Veolia Environnement Adr

very much and good morning everyone and thanks for joining this conference call to present the results for the first nine months of 2024 and I'm accompanied by Emmanuelle Meining our CFO our nine month results are once again very good and perfectly aligned with our annual targets which we fully confirm with confidence in a complex environment These results are the fruit of our operational agility and ability as well to seize new opportunities for growth. Building on resilient foundations, what we call our strongholds. They are an excellent start for our green-up strategic plan as these figures match our ambition and strategic choices with enhanced growth for booster activities and geographies. Going through the numbers, as you know, EPS growth for Veolia comes from three pillars. Top line growth, efficiency and synergies, as well as portfolio transformation. First, growth. In the first nine months, we have enjoyed very solid growth, and our revenue has increased by plus 5.1%, excluding energy price, with enhanced growth in our three booster activities, which are up plus 6.9%. as well as in our three booster geographies, up plus 6.4%. Please note that our Q3 revenue growth was even stronger than in H1, up plus 6.7%. Second, operational performance with efficiency and synergies, both ahead of targets. Efficiency gains reached 296 million euros compared to a normal target of 350 million euros. Regarding synergies, we reach our annual target at the end of Q3 with 411 million euros cumulative synergies already delivered since day one of the merger. We are therefore raising the 2024 target of synergies with cumulative synergies from day one now expected above 430 million euros. Third, capital allocation with the continued pruning of our portfolio and accretive investments. EBITDA increased by a substantial plus 5.6% on a like-for-like basis, in line with our annual guidance of plus 5 to 6%, to €4,936,000,000. Margin was up 72 base points compared to last year. Net financial debt is well under control and in line with our target of a leverage ratio below three times at year-end, close in fact to last year's level. These results allow me to fully confirm with confidence our 2024 guidance in all its components. And now I'm on slide five. In the nine months, we delivered solid revenue growth of plus 5.1% excluding energy price, thanks to very solid performance across all our businesses. On one hand, our struggle activities have grown by 4.4%, excluding energy price. Revenue from district heating and cooling networks was impacted by lower energy price as expected, but with protected margin, as you know, while water operation and solid waste enjoy solid revenue growth. On the other hand, our booster activities have grown by plus 6.9% excluding energy price, driven by water technologies and hazardous waste activities. In terms of geographies, Australia, the Middle East, and the U.S. performed particularly well at plus 6.4% growth, and each above plus 6%, aligned with the high ambition laid out in our greener plan for those booster geographies. As you know, around 80% of our turnover now comes from outside France. On page six, you have a focus on the performance of our Stronghold activities, which did very well in H1, and actually at the end of Q3, with plus 4.4% revenue growth, excluding energy price, after plus 3.4% at the end of each one, so it's even better. Water operations revenue progressed very well, plus 4.3%, with high contract renewal, in particular the CELIF contract worth 4 billion euros of backlog over 12 years. Volumes were contrasted. slightly down in France and Spain due to weather conditions, but better in Central and Eastern Europe and in the U.S. Regarding prices, we obtained a plus 15% tariff increase in Barcelona starting in April, which, while at the same time we successfully completed most of our rate case negotiation in the regulated water activities in the U.S., most of them leading to double-digit water price increases. Districating networks were up plus 0.8% exude energy price due to mild weather in Central and Eastern Europe, but would have shown growth if we had excluded weather effects. Solid waste revenue progressed very well, by plus 6.5% at constant scope and forex, driven by pricing and volume slightly up, notably in France, Germany, UK, Australia and Latin. CNI volumes were good despite soft macro, thanks to a proactive commercial action, both market share gains and pricing efforts. Recycled material price picked up a bit, which is encouraging. We continue to be very selective in municipal collection contracts, as you know. On page seven, a focus on the performance of our green up booster activities in nine months, which have grown by 6.9%, perfectly in line with the average mid to high single digit aimed at in our strategic plan. Water technologies, to start with, grew strongly by plus 13.5% to 3.6 billion euros revenue in the first nine months, a very satisfactory performance