Veolia Environnement Adr

Today, Thursday, July 30th, 2026. I would now like to turn the conference over to Ms. Estelle Brachlianoff. Please go ahead.

Thank you, and good morning, everyone, and thanks for joining us for this conference call to present Veolia's H1 results, and I'm accompanied by Emmanuel Mening, our CFO. We'll start on slide four, and let me start by highlighting the key achievements of the first half. We delivered a new semester of strong performance with another improvement of our EBITDA margin and an excellent 10.4% growth in current net income, well in line with annual guidance. Given the volatile geopolitical and macro environment, these results show how much Veolia is standing out, with resilient growth quarter after quarter. This is showing the strength of our model with a strong combination of stronghold and booster activities, an international presence and a rigorous operational execution. If anything, this semester has shed a light on the importance of water security. In the context of recurring heat waves, dissemination units become geostrategic and data centres hitting wall of acceptability in arid regions. Our unique positioning as a powerhouse of ecological security and resource sovereignty has become even more precious. This semester was moreover a good illustration of the active portfolio transformation designed to enhance value creation and boost growth. We will have rotated more than 8 billion euros of assets in four years through targeted acquisitions such as cleaners, closed earlier than expected early June, and Asset Debt Vestitures which I expect to sign 500 million euros this year. Last but not least, our excellent H1, the good beginnings of cleaners within Veolia and our confidence in our business model allows me to improve our full year guidance. When I expect to grow current Medicom by at least 8% including and not excluding cleaners. Our grid up trajectory is of course fully confirmed. Now let's look at our H1 results, and I'm on slide 5. Revenue reached €22,193,000,000, up 1.5% at Constant Scope and Forex, and excluding energy prices as usual. EBITDA came in at €3,552,000,000, this is up 5% at Constant Scope and Forex, in line with our guidance. And a very good performance given the complex macro and geopolitical environments, and this is, of course, in the absence of any contribution of social energy we enjoyed previously. Noteworthy is our EBITDA margin expansion of another 70 basis points, reaching now 16%, which is an increase of 120 basis points in two years. This margin improvement quarter after quarter is fueled by two levers. Our strategic choices towards more international and technology driven activities, as well as our continuous operational efficiencies. This is €195 million this semester alone. Current EBIT was up 6.4% at Constance Open Forex, demonstrating strong operating leverage. Our net free cash flow improved significantly by €164 million compared to H1 last year, driven by strict management of capital expenditure and working cap requirements. Net financial debt stood at €24.5 billion, including Cleaners Acquisition as anticipated. We are perfectly on track in terms of leverage, slightly above 3 at your end. These results give us strong confidence for the full year 26 and even raise our guidance. On slide 6, you can see a snapshot of our unique strategic positioning which gives us confidence not only for this year's performance but for very long. Belia provides ecological security, supplies essential services, and therefore contribute to Vissou's sovereignty. Our proprietary solutions and technologies help secure access to water supply, which is as critical as oil, if not more, as we see now very strikingly in the Middle East, with desalination plants being targeted or even with data center permits being rejected in arid locations. Our solutions also give access to an untapped reservoir of local energy at fixed price instead of imports. and help secure supply chains, thanks to the circular economy. The disruption we've experienced recently with respect of our moves is another testimony of the strategic importance of our services for our customers. Last but not least, our solutions protect health when we depollute and decontaminate, as when we treat PFAS, for instance. We have built with Veolia a unique environmental security powerhouse, addressing critical needs for our clients. In terms of business model, and I'm now on slide 7, Veolia offers a unique combination of resilience and growth. And I say this has been tested and demonstrated quite a lot in recent years, with results growing quarter after quarter, when simultaneously we faced inflations, trade wars, economical downturns, and more recently the war in Iran. In parallel, we enjoy our international presence and environmental services leader operating 44 countries across five continents which gives us firepower to lead in technology and innovation thanks to our 14 R&D centers and over 5,000 patents. This enables us to offer unique integrated solution combining wastewater and energy services and combining the strength of our infrastructure-like