 12:07PM
Zacks
Veolia Environnement (VE) announced financial
results for the first half of 2011. The company reported an
operating loss per share of €1.05 in the first half of 2011 versus
operating earnings of €0.67 in the first half of 2010.
On a GAAP basis, operating loss during the first half of the
year was €0.14 versus earnings of €0.78 in the first half of 2010.
The difference between GAAP and operating loss was due to a
one-time gain of €0.91 from discontinued operations.
Total Revenue
In first half of 2011, the total revenue of the company was
€16.29 billion versus €14.10 billion in the similar period of 2010,
reflecting a growth of 15.5%.
The year-over-year growth in revenue was boosted by the positive
impact from the acquisition made by the company in the previous
year. The first time consolidation of the Veolia Transdev
joint venture also backed the improvement.
Segment Results
Water: Total revenue from this segment
was €6.12 billion versus €5.89 billionin first half of 2010, up
5.5%. The growth was primarily attributable to higher level of
activity in Europe, particularly the United Kingdom, Germany and
Central Europe as well as the ramp-up of activities in Asia.
Enviornmental Services: Total revenue
from this segment was €4.9 billion versus €4.5 billionin first half
of 2010, up 8.4%. This growth was mainly organic. The increase in
activity levels for industrial services, treatment of hazardous
waste and commercial waste collection in the main geographical
areas boosted results.
Energy Services: The segment generated
total revenue of €3.86 billion versus €3.70 billionin the first
half of 2010, up 4.3%. The growth in this segment was attributable
to the favorable impact of energy prices, offset partially by the
impact of adverse weather.
Veolia Transdev: Contribution from
this new segment in the reported period was €1.3 billion.
Operational Update
During the first half of 2011, the company experienced a 24%
growth in the cost of sales compared to the prior-year period. The
general and administrative expenses and selling costs also surged
by 10.4% and 1.4% from the first half of 2010.
Operating income of the company decreased to €0.25 billion from
€1.1 billion in the first six months of 2010 and was negatively
impacted by non-recurring write-downs amounting to €0.7 billion
mainly in Italy, Morocco and the United States.
Finance costs in the first half of 2011 were €435.6 million,
marginally lower than €439.3 million reported in the first half of
2010.
Financial Update
Cash and cash equivalents of the company as of June 30, 2011
were €5.6 billion versus €4.6 billion in June 30, 2010.
Net cash from operating activities in the first half of 2011 was
€0.86 billion versus €1.3 billion in the same period of 2010.
Restructuring and Convergence
During the first six months of the year, the company continued
to work on restructuring and convergence of its operations to make
it more profitable. To achieve its goal the company has decided to
lower its geographical exposure and concentrate on 40 countries by
2013 as against 77 countries at present.
The company will also work on rationalization of the
organization, processes and local headquarters and has made plans
for additional cost savings aiming to add a minimum of €150 million
in operating income by 2013 and gradually increasing the
level to a range of €250 million to €300 million annually by
2015.
Guidance
For 2011, Veolia Environnement expects a marginal decline in
adjusted operating income at constant exchange rates, compared to
its previous expectation, excluding Veolia Transdev.
The company will continue with its plans for strategic asset
divestments and divest €1.3 billion in 2011. At the same time, it
expects to save €250 million in 2011 through its cost savings
plan.
Our View
Veolia Environnement is bent on reducing costs in the
forthcoming years, which can potentially boost margins. The company
has entered into a few major contracts during the first half of
2011, which are likely to boost its topline. A €1.5 billion
contract from The Private Finance Initiative and €1.2 billion
contract awarded by Dalkia are worth mentioning.
Veolia Environnement retains a Zacks #3 Rank (short-term Hold
rating). Veolia competes with Connecticut Water Service
Inc. (CTWS) and York Water Co.
(YORW).
Based in France, Veolia Environnement is a provider of
environmental management services to its worldwide consumers. It
operates through four segments, which are Water, Environmental
Services, Energy Services and Veolia Transdev.
CONN WATER SVC (CTWS): Free Stock Analysis Report
VEOLIA ENVIRON (VE): Free Stock Analysis Report
YORK WATER CO (YORW): Free Stock Analysis Report
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