in terms of sales, earnings, and backlog. Bioenergy and energy efficiency activities reached 3.1 billion euros, up 0.8%, and I'm happy Hello, we are back. It looks like we had a problem of connection, so I was on slide 8 and I'm going to come back to where I was to focus on water technologies, which has been presented in more detail in our latest deep dive a few weeks ago. And I'm very pleased by our high level of bookings at 3.3. It looks like nobody can hear me, so if... Yes, that's it. I hope everybody can listen to me. So, I'm very pleased by our high level of bookings in water technologies, I'm on slide eight, at 3.3 billion euros for the first nine months, which include key successes in our five priority offers, micropollutants, wastewater reuse, minerals recovery, ultrapure water, and desalination. As you remember, we've enjoyed a big success in desalination in Dubai at ASEAN, as well as last week in Morocco. And in both cases, we're talking about super large plants, actually in the top three worldwide. We have also signed several projects for ultra pure water worth 350 million euros. And our pipeline remains very strong. Water technologies are expected to strongly contribute to the green up plant. And if I talk about the objective of the green up plant for the water technologies, We expect to grow revenue by 6% to 10% per year, three times faster than the market. To grow the EBITDA around 10% per year, with margin expansion and gross increase as well. Our performance in the first three quarters fully confirmed this value creation. Our investments have been prioritized in GreenerPlan to support growth of our boosters, as you know. By 2030, WaterTech revenues are expected to grow by plus 50% at least. I'm now on slide nine. Among the five party offers within WaterTech, we've identified pollutant removals, such as endocrine disruptors, or PFAS, as a key growth area. As you know, Veolia is championing deep pollution via our water technologies and hazardous waste activities, both key to ensure protection of human health. Our surveys show that there is a key priority for population across the globe. We recently surveyed Americans, for instance, about PFAS chemicals in water, and 70% of Americans said they were worried about its presence in their water. Veolia has a unique offer as the only end-to-end solution from detection to disposal, which is Beyond PFAS, a new offer that we launched a few weeks ago. PFAS is a fast-moving market with new legislation in Europe, in the US and in Australia, which requires a high level of expertise. We are confident that combining water technologies as well as hazardous waste know-how and assets is a unique winning formula. Hence, we target €1 billion revenue from PFAS and new pollution treatment by 2030 as new legislation is implemented. This compares to around 200 million expected for 2024 and zero in 2022. So this is fast moving. I'm now on slide 10. And now let's deep dive into our second level of value creation, which is operational performance. At the end of September, we achieved 296 million in savings, in line with our annual target of 350 million euros, with a high retention rate of 49%. They include specific action plan launched earlier this year in France, China, and Spain, following this pointing result in 23, and those action plans are bearing their first fruits. We've developed new tools as well, using AI, for instance, in e-billing and call centers. Efficiency and agility are part of our DNA, and I cannot see any end to us finding new sources of efficiency. Slide 11. In terms of tapping into the reservoir of cost synergies derived from the Suez merger, we are ahead of schedule and have achieved 96 million euros in the nine months. In total, we reached 411 million euros of cumulative synergies at the end of Q3 since day one, meeting our initial 2024 target of 400 million euros ahead of schedule. We are therefore raising the 2024 target to over €430 million, accumulated at the end of the year. It is worth noting that the global plan of €500 million, which you remember is very ambitious, as it was designed for larger parameters, including notably Suez waste activities in the UK, which we finally had to divest for antitrust reasons, has remained unchanged. After the first benefits that typically came from HQ mergers, followed by operational efficiencies, 44% of savings now come from standardization procurement in our key countries, in addition to 36% that still comes from operational efficiencies, particularly within water tech. I'm now on slide 12. These strong nine-month results allow me to fully confirm our targets for 2024, and we very much in line with our green-up objectives. The financial and non-financial objectives of our strategic plan are summarized in slide 12. They include current net income growth of 10% per year on average, with dividend growing in line with EPS. I now hand over to Emmanuelle, who will detail the nine-month 2024 results before we take your questions.

