Veolia Environnement Adr

Thank you very much, and good morning to all of you. Thanks for joining for this conference call to present the LDS first semester's results, and I'm accompanied by Claude Larrella, Chief Senator Officer. I'm on slide three. Following the record results in 2022, the performance achieved during the first semester is once again very strong and a new all-time high. At Constant Stop and Forex, our revenue increased by 14.2% to 22.7 billion euros. EBITDA grew by 8.2%, current EBIT by 13.3%, and current net income by 18.7% to 662 million euros. Our free cash flow has significantly improved, and our net financial debt is well under control. These very good results in a complex environment are a testimony to Veolia's powerful business model of value creation. The group is built on a diversified geographical footprint, 40% outside Europe, as well as on a portfolio of complementary activities in wastewater and energy, and a balanced customer portfolio of industrial and municipal customers. Over the years, we've demonstrated a strong track record of delivering efficiency plans that enhance our results. We are again sustained in the first half of 2023, where we've achieved 187 million euros of savings ahead of our annual target of 350 million euros. The merger with Suez is already a success and is bearing fruit at a fast pace. with €230 million of synergies already achieved since day one, barely 18 months ago, ahead of our complete objective of over €280 million at the end of 2023, and €500 million in total. Above all, our unique positioning as the leader of ecological transformation offering solutions to cities and industries to decarbonize, to depollute and regenerate resources, is a powerful engine for growth. This was illustrated in H1 with many new contracts, notably in water scarcity solutions. This should continue over the long term, as our growth potential has been strengthened with the acquisition of SAFE. Given those strong foundations, I expect those good results to continue in H2 and beyond. This allows me to fully confirm our annual guidance and even target now the upper range of the 5% to 7% EBITDA guidance. To give you some additional color on our first half results, I'm on page four. The main feature of H1 is essentially that all the very strong operational levels in Q1 continued in Q2. a top line driven by strong pricing, margin protection against inflation, a strong commercial momentum, and a brilliant volume, as well as operational excellence and the positive effect of the merger we faced. Our revenue grew by 14.2 percent as a result of the open exchange rate to 22.7 billion euros, and we registered very strong growth in all our activities. Water grew by just 8.4% risen by tariffs, volume, and a good commercial momentum, notably in water technologies where our order book has increased the gains significantly. Waste activities continue to grow by plus 3.3%. or even plus 6.4% if I could recite it twice, thanks to price increase and indexation. Finally, energy activities were verified by plus 41%, driven mostly by energy prices, which is essentially pass-through. The operating leverage was fully effective thanks to savings and synergies, leading to an EBITDA growth of plus 8.2%, at the same pace as in Q1, and above the annual guidance range. EBIT grew by 13.3%. Net income increased by 18.7% at constant Forex to €662 million, well in line with the annual target of €1.3 billion. And as you've seen, we've improved as well the free cash flow generation with the debt well under control. These outstanding results were delivered despite softening economic conditions and continued flat-weight volumes. This is thanks to our strong foundations and powerful growth engine. First, a balanced geographical mix with 40% outside Europe. Our performance in H1 was very strong in the US, in LATAM, and in Europe, which has more than offset software delivery costs. Second, a strong position in key activities and countries. As you know, we are now number one in hazardous waste, number one in water technologies worldwide, as well as in the top three in water, waste, and energy services in all the main countries where we operate. A complementary portfolio of waste, water, and energy and of public and private customers provides unique know-how we can combine to offer solutions for the ecological transformation. And this well-balanced and resilient set of business means we are 85% macro-immune and protected against inflation. We enjoy a strong commercial momentum in all our activities as well, thanks to perfect positioning in fast-growing markets. And finally, we've sustained a strong delivery track record, notably of efficiency gain quarter after quarter, which are now complemented by the benefits of the merger