strongholds together with our agile boosters. Slide 8 illustrates in a trial how strong our model is. with strong results delivered despite external headwinds after the strike in Iran and a confirmation therefore of our positioning. The crisis in the Middle East led to delayed projects such as new destination plants or oil and gas effluent treatment. Paradoxically, on the other hand, the war has reinforced the importance and critical nature of those same projects and I would expect anything but an enhanced pipeline eventually. As a direct consequence of the war, we incurred higher fuel and chemical costs in our contract. Of course, we rapidly passed through this surcharge through our private clients. We are also, as you know, automatically protected by our indexation formulas in our municipal contracts, with some lag effects and therefore temporary margin squeeze. In order to compensate, we have ensured a strong pace and even a stronger pace of efficiency program delivery and put in place specific action plans. Altogether, given the volatile and complex context, I am very pleased about our 5% EBITDA and above 9% net income growth in H1 and even our ability to improve our four-year guidance. With regard to the long-term group's perspective, the Middle East conflict, recent heatwave in Europe and droughts have highlighted water security was absolutely key and technology security is precious. Looking now at our performance by business line, we see resilient growth and solid EBITDA provision across all our activities. I'm on slide 9 and I will start with our stronghold activities. This is municipal water, solid waste and district heating. They generated €15,992,000,000 in revenue, up 2%, with an EBITDA up 4.7%. In times of uncertainty, our strongholds are solid foundations for our group performance. And municipal water was a real driver in H1, with revenue up 4.1% and EBITDA up 7.7%. Not only have we benefited from a very good volume momentum in all our geographies, but also from a renewed commercial dynamism. When droughts hit, cities face water restriction, or industries realize the cost In H1, we enjoyed in France close to 100% renewal rate of contract and we registered new commercial successes, for instance in Cucuta in Colombia with a 2 billion euro backlog over 20 years. This is a very significant contract. I would like to stress also that we are growing our district cooling offer in France, with more than 100 sites identified, covering 3 million inhabitants, an offer which has gained traction since the heatwave in June. This is illustrated by our very innovative solution deployed in Saclay, where nature is helping cooling down data centres, flats and universities for minimal energy consumption. Now to our booster activities. So this is water technologies, hazardous waste and bioenergy. They generated €6,201,000,000 in revenue, up 4.1%, including tuckings, and excluding projects, with a very solid growth of EBITDA up 6.2%. Regarding water technology, revenue was slightly down due to project delays in the Middle East crisis, which is temporary, as I just explained. And we expect a recovery from H2 thanks to the action plan we've put in place, including pricing initiatives, commercial actions, for instance. Moreover, we see renewed demand and a healthy pipeline. The month of June was very promising in terms of bookings, notably with large microelectronics clients, totalling €343 million of orders in microE. And we will continue our strong EBITDA growth and margin expansion. As the Swiss enjoy solving growth after a first quarter penalised by weather events, as you remember. In the US, we succeeded in closing cleaners early June. and I'm very satisfied with the ramp up of the integration and teams. The month of June was excellent and very promising regarding the rest of the year. You remember we built in parallel our future growth for years to come with five new treatment plants under construction of ramping up across the globe in hazardous waste, which is an additional 486,000 tons of capacity eventually. I'm pleased they are progressing well with the commissioning in the UK in January, and the beginning of the commissioning of the High Temperature Incentor in January and June and a ramp-up which is starting therefore. On slide 11, I'm very happy about the progression of our innovative offers which are on trajectory of reaching each 1 billion turnover by 2030. With regards to AI industries, this is data centers and chips manufacturing, they are in high demand to secure steady water supply for cooling systems, ultra-pure water, and they use large amount of high quality solvents and acids. Data centers are starting to see resistance from local communities to be granted permits given the intensity in resource consumption. And our data center resource 360 new offer helps secure local acceptance and license to operate. We use recycled water technologies and heat recovery, for instance. As explained in our April event in London, we already grew very quickly in those AI industries from 150 A million euros in 2019 to 560 million euros in 2025. And we're now targeting approximately 