Thank you, Estelle, and good morning, everyone. As Estelle already highlighted, Veodia continues to navigate successfully in a complex environment. With 32.5 billion euro revenue for the nine months, we experienced solid organic revenue growth of plus 5.1% excluding energy prices, with an excellent performance in Q3 up 6.7%. It is driven in all our businesses. First, by our differentiating offers, allowing good commercial momentum and good volume in waste and water. And secondly, thanks to the productivity of our team to deliver strong pricing with increased indexation on our long-term contracts and the continued impact of price increases on non-indexed businesses. EBITDA is significantly up at 4.9 billion euros, a strong plus 5.6% at Constant Scope and Forex. Nine-month EBITDA growth is fully aligned with the annual guidance range, which makes us very confident for the rest of the year. Thanks to the operating leverage, current EBIT is growing faster at 2.6 billion euros and is up by 6.4%. Net financial debt amounts to 18.9 billion euros. We expect a net debt at year-end in line with the leverage ratio of last year, fully in line with our guidance at below three times. We continue to demonstrate the strength of our business model, combining stronghold and boosters, sizing growth opportunities and adapting when necessary to deliver quarter after quarter. Let's take a closer look at revenue. You can see the outstanding performance of our revenue growth in Q3 with strong water, strong waste, and resilient energy. If you include the energy price impact, the combination of our three businesses deliver a strong revenue growth year-to-date of plus 6.7% at Constant Scope and Forex, which reflects good volumes and pricing effects. Let's take a deeper look at each business. Water is up plus 6.5% year-to-date and plus 6.9% in Chouchourny, with good tariff indexation in all geographies constructed volumes, and strong activities in water technology. Waste is up plus 6.4% with very encouraging commercial and industrial volumes in France, UK, and Germany, despite soft macro conditions. And energy is up plus 0.8% here today, excluding energy prices. Q3 revenue is stronger, up plus 5.8% after minus 0.8% in H1, thanks to increased volume in Central Europe without any adverse weather impact and good energy services activity in Northern Europe and in the Middle East. On slide 16, you have the revenue brief detailing the different effects and showing our top line intrinsic growth of plus 5.4%. And you will see that it is even stronger at EBITDA level. Forex has an impact of minus 586 million euros due largely to lower Latin currencies. Scope impact is minus 582 million euros and includes 3D investments, the non-strategic construction business in France, La Sade in March, the non-replicable sulfuric acid regeneration business RGS, which closed early August, and the last 12 antitrust remedies, LIDEC, in early September. These investments are partially offset by a few tokens, notably Ofman, a waste management company in Germany, which is already generating synergies. There was a weather impact in H1, essentially in Central Europe, for minus 132 million euros. The main item of the bridge is the impact of lower energy prices for almost 1.2 billion euros. Meanwhile, pre-cycled prices started to pick up this year with a positive impact on revenue of 56 million euros at the end of September. So that the plus 5.4% intrinsic growth is fueled by first, good commercial momentum, resilient volume, and secondly, price and indexation increases. Regarding volume, as Estelle pointed out, activity levels are quite satisfactory in the nine months, contributing to plus 1.8% to revenue growth. CNI waste volume are encouraging, including in Europe. We benefit from several contract wins in waste, notably in CNI business in the UK, but also in building energy services in the Middle East. Finally, the largest contributor for the nine months is water technology in the US and in Europe. Regarding prices, we continue to benefit from favorable indexation and we maintain our capacity to increase prices faster than our cost base, which contributes to plus 3.6% to revenue growth for 1.1 billion euros. On slide 17, you can see the revenue evolution by geographical segments. With water technology revenues growing by 13.5%, with solid growth in all its business lines, whose combination allows high integration capability and cross-selling. Revenue benefits notably from the continuation of desalination projects in the Middle East, as well as strong activity in services and technology, especially in the U.S. Regarding the rest of the world, all regions are performing well, notably Australia and the Middle East. Rest of Europe revenue is up 4.6% excluding energy prices and climate, with a strong UK performance and strong water activity in Central Europe. Finally, in France, after a challenging 2023, we continue turning the tide thanks to a specific action plan launched at the end of last year. The combination of our two businesses continue to deliver value creation, and let's start with water, our largest activity, representing 40% of our revenue. Water business grew by plus 6.5%, driven by volumes and commerce, plus 2.4%, and pricing, plus 4.1%. It is thanks to good volume in Central Europe and in the US, around 2%. France and Spain were slightly down, minus 0.5% due to weather. Regarding contract renewals and wind, on top of the SEDIC contract mentioned by Estelle, we also extended our SOFIA contract by eight years until February 2034. In water technology, our bookings at the end of September are much higher than last year, amounting to 3.3 billion euros. Coming to pricing, we have continued favorable tariff indexation in France, plus 4.5% in Central Europe. with double-digit price increase since the beginning of the year, and in Barcelona, where we were granted an FT 15% price increase in April. Finally, in the U.S., we successfully completed our rest-case negotiation with double-digit increase in New York, New Jersey, and Pennsylvania. Slide 19, moving to energy, you have the detail of our energy business revenue growth. Regarding energy, as anticipated, lower energy prices, electricity prices to be more accurate, have impacted our top line. Excluding energy price, revenue grew by plus 0.8% and by plus 2.3% if we also exclude negative weather effects. As you know, our energy margin is well protected. From the up and down of energy prices, as we are providing heating services, which are regulated activities, fully pass through on energy costs, as proven by the significant double digit heat price increase we have obtained over the past two years. There is only a lag effect as we obtain the price increases over a couple of years. In nine months, we continue to implement in price increases, notably in Czech Republic. We are also ramping up our large district heating contract in Tashkent. Electricity comes on top as a byproduct from our cogeneration assets and also reflects the evolution of the cost of fuel and