with Fed, ahead of schedule and with a positive momentum. When I refer to our value geographical portfolio, I think it's useful to focus on the performance of our U.S. operations, and I'm on slide six. In the U.S., we've changed dimensions thanks to the merger with Chase, and our business there now has a turnover of $5 billion, in part with the water technology segment, in part within our North American services activity, which are very strong in municipal water, in particular regulated water, and in hazardous waste. Those two businesses were among the top three players in the U.S. Excluding water technologies, which, as you know, is reported separately, our revenue in the U.S. in H1 has grown by 10% at constant slope and forage, and more at the EBITDA level, fueled by the outstanding performance of our hazardous waste operations. In hazardous waste, revenue increased by 13% and EBITDA by 75%, thanks to a strong improvement of our waste mix. Regulated water continues to deliver strong revenue and EBITDA growth as well, driven by good volume and a crisis collection mechanism. This solid growth is here to stay. Thanks to our strong position in hazardous waste, which is key to creating new pollutants such as PFAS, as well as water scarcity solutions, including, for instance, water reuse projects. Moving on to our strengths and leaning position in key activities, and I'm now on slide seven, I will take the example of water technology, where we rank number one worldwide, thanks to a unique portfolio of patented technologies in reverse osmosis, infrared radiation membranes, evapocrystallization technologies, and desalination, just to mention a few. Water technologies is another very good example of our growth capacity with revenues of 9% and EBITDA of 13% in H1. We registered very strong bookings, 2.7 billion euros at the end of June, with in particular a strong pipeline in desalination and lithium projects. As I said in my introduction, and I'm now on page eight, this semester is another demonstration of the strength of our business model. All our businesses have been growing in H1, and as you can see on this slide, they are all well, very protected against inflation. We've been monitoring inflation and price increases as early as the spring 2021, and demonstrated quarter after quarter our ability to pass on cost increases. And this was, again, the case in Q2. We do protect our margins via pricing, either through indexation formulas for 70% of our business or through specific price increases for the remaining 30%. The results for H1 are shown on slide 8, and they should be read, of course, in addition to the 2022 price increases already granted. Let's now turn to the commercial success of the first image, and I'm on page 9. I've chosen to illustrate those with a few examples of the other solutions we offer to our customers to tackle water scarcity and water quality issues, where we've enjoyed many new contracts in H1. There is certainly a growing demand from our clients for resource preservation, water reuse, and water quality. We were awarded a €700 million countable water distribution contract in Perpignan for the next 12 years, in which we committed in particular to significantly reduce leakage from 20% down to 12% in this very scarce water part of France. In Abu Dhabi, we won another big dissemination contract worth €300 million, in which we will implement innovative technologies allowing us to significantly reduce energy consumption. In terms of water reuse, in France again, Velia is a pioneer. In less than a year, we've secured more than 50 of our compact water reuse units and we are targeting 200 by 2024. In the Ivory Coast, we are now operating the largest drinking water treatment plant in Abidjan. with a total backlog of €390 million over 15 years. Regarding water technologies, Veolia has recorded many successes since the beginning of the year, and I will give you a few examples. We will provide Samsung with wastewater treatment equipment for their semiconductor facility in Austin, Texas for $158 million. In the lithium recovery market, we've won three new contracts in Canada, South Korea, and the US for a total of 181 million euros. I'm now on slide 13 to talk about synergies. And finally, our delivery track record in terms of efficiency and synergies, I guess, has continued. In terms of synergies, which come in addition to efficiency gains, as you know, We've delivered 84 million in each one, leading already to a community amount of 230 million since the start of the slave merger, ahead of our annual target of more than 280 million in community synergies by the end of 2023. And I could fully confirm our target was 500 million euros. We achieved 187 million of efficiency gain in the first semester, and I'm on