UPDATE: Suez Environnement Net Profit Hit By Melbourne Plant

PARIS (Dow Jones) -- French waste and water utility Suez Environnement SA (SEV.FR) Wednesday said it expects a better revenue and earnings before interest, tax, depreciation and amortization, or Ebitda, in 2012 after it posted a 43% drop in its 2011 net profit, dented by the issues related to its Melbourne desalination contract, and by the deterioration of the macroeconomic environment.

In 2011, Suez Environnement's net profit dropped to EUR323 million, from EUR565 million a year earlier; analysts polled by FactSet expected EUR307.3 million on average. Earnings before interest, tax, depreciation and amortization, or Ebitda, for the period grew 7.3% to EUR2.51 billion from EUR2.34 billion in 2010. Revenue increased 6.9% to EUR14.83 billion, from EUR13.87 billion a year earlier, in line with analysts expectations.

This year, the group expects higher or at least similar revenue, Ebitda and free cash flow from 2011, and targets Ebitda of EUR2.7 billion at constant foreign exchange rates in 2013, while it plans to be more selective in its investments from now on, with investments capped at EUR1.3 billion in 2012 and 2013.

Suez Environnement "in an atonic economic environment is setting as priorities for 2012 and 2013 to protect profitability and maintain a solid balance sheet with a sustained cash flow generation," the group's Chief Executive Jean-Louis Chaussade said, as the company's cost-savings plan has been increased to EUR360 million for the 2010-2012 period.

Suez Environnement's Degremont unit won a contract in July 2009 to build and operate a seawater desalination plant in Melbourne, worth EUR1.6 billion in revenue for the group. But the construction project, which started in August that year, ran last year into adverse weather conditions and social issues resulting in low productivity. Degremont is building the plant in partnership with Australia's engineering group Leighton Group.

The issues in Melbourne dented the group's full-year net profit by EUR237 million while Ebitda and free cash flow were deprived of EUR153 million.

To Chaussade, the situation is now resolved, with a "calmer social situation" following earlier labor-related strife. At the end of January, the completion of the plant was 89%. The plant should start producing water by mid-year, he said.

For 2011, the group will propose a EUR0.65 dividend per share and intends to keep the same dividend in 2012, which could nevertheless be improved if the performance of the group allows for it, Chaussade also said.

Suez's Water Europe division posted a 1.9% increase in revenue in 2011 due to higher prices in France, Spain, and Chile and higher volumes also in Spain, while they dropped in France. The group's Waste Europe division had a 9.4% increase in revenue in 2011 with Ebitda 5.6% higher, thanks to cost savings and higher raw material prices which boosted the recycling activity.

Over the past six months, shares in Suez Environnement lost around 17% along with the deterioration of the economic environment and fears related to the Melbourne contract. Shares closed Tuesday at EUR10.09.

- By Geraldine Amiel, Dow Jones Newswires; +33 1 40171767; geraldine.amiel@dowjones.com