CO2. We also benefit from our aging policy and the improved performance of our assets. As a reminder and as part of our coal program, we started new high efficiency cogeneration with higher EBITDA. such as Braunschweig in Germany and Trierhof in Czech Republic. And we have more to come with Poznań in Poland in 2025. Electricity revenue is already fully hedged for 2024, as well as our energy purchases, and we have hedged approximately three-quarters of next year. Our visibility is therefore very strong. That is why we expect 2024 energy EBITDA to remain at the high level we reached last year, despite lower energy prices, as shown in the first half. Building and industrial energy services have also performed well, with new contracts in the Middle East and in Spain, offset by lower energy prices in Italy. In the nine months, we signed significant new energy efficiency contracts in Belgium, the Middle East, and Hong Kong. We have, however, seen a temporary slowdown in industrial customer demand in China, notably. Let's have a look at the waste performance. Waste activity are growing at a faster pace since the second quarter of 2024 by plus 6.4% compared to plus 3.4% in 2023 and 5.5% in Q1 2024. This is due to continued pricing power, improved volumes in Europe, and good commercial momentum in Australia and Latin America. Let's take a few examples. Europe is resisting well Despite soft macroeconomic conditions, we are winning market share with good pricing. We continue to carefully select our contracts and give priority to value over volumes. France is doing better than last year in terms of volumes, for instance, landfill, and also in terms of profitability. In Germany, we have a strong commercial activity and volumes slightly increased after a difficult 23 and a softening industrial environment. The UK has a strong start to the year with high-performing waste to energy activity, good commercial and industrial performance, and 100 of contract renewal in 24. As industry remains well-oriented with a strong use in Europe, which we are very proud of as the macroeconomic condition has certainly, and a momentum which is still positive in the US despite the 2023 high comparison basis. The action plan implemented in China confirms our agility. Recycled prices had a positive impact as the increase in carbon price compared to 2023 largely compensates the negative impact of plastic prices. Coming now to EBITDA on slide 21. The EBITDA bridge you see detail the very solid 5.6% organic growth fully in line with the annual guidance range It is fueled by the combination of two factors, the solid underlying revenue growth and strong efficiency and synergy ahead of schedule. We have limited scope impact amounting to minus 4% with the disposal of SAD, RGS and LIDEC compensated by the integration of Bolton assets in Germany. Forex impact is consistent with the trend in H1 and reach minus 121 million euros. Assuming the exchange rates remain at today's level, the full year impact at EBITDA level would be around minus 80 million euros. And we expect a slightly positive impact in Q4. The energy recycling impact was minus 51 million euros, including energy price minus 67 million, which I explained earlier, and was plus 60 million euros due to recycling prices. The weather impact was slightly negative at minus 38 million euros. Very satisfactory is the fact that our interesting growth, which is our organic growth excluding external factors, such as energy or inflated prices or weather, amounted to plus 7.5% and is fueled by volume and commerce impact for plus 2.5%. Synergies coming from the measure which says that we are successfully delivering on target and faster than forecasted. We have reached the yearly target after only nine months, which is remarkable. In terms of efficiency, we achieved 296 million euros in savings with an excellent retention rate on EBITDA of 49% and in line with our annual guidance of 350 million euros. I am pleased to see the specific action plan launched in France last year deliver results. Let's see how the EBITDA increase is fueling current EBIT, which is growing very steadily by 6.4% to 2.6 billion euros. Renewable expenses of 225 million euros are comparable to 2023 due to ramp-up of contracts in Europe, in the US, and water technologies. Amortization and O5 building PPA amounts to 2.3 billion euros, slightly above last year. Industrial capital gains, net of provision and asset impairment of 133 are similar to last year amount, 129. As I mentioned in Q2, Normally, this line should be less significant in Q4, as we are reviewing our impairment and provision, as usual, at the end of the year. GVs amount to €91 million versus €90 million in 2023, mostly due to divestment. It is fully stable. Page 23 CAPEX remains stable and includes €399 million of gross CAPEX, of which €45 million is even sent in WaterTech mobile unit and plan expansion. 98 million euros of decarbonisation capex with good progress on our Poznan project and 131 million euros of new hazardous waste projects, particularly in the US, the Middle East and in Germany. Seasonal variation of work capital was higher than last year at 1 billion 179 versus minus 745 million euros due to base effects and seasonal differences, which will not impact the free cash flow delivery of the year. We had higher payment in 2024 of CO2 quotas for €100 million and received higher adverse payment in water technology and energy national scale in Europe last year for around €300 million. Despite this timing effect on working capital, net free cash flow was positive in Q3, plus €136 million. We expect to largely reverse our working cap in Q4 and deliver, as expected, a strong net free cash flow for the full year. Net financial debt reached €18.9 billion and benefit from the cash proceeds from SAAD, LIDEC and RGR disposal, partially offset by the impact of the hybrid debt repayment for 2009. After the renewal of our €600 million hybrid debt in November last year, taking into account the seasonal working capital reversal in Q4 and the net cash proceeds from our disposal and a few acquisitions, we expect the leverage ratio at year-end to be in the same range as last year, which was 2.74%. On slide 24, you have the detail of the net financial debt variation, where you can see the different effects I have just highlighted. And you have on slide 25, our 2024 guidance, which we fully confirm. EBITDA organic growth is expected fully in line of the 5% to 6% range driven by 250 million of HTC gains. Our net target new target of cumulative synergy of more than 430 million at the end of 2024. Current net income will be above 1.5 billion euros, which means a double-digit growth compared to last year. As usual, our dividend will grow in line with our EPS. The leverage ratio will be at a comparable level to last year, below three times, and given our first-class nine-month delivery, we are, of course, very confident for the full year. Thank you for your attention. Thank you, Emmanuelle, and we're now ready to take your questions.