slide 14, which is ahead of our annual target of 350 million euros, with 53% already delivered in H5. Efficiency gains are now part of Veolia's DNA and I will ensure this remains so. Slide 15 now. ESG is completely at the heart of our business models and our offerings, as Veolia's business is about offering solutions to decarbonate, to gene produce, and to regenerate resources. Regarding sustainable management of water resources, we've set a net zero water commitment for activities in France by 2033. It's a little bit like a net zero carbon, but with the water in mind. And of course, the contract is a good illustration of that. Remember that in 2022, Veolia helped save 320 million cubic meters of water through our services, which is equivalent of Singapore's consumption. This is huge. In terms of carbon, we accelerated our coal phasing out program in H1, and we've already achieved a third of the decarbonization capex plan. We completed Germany. We are about to commission new facilities in the Czech Republic, in Tverov and Karvina. And next will be Poland. In addition, we've helped reduce our Christmas footprint by 14 million tons of carbon in 2022 alone, which is an amazing achievement. This is what I call scope four. As for our employees, I'm very proud of our 89% engagement rate, measured by an external firm within our 220,000 employees base. which corresponds to answering questions, and of course answering positively to questions such as, would you recommend working for Veolia, or do you feel your daily work contributes to the ecological transformation, or again, do you feel the working atmosphere is positive? I'm on page 16. Veolia's capacity to deliver strong high-earning growth, and I guess to sum up, I would like to remind the main characteristic of the OEF business model, a solid, agile group with sustained results. We are now the world leader in pollution, in decarbonization and circular economy services with a unique range of offering on a fast-growing, more than 2 trillion market. Our business portfolio is very resilient with 85% not exposed to the economic cycle due to the key position we have in very resilient infrastructure-like assets, where we are in the top players. The indexation of 70% of our contracts, as well as the disciplined pricing for our offers, allow us to be protected against inflation. We've been able to deliver significant headings each year, which are now supplemented by the synergies from the majority. Our balance sheet is very solid. All these elements allow us to forecast solid growth in our results and our dividend, with accelerated growth from 23 to 25 thanks to synergies. And now on page 17, you have our 2023 guidance. I fully confirm our annual guidance and I even improve the organic and big bag growth target now expected at the top end of the range. You understood that I'm very confident for the rest of the year. We continue to benefit from our strong foundations pricing power and indexation, operational efficiency, a very well-balanced and resilient set of business, 85% macro-immune and fully protected against inflation, and a very balanced geographical mix with 40% outside Europe. The operational trends we've seen in H1 have continued in July. Therefore, we have great visibility for the rest of the year. including in terms of energy, thanks to our hedging policy. Of course, we will maintain our balance sheet discipline. I will now hand over to Claude Lavelle, who will comment on our results in more detail, and then we will be able to answer to your questions.

Claude. Thank you, Axelle, and good morning, ladies and gentlemen. I'm on slide 19. And as Estelle already highlighted, following our 2022 record delivery, our H1 2023 results are remarkable. In H1, with $22.7 billion revenue, we experienced a very strong organic revenue growth of 14.2%, 5.2% excluding energy prices, driven in all our businesses by first increasing taxation on our long-term contracts, and continued price increases on non-indexed businesses, and second, good commercial momentum and resilient volumes. EBITDA is significantly up at €3,152,000,000, an outstanding plus 8.2% at ConsonScope and Forex, which is above the organic growth of revenue, excluding energy prices. H1 EBITDA growth is above the annual guidance range, which makes us very confident for the rest of the year. Thanks to the operating leverage, current EBIT is going faster at $1,674,000,000 and is up 13.3%. This shows a strength of our business models, highly resilient on delivering results quarter after quarter, and fully protected against inflation. Net financial debt is well under control at $19.2 billion, thanks to a significant improvement in free cash flow generation from minus $300 million last year to minus $78 million this year, due