1 billion by 2030. In H1, we secured multiple commercial successes by leveraging our new offering and technological capabilities, resulting in new contract wins in data centers and microarrays, such as our recent contract with AWS in Mississippi, the one we just announced today in Ohio, and the more than $200 million ultra-pure contract or large micro-e with U.S. cleaners in the water tech. Regarding PFAS and new pollutants, we have also an ambition of €1 billion revenue target by 2030 and we are already very successful. Our recent acquisition of cleaners will enhance our U.S. capabilities with a presence in 50 states. So will the acquisition of the sole remediation specialist in Australia with duplication possible. These innovation-driven growths are testimony of the Group's transformation towards more value-added offers and services. Our international footprint has largely contributed to our good results in H1, and I am now on slide 12. I would like to highlight the continuous standout performance in our regions outside of Europe, which grew by a strong 7.1% at Constance Forex, with a noticeable acceleration in Q2. Outside Europe, our growth is much faster than the Group's average. and a testimony to our asset portfolio internalization. All geographies outside Europe showed commercial traction, notably Australia, Asia rebounding, and a sustainable growth very strong in Latin America. That was accompanied by significant EBITDA progression as well. In the US, we closed cleaners earlier than expected, and I will come back to it. The water technology segment was temporarily penalized by the crisis in Belize, as I explained earlier, but continued to deliver a remarkable EBITDA growth. In Europe, we grew by a solid 2.6%, as France and Europe have shown resilience. I would like now to spend a few minutes on efficiencies, slide 13, because at Veolia, it is the backbone of our value creation process, as our track record shows, and again in H1, with €195 million. Our recurring efficiency plans are enabling us to enhance year after year the profitability of our operations, with commercial efficiency, smart pricing, upselling, cost optimization and synergies. AI and digital gains will even support our efficiency in the years to come. We've started already with 23% of our gains last year sourced from AI and digital, and we are deploying more widely solutions such as Talk to My Plant, enhancing maintenance manager in our waste or wood replants. Regarding synergies and integration processes, we've been successful executing the Suez Acquisition, which bodes quite well for the upcoming progression of cleaners. I'm now on slide 14. Veolia continues its transformation as set in green-ups towards more international and multi-technology driven activities and boosters. These two fuels margin improvement and value creation and enhance the growth profile. We are very are active in strategic portfolio management with €8.5 billion of assets which will have rotated over four years, which is massive. You remember that 2025 was a pivotal year as we successfully achieved the trade integration, but we've also crystallized strategic move with two major acquisitions signed or closed. €1.5 billion invested in water tech. We have already extracted nearly half of the planned €90 million synergy, this is €40 million, including €20 million in H1. and of course 2.5 billion euros with the acquisition of Clean Earth in the US closed early June. Lastly, we announced 2 billion euros of non-strategic asset divestitures by mid-28 and I'm fully confident in this process which is accelerating now. We have processed already ready for more than 2 billion euros disposal and I expect around 500 million euros of signed divestitures in 26. A few words on the landmark acquisition of cleaners in the U.S. This is slide 15. Not only are we doubling our size and growing the U.S. hazardous waste market, reaching the number two position with more than $2 billion of revenues, but we are also building a national platform to offer a full range of the other services throughout the U.S. Integration started at full speed. I'm very confident in our capacity to deliver the $120 million cost synergies by year four, let alone the growth enhancement I expect from this acquisition. The acquisition is dilutive in year one, as you would expect, but we will offset it, as you will see in a minute with our enhanced guidance. And the deal will be accretive as early as year two. Now, Veolia generates more than $6 billion of revenue in the U.S., that is the second Country of the Group. Finally, I would like to say a few words about our guidance on slide 16. The OILIA, as you know, is not used to increasing its targets, but I will do it this time. We now target a current net income growth of at least 8%, even including cleaners and not excluding cleaners. This shows our confidence regarding this acquisition as well as in our capacity to continue to give a growing result in spite of a volatile macro and geopolitical context. I of course confirm as well our brilliant planned trajectory. Emmanuelle, the floor is yours to elaborate on H1 results.