Thank you. If you do wish to ask an audio question, please press the star 1 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star 2 to cancel. Once again, please press the star 1 to register for a question. One moment, please, for your first question. And your first question comes from the line of Arthur Sittman with Morgan Stanley. Please go ahead.

I have two. The first one is that in your presentation, you talked, for example, about the ramp-up of the district heating asset in Tashkent. I know you purchased some assets from Uniper as well in Energy. And I suspect there are a few more of these. So I was wondering if you could provide us with a quick summary of the key large assets and contracts that are expected to come online and contribute to EBITDA in the in the rest of the year in 2025 and maybe even 2026. And if you're able to give a sense of the EBITDA contribution, this would actually be even more helpful. The second question is on the EBITDA bridge slide 21, I see the volume commerce and work component is at 118 million, which is only 13 million higher than in H1. I noticed that the same component shows a good improvement at revenue level in 3Q. So I was wondering if maybe something happened in 3Q between revenues and EBITDA. Was there a negative one-off in 3Q or maybe a positive one-off in 3Q last year leading to harder comps? Just a bit of color on that would be helpful. Thank you very much.

Thank you very much. So I guess on the first question, I'm not going to be able to give the full list of the contracts we've won which have an impact on acquisition. I can give a flavor of that. But in a way, this is all bundled into our bridge of revenue and EBITDA and what you call increasing growth. Listing still, the one you've mentioned, Uniper is not yet in the account, it's not closed yet, so there is nothing, and we expect it has been a bit delayed by the antitrust duration to get the authorization, so we will have more probably earlier next year, something like that, the result of Uniper, or as soon as possible, but nothing in the results so far. In terms of Tashkent, it's really a ramp-up thing, as in, you know, it started last year, but, you know, the perimeter is growing, and so are the results every year, and it will grow again next year. But other stuff you haven't mentioned, still in the energy and district heating, this year we enjoy the positive effect of our decarbonization in Brunswick. where we invested in the last few years and which is bearing fruit in EBITDA and everything else. Next year, we'll have probably the Poznan one, or not probably, I don't know why I said probably, we'll have Poznan, which is the next one in the line of our decarbonization plan, which, as you know, has double-digit RR. That's what we've presented in our deep dive related to the energy business earlier in the year. So the energy business is profitable, has good return, so is our decarbonization agenda on those. I'm very pleased to see that, as we said, the ups and downs of the revenue of energy in the world. has almost no impact on our result as we've demonstrated this year and it will be the same next year because it's a structural choice of very specific activities we have in terms of the base effect comparison emmanuel maybe yes

We are very proud of this Q3, which are, of course, at EBITDA level fueled by the strong revenue growth that you have seen in waste and in water. You have noticed that I think that it's in the bridge on page 21. You were mentioning some effects compared to June. It's true that when you look at the bridge, we are very proud of this Q3 and very proud of our intrinsic growth of plus 7.5%. We have been able to compensate all the negative effects coming from external factors. as forex or weather or recycled or commodity price by all the action that we have taken on synergies and efficiency as well as volume pricing. We have slightly less volumes compared, I think, to the percentage we had at the end of June, and it's coming from less work and, as mentioned by Estelle, weather regarding water, which were not super favorable. But even with that, we are able to generate a very, very high interest rate at plus 7.5%, making us comfortable for the rest of the year and allowing us to fully confirm our guidance at EBITDA and NetResults.

So basically, water volumes, you know, link with the handworks is the answer to your question.

Thank you very much.

Your next question comes from the line of Ollie Jeffery with Deutsche Bank. Please go ahead.

Thank you very much. I just wanted to start by talking about the efficiencies. You've had a very strong Q3 in your retention rate. When we think about the full-year efficiency program of 350 million gross and an average retention rate of 40%, that would go into net efficiencies of 140. You're already ahead of that at the Q3. Can you just explain a little bit about what's happening this year? Why are you managing to secure such a high retention rate? Does this mean that kind of going forward that perhaps 40% is a bit conservative given, you know, in every course you've been ahead of that? And then just coming to the synergy, that's obviously going very well. You've lifted the target to 430. If you do that, I think, you know, you'll be well in excess of, you know, with 500 million to keep the target, applying 70 for next year, is it fair to say you would consider that relatively conservative? I know it's a finite reservoir. You talk about that in terms of what you can get from that. But at this stage, would it be fair to regard that as conservative with 70 million left in the tank for next year? Thanks very much.

So two different questions. So first on efficiency and, you know, Before answering precisely to your question, you've seen on page 21 of the bridge that basically half of our, you know, result growth comes from efficiency and the other half from growth, as in top line growth. And, you know, I think that's important to have the global picture in mind in that respect. So it's really two engines that we are fully on in Veolia. Back to your question on efficiency and retention rate, you're right, you know it was higher than the average 30 to 50% we've enjoyed in the last few years and the main answer to that is because we are agile and launching a specific plan when it's needed. So we have the usual efficiency plan but very specific one on top when it's needed. It was needed given the disappointing results of 2023 in France, in China, or specifically in Spain. And that's what's bearing fruit. So in a way, that's what explains the agility is what explains the 49%. In terms of synergies, You're right, it's a limited reservoir, contrary to the efficiency which is really ongoing and I was about to say forever, as far as I can see. So the limited reservoir will have an end. We expect the end to be next year. I'd rather be on the delivery side than commenting on anything else, as you've seen. Is it conservative? The only thing I can say is if we can do more, we will. And we'll try to drive this reservoir to the last drop next year. That's for certain.

Thanks.

And your next question comes from the line one, Rodriguez with Kepler. Please go ahead.

Thank you. Good morning. Thank you for taking our questions. I have two on my side, if I may. The first one is on the possible changes that we've seen in taxes in France and the U.S., probably in the U.S. coming. In France, have you included any provisions from your 2024 guidance? And at the same time, we know you're an international company, so France and U.S. can actually cancel out, but then your 10% income guidance as well to include any provisions on the tax side and that's it. And the second part is in the synergy levels. You already signaled, you raised the guidance. On this part, you're already at the midpoint of your 5% to 6% range. Can you give us some clarity on what you've seen the operating performance so far in October to have a better idea of what the end of the year Q4 might look like? And we can expect something between the mid-range, the high range, the lower part of the range. Thank you.