notably to strict discipline on working capital and lower integration and restructuring charges. We expect a net debt below $19 billion at your end, including the positive free cash flow in H2 and Bolton acquisition that should be closed by your end. You can also see on the slide the detailed Forex impact in H1, which were slightly negative and more significant in Q2 than in Q1, the negative impact trends from the UK, Latam, Australia, and China. For the full year, we now expect a continuation of these price trends. I'm moving to slide 20, and you can see the quarterly growth of our main geographies. Obviously, revenue growth in Q2, 8.8%, was lower than in Q1 due to the end of the heating season. All the strong operational trends of Q1 continued in Q2. Our revenue grew by 8.8% at constant scope and exchange rate to $10.7 billion, and we registered very strong growth in all our activities. Water grew by 7.1%, driven by good pricing and well-oriented volumes and works. Waste activities continued to grow by 3.3%. and plus 7.1% excluding recycled prices, thanks to resilient volume and commerce impact, price increases, and indexation. Finally, energy activities grew very fast by 23.8%, driven mostly by energy prices. Adjusted for the energy price effect, organic growth was 5.2% in H1, which is a very good performance, and it's fueled by a continued good commercial momentum. This number is slightly lower than in Q1 due to two main effects. First, project completion in water technologies with little impact on EBITDA. It is just a timing effect, and as Estelle said, the backlog of water tech increased sharply in 2023. Second, lower water volumes in France coming from adverse weather with colder April and May and more rain in June. All in all, there is no change in trend in Q2 compared to Q1. EBITDA growth in Q2 stood at 8.4% in line with Q1, thanks notably to continued strong synergy delivery, 41 million in Q2, leading to accumulated 230 million ahead of our unrollable Q2. Q2 current EBIT increased by 13%. I'm on slide 21. Revenue increased strongly in H1 by 14.2% to $22.7 billion. Most of this growth came from outside funds. Water technologies were up 9%, which is very good, with a very solid pipeline of new projects. In the rest of the world, double GDP growth continued in Q2, coming from all geographies. For example, the U.S. grew by 10.6%, driven by hazardous waste, and Latin America by 28%. In the rest of the world, all our operations were very well-oriented and experienced high revenue growth, 23.2%, with strong energy prices in Central and Eastern Europe. The U.K. continued to perform well with resilient volumes, good commerce, and price increases, leading to 6.1% revenue growth. Iberia grew by 10.6%. France and hazardous waste Europe is at 1.5%, slightly lower than in Q1, with lower water volumes due to adverse weather, as I said. Waste volumes remain flat, like in Q1, while recycled suffered from a very high comparison basis. On the next three slides, we detail our performance by activity, water, waste, and energy. And we start by water, our largest activity. I'm on page 22. Our water business experienced a very solid organic growth of 8.4% to 8.8 billion euros. Growth was driven by increased indexation and prices for 4.4%, and volume, commerce, works, accounting for 4.3%. In France, higher indexation of plus 6% were partly offset by the end of the Lyon contract, and lower volumes, down by 2.8% due to adverse weather. Commercial momentum remains very strong. In particular, I'm very proud to announce after a lead in Q1, as Estelle said, the new Perpignan water and wastewater contract with a backlog of 700 million euros, on which we will implement our newly patented WTS Z-Dense technology. In Central Europe, Revenue was up 19.2%, driven by increased tariff indexation and strong works activity. In Spain, revenue increased by 11.3%, driven by good water volumes, tariff increase, and strong works activity. Regulated water progressed strongly thanks to good volumes in the U.S. plus 5.2%, in Chile plus 1.4%, and indexations. Our water technology business performed very well, going by 9%. Verga Water Technology, its revenue increased by 4.6% thanks to service and technology business. Bookings are sharply up, 500 million, plus 500 million, with significant wins in desalination and lithium extraction. WTS revenue grew by 11.4%, driven by good commercial momentum and continued price increases in chemicals. On projects, WTS has booked a very large contract for Samsung, in the U.S. that will fuel the activity in the next month. Engineering backlog increased by $200 million to $2.6 billion. I'm now on slide 23, and here are the main trends of the waste activities. Our waste activities performed well despite flat volume and low