Thank you Estelle and good morning everyone. In the current environment, our results are continuously progressing thanks to solid operational execution and the unique combination of growth and resilience. I will start with revenue, which amounted to €22.2 billion, up 1.5%, excluding energy prices. Organic growth of EBITDA was 5%, and that's with online guidance. It's a remarkable performance, as we no longer benefit from such synergies, and given the temporary negative impact of energy prices in H1. and our EBITDA margin continued to increase by 70BP to 16%. We continued to enjoy a strong operating leverage leading to 6.4% progression of current EBIT with a good quality of earnings. Current net income jumped by 10.4% at Construx, largely in line with our annual guidance, thanks to stable financial charges, which is excellent when considering the higher average net debt linked to our M&A operation. and thanks to a stable and modest tax rate of 25.8%. Net free cash flow increased slightly by 163 million euros thanks to tight capex control. As expected, net debt landed at 24.5 billion euros including the closing of clean earth acquisition and the seasonality of working capital. Worth noting, forex impact reversed in Q2 and became positive thanks to stronger dollars in Q2 and the appreciation of central European currencies. Moving to slide 19, you can see the revenue and EBITDA evolution by geography. Starting with America, APEC and ME, as Estelle mentioned earlier, growth outside Europe was excellent, at plus 3.9% and even plus 7.1% at constant forex, with an acceleration in Q2 at 4.6% and even 9.1% at constant forex.