Okay. Very clear. And in a way, the two are partially linked. The global short answer to all your questions is I can fully confirm that we will be above €1.5 billion of net income at the end of the year in Veolia, which is a big increase compared to last year, more than 15% increase compared to last year, which I'm very happy to be able to confirm despite the global context environment we are in. Going to your most specific question, tax in the US, in France, and you're right, we could comment on taxes across the globe. We are a very international company. Less than 20% of our revenue in France and less of our funds employed. You know, more than 5 billion in the US. You know, you're exactly right. You know, one may compensate the other. But, you know, the only thing I can say is... So far, the tax, you know, potential new tax in France haven't been stabilized and been voted for in the parliament, so it's difficult to comment in very much detail. But our first statements are non-significant at group level, irrespective even of the potential reverse on the opposite side of the Trump administration when it comes. So I can fully confirm the above 1.5 billion in a way, whatever the tax legislation in France comes in terms of conclusion. In terms of moving parts in a way, because you're right, I've raised the synergies for the year. I haven't raised the guidance in EBITDA. I can fully confirm it, and I can fully confirm the net result despite a lot of adverse elements. So in a way, there is an element of the moving parts, being able to confirm the more than 1.5 billion euro net results, which is plus 15% again, despite what? Weather, which is not exactly great so far, but I have no idea what it's going to be like in the next few weeks. I guess macroeconomically-wise, we don't see any change in trends, so nothing specific here. It's exactly the same in October as what we've seen in the rest of the year, so no change to expect for us. As you've seen, we've had a negative Forex as well, and a bit of Scope. There probably will be a negative in the Tax French element. And a positive in everything we do in being agile, including, you know, raising our synergies for the year and all the rest of it. I think, you know, the slide 21, if I should say, is quite striking. The intrinsic growth of our EBITDA is plus 7.5%. But you have a lot of external elements which hasn't helped. And despite that, we can confirm our guidance, which already is relatively narrow, if I may, 5.26%. is relatively precise. And again, above 1.5 billion, despite everything I said, I think it's quite a good performance and a very positive sign of our confidence for the rest of the year. So nothing specific to expect for the rest of the year.

Very useful. Thank you very much.

And your next question comes from the line of Ajay Patel with Goldman Sachs. Please go ahead.

Good morning, and firstly, congratulations on the results. You're really sharing some resilience here. I wanted to ask the questions, maybe what's been asked before, maybe in a slightly different way. If I took the benefits and the cost-cutting and just add them together, and clearly this year has experienced headwinds in FX in particular, And we're bringing, we're increasing the target for synergies this year but keeping the overall target unchanged. So we're bringing forward the benefits of that into this year. Is the message that we still have the same cost-cutting potential but we're just delivering that cost-cutting earlier and therefore we're exchanging a bit of growth from next year into this year? Or is the message that when we take the cost-cutting we have from synergies together, the potential we have is much stronger than we target, and then we'll unlock those levers as we go along. I'm just trying to get the tone of where your picture is on cost-cutting. And then the second question, just to make things a little bit easier for me, what is a 1% movement in corporate tax impact you for French business and for the U.S. business? So just so I have an idea of scale for any corporate tax changes that may occur, I have something in my back pocket.

Thank you. Just a few things. In terms of cost cutting, you've put together something which I would rather, I guess, put on different pots because they have a different category, which is cost cutting and synergies. Cost cutting, it's a recurring one. And you know, it will go on, so it's 350 million per year, and in 25, in 26, in 27, you know, you will still have the 350 million euros, and as I've said, we are able to adjust when it's needed to specific action plan and so on and so forth, and it delivers good results. So that's, in a way, a very recurring engine for growing our results. The synergies is the one which is limited. You know, once you've tapped into this reservoir, the 500 million accumulated, it will come to an end at the end of 2025. But again, there is a third element of growing our result, which is growth. That's why, again, I'm insisting on the few elements, the few engines, which you haven't mentioned. So in a way, you know, growth, And I'm very, very pleased by the plus 5.1% organic growth in the nine months, despite very difficult macros in various geographies, despite everything we've seen and we haven't been helped in other ways. But we're gaining market share, we have a good pricing strategy, we enjoy good positioning. happy to answer the question on synergies and efficiency but if I may the there is another engine you haven't touched upon which is super important in growing our results and there is even a third one which is the allocation of capital as I said three engines top line bottom line as in efficiency and synergies and capital allocation so it's really the three together that's more the way I see it And another way of answering the question I'm very, very often asked, which is how come you have so solid results, I would say quarter after quarter, how come you are, you know, launching so quickly in a way very promising green up strategic choices despite the global environment which is complex. And I really think there is a strategic position in here, which I would like to mention in a minute in a short version, but which is exactly what's underlying our green-up strategic plan. What is it? One, wastewater and energy activities. So we are really assembling and combining those three activities and seizing the opportunities when they arise and being very adaptive. We are very international. I've mentioned 80% outside France. It's more than 5 billion in the U.S. We are growing fast in the Middle East and Australia. So I guess the international footprint of the group is something which is super important as well. And I guess the third one is the demand of the population. So here I would say irrespective of the political turmoil at times, in the end what's supporting our growth not only for this year but for the years to come, is our ability to offer solutions which protect health, which protect cost of living, which help the industries to thrive. They just desperately need water and we are the solution. So I guess this is a combination of all that which help us to deliver results like the one I said and I think GreenUp choices with boosters and strongholds combined is really a key for me. In terms of corporate tax, Emmanuelle, you know, although I want to ask you to mention all the corporate tax in all the countries we operate, as I said, it's 40 countries across the globe, but in the US and France, please. Yes.