recycled prices. We have delivered strong performance thanks to our price discipline, indexation in municipal business, contract selectivity, operational excellence, and a very high availability rate of our incinerators in France and in the UK, and also an improved mix in hazardous waste in the U.S. Revenue grew by 3.3 percent in light for light to 7.3 billion euros, excluding recycled price impact revenue grew by a solid 6.4 percent. The scope effect of minus 7.2 percent is significant. It is due, if you remember, to the antitrust disposal that has been made in 2022. It includes, of course, Suez UK, sold in November last year, but also assets in Australia. The growth came mainly from pricing, complemented by resilient volumes and partially offset by the negative impact of lower recycled prices. Volume was stable, minus 0.3%. Commerce, plus 0.8%, was solid, notably in the UK. The main driver of revenue growth was pricing, with plus 4.7%, partly compensated by lower recycled prices. Recycled prices have decreased since August 2022 from return high levels. In H1, higher equity prices contributed to 1.1% to revenue growth. The impact at revenue level was mitigated by taxation and profit sharing at EBITDA level. Hazardous waste remains well-oriented, which plus 4% revenue growth, notably in North America, as described earlier. I'm now on slide 24, and you have the details of our energy business. As you know, energy for Veolia is local, decarbonizing energy, and it's a key business priority at the heart of our ecological transformation strategy. We delivered strong results in the energy business in H1, of course, thanks to the favorable pricing environment, but also to the value and efficiency of our offerings. It's frequently providing local, affordable, and renewable energies and energy efficiency services. Energy revenue in H1 was $6.6 billion. Revenue both achieved 41.3% like for like due to the sharp increase of energy prices for 37%. Our business models allow us to pass the cost of energy increase to our clients, which protects our results. Weather was unfavorable, with an impact of minus 0.7%. In H1, we continue to implement the heat price increases, notably in Poland, in line with our fuel cost increase. I'm also proud to highlight the very good performance of our newly-opened Braunschweig biomass facility in Germany. which is a very good example of how we are transforming our energy business in Central Europe. Electricity revenue is largely hedged for 2023, as well as energy purchase, and we have secured heat prices for the next heating season. Our visibility is therefore very strong. Building and industrial energy services have also performed very well with new contracts in the Middle East and in Spain. I'm now on slide 25, and you have our usual revenue bridge, detailing the different effects. Organic revenue growth in H1 of 14.2% was lower than in Q1 due to the end of the heating season in Q2. Forex has a small negative impact of 1.5% due to lower GDP, Australian dollar, and Chinese yuan. Scope impact was not significant. And the 14.2% organic growth is fueled by good commercial momentum, energy price increase, and price and indexation increases. Its solid commercial momentum, as Estelle highlighted at the beginning of this presentation, is contributing to 2.8% to revenue growth. The weather impact was slightly unfavorable. The contribution of price increases in water and waste was plus 3.9%. and it is partly offset by lower recycled prices for minus 1.2%. Moving to page 26, let's have a look at the EBITDA Bridge, detailing the remarkable 8.2% organic growth in line with Q1 and above the annual guidance range. Scope and slides, in fact, were more significant than in Q1, Scope amounted for minus 12 million, mainly to the divestment of Trade UK. Forex negative impact reached minus 21 million, after minus 7 million in Q1, due to the depreciation of the US dollars, the lower GBP, Argentine pesos, and Australian dollars. Volume and commerce impact was plus 56 million, or plus 1.9%. Weather impact was slightly negative. of minus 22 million euros. And as usual, the main contributor to our EBITDA increase is the net efficiency and synergies. The growth efficiency gained reached 187 million, ahead of our 350 million target for the year. Net of shared efficiencies with clients and contract renegotiation, net efficiencies amounted to 73 million. The synergy delivery was also very good, reaching 84 million euros in advance of our annual target. In total, synergies and net efficiencies contributed to 157 million in Q1, which is 5.3% EBITDA growth. Energy and recycled impact was 52 million, with energy more than compensating the decline in recycled prices. The favorable energy impact at EBITDA level mainly comes from the