Above all, EBITDA jumped by nearly 9% outside Europe.

Most regions resisted mid-table digit growth. Let's mention some of them. The U.S.A. grew by 3.9% and 11%, including Takim, in spite of adverse weather conditions, which impact others with volume. Cleaners contributed one month, perfectly in line with expectation, and integration had started promptly after closing on June 1st. Latam was up by 10%, benefiting from strong commercial momentum, good waste activity, as well as water tariff increases. Africa, Middle East revenue increased by 1%, with limited decrease of Middle East revenue in a complex geopolitical context. All the technology was a bit disappointing in H1, with revenue of 0.6% excluding projects. Projects were impacted by several bookings, and milestone delay due to the global attentism linked to the Middle East crisis. The market in the U.S. was mixed with strong bull and bears, AI and mercury, upset by lower petrochemical and oil and gas clients. We expect recovery in H2 thanks to the action plan we have put in place, including pricing initiatives, volumes, rebounds, and commercial actions. Above all, Autotech continues to deliver a solid EBITDA growth of plus 6.7% due to our business refocusing, efficiencies, and synergies. Europe grew by 2.6% due to favorable weather in urban heating and strong water activity. Finally, France and other Swiss Europe were resilient as always in spite of adverse weather conditions. Water volumes were very good, thanks to various solutions to face heat waves. Now let's take a look at our performance by businesses. I start with water, which you remember represents around 40% of our revenues. H1 water performance was outstanding. Revenue was up by 1.6% thanks to an excellent performance of municipal producers. EBITDA increased by 7% and we reached a record EBITDA margin of 19.8%. Water operations grew by a remarkable 4.1%. We benefited from a good volume momentum in all geographies, but also from strong commercial dynamism combined with positive indexation in Europe and in the US, except in France, due to lower electricity prices. and it's ruled by excellent volumes in France, in Spain, in Central Europe and in the U.S. This confirms the strong momentum as the water stress expands. We expect a good truth here on that front and we are very pleased with the new contract in Colombia. As I just explained, water technology continues to be impacted by lower project bookings, but we expect a rebound in H2. Moving to waste, representing 35% of our revenues, waste activity are overall stable, despite unhelpful macro and is very comparable to previous quarters. Excluding external factors, whether recycled and electricity prices, waste revenue was up 0.9% at Constant Scope and Forex. And what is remarkable is that we continue to improve our profitability, EBITDA grew by 5.5% and EBITDA margin increased by 100 BP, Close to 14%. Dealing with solid waste, revenue was flat as in previous quarters with solid growth in the UK, Australia, and LATAM, offset by slower Germany in France, impacted by lower electricity and recycled prices. We start to invoice fuel surcharge to our clients after the diesel cost increase, and we expect to fully recover the cost of ruin by year end or early next year for municipal contracts. As other squares grew by 2.1% plus 6.2% including tuck-ins, growth remained strong in the US with solid price increases and good commercial momentum in K2. Finally, moving on to energy, I'm on slide 22. Energy performance was quite strong with revenue up by 2.7%. District heating and cooling network revenue progressed by 1.9% excluding energy prices with a very good heating season in Central and Eastern Europe. We register less flexibility services, marginally benefit from the heat wave in Q2, boosting our electricity size. Energy prices were down year on year, but as you know, it is regulated and our margins are protected. Excluding the energy price impact, growth was quite good, plus 2.7%, with the strong activity in the booster energy up 4.7%. The revenue bridge on slide 23 explained the driver of our resilient growth in H1-2026. Like impact reverses too, as I just indicated. Scope was positive by plus €189 million, including as-ways sticking and one month of consolidation of cleaners. The impact of energy prices was as expected, more than divided by two. And recycled prices were slightly negative due to mostly paper. The water effect amounted to plus 84 million euros. The contribution of commerce volume and pricing was plus 1.2%. Let's focus on the EBITDA bridge, which illustrates our strong operational performance. Forex translation impact became positive in Q2, plus 4 million euros and minus 29 million euros for H1, representing less than 1% of EBITDA. and it's not significant at net income level. Scope effect show good revenue to EBITDA conversion and will fuel future EBITDA growth. Energy and recycled material prices at an impact of €60 million with a more significant impact in Q2 than in Q1 due to higher diesel costs incurred after the crisis in the Middle East which we progressively pass through to our clients. Whether effect continues positively The most impressive component is our growth and performance contribution of 6%. It's higher than last year in terms of no more stress synergies and even higher than in Q1. This breaks down into €113 million from net efficiency gain, which is a very good record retention rate, thanks to action plan implemented across Europe. Fuel surcharge invoicing plus 20 million from water technology synergies. The volume and commerce contribution was much more robust than in Q1 at 52 million euros. This brings us to an EBITDA of 3.55 billion euros. Let's now analyze our performance below EBITDA on slide 25. Going down to current EBITs, H1 performance illustrates again perfectly the operational leverage of our business model. 1.5% revenue growth, 5% EBITDA growth, and 6.4% EBIT increase. Current EBIT grew at faster pace than EBA. Let me highlight amortization and HOFA were slightly up at Constant Scope and Forex. Industrial capital gains provision and other were lower than last year, showing a continued Strong quality of results. I am very pleased with our financing costs and other financial charges which are stable year on year in spite of a higher average net debt of 2.8 billion euros due to the financing of M&A.

30% minority interest in water technology in June 2025, stable tokens and lastly the closing of cleaners.