So to answer your question shortly, around 1% will be a few million. So the main message is to see that when you look at our net result, the impact that we will have from Forex and Scope as well as will be compensated as the impact of taxes by the capital gain positive that we discussed in the last result. And as Estelle has mentioned, what is important is thanks to the rate synergy for the year, we'll be able to face any impact of weather which could come in Q4 even with an October which is not super favorable so far. And it's true that, as mentioned by Estelle, efficiency is our contractual model. What we can do is improve the rendment or profitability, or the efficiency, as you see with what we are doing in France, in China, and in Spain, and it's not the end. We are continuing and working on every part of the group where we can find value and improve the margin generation.

So 1% of corporate tax equals a few millions in the geographies you mentioned. And altogether, growth and resilience are the two elements of our growing our results.

What I wanted to say, if I hear you correctly, is that despite you moving forward the 30 million of synergies that you attained this year to get to the 1.5 billion target, you're saying We have, and the FX has been around 100 million headwind to you. You have levers in cost-cutting synergies, balance sheet, the portfolio, i.e. the green-up program, to have full confidence in delivering 10% growth per annum out for your plan. Is that fair? Is that the summary of?

No, I guess I may say, I think you're, you're just, the effect that you are mentioning, it was a bit down for Forex and Scope. So you, It's slightly lower regarding net results.

I thought you were referring to the 2024 guidance. If you're referring to the 2027 guidance, which is on average 10% per year of net results and EPS in line, I guess we will have a few moving elements. And everything we do in terms of synergies and efficiency and agility helps us to be able to deliver and be very confident in the delivery of this objective despite, you know, moving factors around us in a way. So you could see Veolia as a resilient and solid despite the environment, the macro environment, the tax environment, the political environment. That's more the way I would see it. Okay. Thank you.

And we do have a follow-up question coming from the line of Ollie Jeffrey. We joined Deutsche Bank. Please go ahead.

Thanks. I wanted to ask two questions. The first one is just coming to weather. So if I look at the nine months this year and I look at 22 and 21, cumulative negative weather EBITDA effect is basically 200 million. Part of the question here is when we think about Q4 last year, the weather effect was minus 35 million at the EA level in Q4. At some point, I know we're having a, you said that, you know, so far this quarter it's been, you know, weather hasn't been favorable. But given we've got, we've had consistent negative comps in previous years, does that mean we should expect Q4 for the airport to be in line with last year? Because that was negative last year as well. And then when thinking about next year, If we were to have a normalized weather year, how much of that should bounce back of that cumulative 200 million? I'm just not sure if that's just volume effects and maybe there's a combination of volume and price. And then on internal growth, your internal growth or volume commerce, I mean, that's progressed quite nicely from 21. In 21, that was 1.5% for the year, then 2% in 22. And then it was 3%. or 3.3% at the half year for this year. I know that's come back a bit because of water volumes in Q3, but when thinking about Q4, if you had normalised weather, is 3% the kind of level of what volume commerce you'd expect within the intrinsic growth? I'm just trying to understand if that underlying, that improvement that we've seen in the last two years can be sustained. Thank you.

So What you say about the, you know, there is part of it which is dependent on us and part of it which is not. That's why we call it intrinsic growth of our revenue and EBITDA versus what's not intrinsic and whether it's not something we can, I guess, you know, have an impact on. You're right, we have negative weather effect in Q4 in the last few years. The Q4 is more impacted by energy, weather, if I want. If you want, as opposed to in the summer, we're talking more about water, weather, volume effect. So I guess winter and summer are quite different in that way. Is that an ability for me to predict what the normalized looks like? I'm not so sure I can do that. What I can say is, you know, we are getting used to weather which are very unpredictable. But the good news is Veolia is solid enough to compensate when we have a negative weather effect. That's the way I would see it. And to be able to deliver such a good and solid result despite, again, the negative weather constantly, and I hope it will reverse in Q4, but I cannot guarantee that. And even if it were not to, then everything else we do is enabling us to guarantee, in a way, the result for the year, irrespective of the external factor. That's the way I would see it. Talking about the normalized weather, sorry, I'm unable to do that for you. As we've seen in Valence last week, which was totally flooded, following a summer which was super dry. So the mid-term, if you want, supporting element of everything I said is whether all that is a consequence directly of climate change, and we have to adapt to it. But the good news is for Eolia, adaptation to climate change is exactly the type of solution we offer to our customers. So if you look at the mid-term, if you want, or over a mid-long period, this is helping our business because the customers are coming to see us to say, okay, what can I do regarding weather impact and so on and so forth. So in a way, it has a positive link, such as a winning desalination contract and so on and so forth, or our very good water tech performance. I'm not comparing apples and pears, but I would say if you de-zoom from a quarter-by-quarter element, there is a very supportive trend supporting our business.

And on the volume and commerce, would you agree with the fact that that volume and commerce, apart from the course we just had, generally speaking, that underlying is showing steady improvement?