benefit of the new biomass in Germany generating higher EBITDA, higher electricity prices for incinerators in France and in the UK, the positive impact of the catch-up of prices in Central Europe, China, and Italy, and a few opportunity gains in electricity in Central Europe. Our energy business will remain a strong contributor to our results in 2024 thanks to our secure heat tariff for the next heating season, which represents 75% of our cogeneration revenue. The negative impact of recycled prices almost offset the exceptional positive impact that we had in 2022. So we are back to a normal level of profit in recycling. I'm moving to slide 27. Let's see how the EBITDA increase is shooting the current EBIT which is going very strongly by 13.3% at 1,674,000,000. Renewal expense at 153,000,000 is comparable with 2022. Amortization and offer amounted to 1 billion 479 million slightly above last year. Industrial capital gains, net of provision and asset impairment is 93 million. This amount is significantly down compared to H1 last year due in particular to lower industrial capital gains. In 2022, we recorded higher capital gains from Suez antitrust disposals. In H1 2023, this 93 million euros includes 29 million euros of industrial capital gains coming from the last Suez antitrust divestment and pension scheme alignment between Veolia and Suez combined with the implementation of the new pension law in France. JVs are slightly down to $53 million, mostly due to divestment. I'm now on page 28, and you have the current net income, which is sharply up by 18.7% to $662 million, thanks to current EBITDA. Cost of net financial debt is slightly down to $312 million, thanks notably to the early reimbursement of the Sterling Bond in September 2022. The net cost of financing is stable at 3.66% in H1. Other financial income and expense were significantly down to $120 million compared to $199 million. It is due to the lower fair value adjustment of the Aguas Andinas Inflation Link Bond and unfavorable stress-related one-off in H1 2022, which was reversed in H2 2022. I expect total current financial charges for the full year around 950 million euros. Current tax rates stood at 28%, slightly lower than last year, and we expect a 26% tax rate for the full year. Minority interest increase in H1, due to Chile and central Europe. For the full year, we expect around 400 million euros. I'm now on page 29, and you have the bridge from current net income to net income group share. Net income more than doubled to 523 million compared to 236 in H1 last year. Non-recurring items were very high in 2022 due to the trade acquisition and integration costs. They decreased sharply to $123 million in H1 this year thanks to lower restructuring and integration charges, and they are now back to normal levels. I'm on page 30, and you have the detailed free cash flow of H1. Free cash flow improved significantly from minus $304 million in June last year to minus $78 million. H1 capex reached 1.8 billion compared to 1.6 billion due to increased discretionary capex from 150 million last year to 285 this year. Mostly decarbonization in Central and Eastern Europe that reached 104 million in H1. So we're accelerating the decarbonization in Central Europe. And a total of almost 500 million since January 2020 well above our initial commitment in the impact 2023 plan that was $400 million by the end of 2023. Ongoing Hazardous Waste project in the U.S., in Germany, and in the Middle East, the fading of works on contractual capex, and IFRS 16 impact with the renewal of the HQ lead. Second, we improve our working capital variation by $50 million compared to H1 last year, despite strong revenue increase thanks to our numerous cash initiatives across the group. Group VSO, for example, decreased by four days. Net financial debt reached $19.2 billion, including almost $200 million of negative forex. And we expect net debt to be below $19 billion at your end thanks to our extra free cash flow and the likely closing of Bolton acquisitions. On slide 31, you have the details of the net financial debt variation, where you can see the different effects I have just mentioned. I'm now on slide 32, and you have your 2023 improved guidance. EBITDA organic growth is now expected at the high end of the plus 5 to plus 7 range, driven by 350 million of efficiency gains, more than 280 million accumulated synergies at the end of 2023. Current net income around 1.3 billion, which means a double-digit growth compared to 2022. As usual, our dividends will go in line with our current EPS. Given our remarkable H1 delivery, we are, of course, very confident for the full year. Thank you for your attention.

Thank you, Claude. And now, you know, I'll let you have the floor for questions you may have.