This was due to the combination of a well-controlled cost of debt at minus 371 million euros and lower other financial charges coming notably from foreign exchange results. In H2, though, I remind you that we'll be at six months of cost of the debt raise to acquire cleaners, so that I will continue to expect for the full year 2026 a cost of debt at around 800 million euros, while other financial charges should remain below 300 million euros. Tax charges were slightly higher by €22 million and our current tax rate was flat at 25.8%. Finally, current net income increased by 10.4% when in line with our yearly guidance of at least 8%. Clean Earth PPI will be treated as a non-current item. Given our strong H1 performance, the very promising first month of Clean Earth, we are slightly improving our objectives, which now include Clean Earth consolidation. Moving to Net Income Group Share, I am on slide 27. Non-current charges increased by minus 50 million euros due to higher integration costs associated with the work-stake merger and cleaners integration. Non-current impairment PPA and other charges include the specific cleaners acquisition costs. And Net Income Group Share reached 682 million euros, up 3.8%. Now, free cash flow generation, which is key in net financial debt, I am on slide 28. I am satisfied with the progression of net free cash flow, despite the seasonality of working cap, which previously was close to last year, and thanks to a very tight control on capex. Net financial debt is well under control, reaching 24.5 billion euros. The increase of 4.9 billion euros is due to the seasonality of working cap, The dividend payments and financial investment for minus 2.9 billion euros, including Enviro-Pacific and Cleaners. In terms of our net debt, 76.6%, our net debt liquidity is very solid. Our balance sheet, therefore, remains very strong. Both rating agencies confer strong investment-grade ratings beginning of 2026. Before we conclude, let's revisit our improved 2026 guidance. Continued solid organic revenue growth, including energy prices. EBITDA organic growth between 5% and 6%. Current net income of minimum 8% at constant forex, including and not anymore excluding cleaners. Leverage ratio equal or slightly above three times. And as usual, our dividend will grow in line with our current EPS. And as you see, we are very confident for 2026. We deliver a strong H1, resilient growth, and robust underlying EBITDA progression well in line with our net guidance. In addition, I'm also very confident in the delivery of our 2 billion euro disposal plan by mid-28. All processes are ready. and we are expecting around 500 million euros signed by the end of 2026. Last, we obviously fully confirm our green-up trajectory. The very good results recorded in the first half illustrate Veolia's ability to leverage its strategic positioning for ecological security. Thank you for your attention.

Thank you, Emmanuelle. And now we are ready to take your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press a star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press a star followed by the number two. One moment, please, for your first question. And your first question comes from the line of Arthur Sippen with Morgan Stanley. Please go ahead.

Hello, thank you very much for taking my questions. The first one is on the change in guidance. So you obviously, given you changed the guidance, you seem more comfortable with the prospects on the outlook for net income for 2026. On the other hand, the organic EBITDA growth at the moment is more towards the bottom end of your 5% to 6% range from what we can observe in H1. So I was wondering what is driving that higher conviction, that stronger conviction on net income for the year? Is it, given it's not organic EBITDA, I assume, is it perimeter maybe with disposals coming more in 27 than in 2026? Is it FX? Is it something below the EBITDA line? A bit of color on that would be helpful. And the second question I would have is, quite often you give a bit of color on what's your view on the full year impact of FX on your EBITDA net income as well as energy prices. I would be quite curious to have a bit of an update on that. Thank you very much.

Thanks for the question. We'll start and probably Emmanuel will compliment you. Starting with your guidance, you're right. I'm very happy that we've raised our guidance for net result. Just in a nutshell, the 8% before cleaners, which is now 8% after cleaners, given the fact that cleaners were dilutive, say around 1%, this is what we're talking about in terms of net result in terms of our guidance. What gives us confidence to do it? One is the first half was very 10.4%. I'm very happy about it. Two, I'm confident about the H2 in terms of operational performance as well as everything which is below the EBITDA. Is it anything specific? No. So it's not a question of disposal which were later rather than earlier. We are really exactly on our trajectory that we had anticipated with regard to disposal. Forex, again, it's the same. So it's really a series of small things, if I may, which makes us being very, you know, happy about our performance in net results. You know, well controlled in terms of, you know, cost of debt, as Emmanuel said. Very nice control of, you know, our tax ratio, as Emmanuel said. A series of smaller stuff, so it's more the small flows which make big rivers, rather than the big One thing which explains why we are raising our guidance in that result. I must add that when you say EBITDA is on the bottom end of our guidance, yes, but you have to have in mind that I'm very happy about this performance because this is despite The temporary squeeze in our margin, which I've explained, with a delay in recouping the margin, you know, in terms of our index section formulas, which will be in H2. So to be able to deliver 5% despite that is a very good performance, and this is thanks to our efficiency plan, which we've enhanced. in particular. So I'm very confident altogether about H2, which is the global tone that I wanted to highlight, I would say, in addition to just the figures. In terms of the foliar effects, the forex, all that, Emmanuelle, do you want to elaborate? Or maybe I'll give guidance as well?