Yes, it is. I would agree with you because it's a volume commerce and in a way pricing. We can add that if you want, which is a sort of commerce as well. Intrinsic growth and then top line growth is plus 5.4%. Let's say Veolia now is more in those range where a few years ago we were more in the 2-3% type of range. So, yes, it's steadily, we're getting market share, we're good at what we do, we have built a leader in our industry, which our offers are very supportive. An example of that would be PFAS. I've announced we will have probably more than 200 million revenues in PFAS by the end of the year. It was zero two years ago. That's really an example of, yes, the underlying growth of Deolia is improving year on year. irrespective of the external factor. You're exactly right.

Thank you.

And your next question comes from the line of David Candela with Intesa San Paolo. Please go ahead.

Hi, good morning. And thank you for taking my questions. I just have one on the water technologies. If I remember well in your deep dive presentation, you said that you can be selective in project that as the demand is basically outpacing your supply and given your remarkable growth in the revenue that is in the low teens i was wondering if demand will keep pushing you will be able to to catch more and more and or if there are some constraints i don't know related to the uh i don't know the operating machine capability or the the workforce or something else it just Just a way to check if you can do more, and of course you're doing really well for today. Thank you.

Thanks for the comment. I would agree with that. So in a way, is there a bottleneck? I guess there was a little bit in terms of the production of some membrane. That's why we've expanded our plant. typically in Hungary and invested accordingly. There was a little bit of bottleneck in the mobile unit. That's why we've invested in expanding our fleet of mobile units, which has above 90% of utilization rate. So we are progressively, I guess, bottlenecking, if you want. What I can testify is the fact that, as I said, we prioritize investment in the growth boosters. So there is no question of, you know, could we need more if we had more money? We prioritized those investments in water technologies, in hazardous waste, in bioenergy, because it's good return, good growth, high demand for a long time. And we don't have any bottleneck in terms of people recruitment, as you've alluded to, or anything else. The only thing was really those production plants and mobile units, which were unbottlenecking. And I guess another, I'm insisting on the fact that part of our success of the water tech is due to the combination with the rest of the business, as in water operations or even hazardous waste when you think of PFAS. So don't think of it as in isolation of the rest of the group. When I said part of us delivering those very solid results comes from the combination of the various businesses as well as the various geographies. If I go on with the various geographies in water tech, we used to have very high demand in part of Asia two years ago. We've moved to the U.S., being very agile, which is in high demand. And then we have a higher demand in the Middle East, for instance. So we are constantly moving from one geography to another to follow where the demand is. multiple businesses with water and energy plus multiple geographies are key to our success.

Thank you.

And your next question comes from the line of Thomas Martin with BNP. Please go ahead.

Hi, good morning. Two questions, I think. Firstly, on energy, I think you mentioned you've seen a slowdown of new customers in a particular area. I think energy services, perhaps. I didn't catch the details on the segment or the geography, so can you just clarify that for me, please? And secondly, I had a question on hedging. You mentioned you're three-quarters hedged for 2025, I think. So can you help us understand the magnitude of the potential impact from hedging, the delta, I guess, for 2025 versus 2024? Appreciate that in broad terms, district heating energy costs are largely a pass-through. But is this three-quarter hedging weighted to, for example, energy from water and wastewater, or is it district heating, which is a whole lot? Presumably, hedging will be a negative at the revenue line in 2025, but is there a material delta at the EBITDA line, please? Thanks.

So I guess first question on the slowdown. So there is no slowdown altogether. There is a very specific situation I'm going to explain. Altogether, we enjoy very strong demand in our energy activities, both our stronghold, which is district heating, and our booster, which is energy efficiency and bioenergy. In terms of district heating, the river view is impacted by weather and the price of energy, if you want. But since it's a pass-through, you know what, I don't care so much about it. What I care about is margin. And we've maintained the margin at a very high level, which we had reached last year, which I'm very pleased to see. So we've demonstrated this year that when I said energy prices largely pass through. That's what we see in the figures. We've seen a very high demand in our energy efficiency and bioenergy, which is the booster of activity as well. The only negative we've seen is some delayed project from industrial customer in Asia. So typically transforming your boiler into biomass something has shown some delay. That's exactly what I was referring to. So very specific industrial customer in Asia, as you would guess the reason behind, given the slow macro environment in industry in this part of the world. In terms of hedging, So, as you said, you know, I care more about EBITDA than revenue altogether in terms of revenue as in, I won't say artificial, but pass-through revenue. I care about revenue as in growth, as in winning new customers and pricing. But if it's just a pass-through, you know what, the important stuff is margin. But on hedging, Emmanuelle.

Yes, on hedging, you know our hedging policy. When we are not in a pass-through model, we are hedging. And as you mentioned, we hedge for next year. two-thirds of our production. So we have moving parts, and at the end of the day, the message is that it's neutral. We have negative effects from lower price for cost generation, as well as waste to energy in the UK, but it is compensated by positive effects on electricity costs, for instance, in France. as well as lower energy costs from coal and gas, for instance. So at the end of the day, what we see for 2025 is that it will be neutral.

Thanks.

And there are no further questions at this time. I would like to turn it back to Ms. Estelle Broshnoff for closing remarks.

Thank you very much. You've seen that you know a very good set of results showing resilience and growth, which is really the winning formula for us. And we are very confident and therefore I can fully confirm our guidance for the full year. Thank you very much.