Good morning, Arthur. Thank you for your question. So, as you have seen, we are very happy with the performance of the bottom line and of the margin. The net income jumped by 10.4%, which is more than largely in line with our annual guidance. The move that we have done on the guidance is linked to the bottom line of our P&L, with stable financial charges, which is excellent when considering the high average net debt linked to our M&A operation, and also thanks to the stable and modest tax rates of 25.8%. As you have said, it's a stronger conviction of the profitability that we are going to deliver. Regarding your question on Forex, You have noticed that forex impact reversed in Q2 and became positive, so it's linked to the evolution of dollars and the appreciation of central re-operant currencies. When we have guide beginning of the year, we have communicated around a forex impact which is estimated at 100 million euros. So we cannot have a perfect estimation of forex. But our estimation today is minus 50 million euros compared to the minus 100 million euros that we have communicated. And if we are using the Forex rate of the 21st of July, it gives us the Forex impact, which is between minus 50 million euros and zero. So our best estimate today is minus 50 million euros.

So all together it's improving. I just wanted to add to what Amanda said about Forex, a few things which we know, but you know, but I'm just repeating them. which is a Forex for us is only a translation not transaction so it has no impact on our margin rate as we've demonstrated again you know last year the year before and this year this is nothing to do with our margin rate And you remember that the impact being 100 at the top of our P&L ends up being basically 20 at the net result. So it's a kind of, you know, four-fifths of it vanishes when it comes to net result. I'm just doing the link with the previous question you asked. On energy, maybe, Emmanuelle. Yes, on energy cost.

So on energy cost, you have seen that in the bridge, the impact on EBITDA was minus 60 million euro. A bit less than 50% of it was linked to the evolution of our edge electricity prices and the rest was linked to what has been mentioned in the poll by Estelle and myself is the increase of fuel prices with in Q2 a slight squeeze that we have as we have been able to fully pass. Our energy cost increase in the 30% of our contract, where you don't have an indexation formula, and for the 70% of the rest, part of it has been passed, but you know that we have a bit of time lag, which can go to 6 to 12 months, meaning that we fully have passed it in H2 at the beginning of Q1 next year.

Thank you very much.

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

Good morning and thank you for the presentation. I think I want to just revisit the earnings again. So in the first half, you achieved 10% growth. And I'm thinking about the second half. I'm thinking, is that implying a deceleration of earnings growth in the second half? Or is there any sort of timing effects between the halves that we need to take into account? It feels to me... The 8% seems modest in the sense that implying by this strong H1 results, why not 9, why not 10 given this? I'm just making sure that I'm not missing something for H2 when it comes to the modeling. And then secondly, on cost cutting, you've been achieving a run rate of around 400 million for the last couple of years now. Thank you very much. Thank you.

Thanks for your question. Do you want to take the first one, Emmanuelle? Yes. Why are we so modestly increasing our guidance by only roughly by one percent, Emmanuelle, on net results?

Good question. Just for you to have in mind that when we have defined our guidance of 8%, so at least 8% in terms of net result growth, We knew that we were going to have a stronger H1 than H2 because in H2 you will have six months of financing on cleaners that we were not having in H1. So now it has been slightly adjusted as we have one month of financing, which is June, and we'll have six months of financing. That's the explanation. So meaning that when we forecast our guidance, it was strong H1, close to 10%. and Lower H2 between 7% and 8%.

So in terms of your second question of can you dream big in terms of efficiency, the way I see it is, you know, a rent rate of 350 million euros per year is already very, very good. What happens is when the war in Iran started in, when was it, March, something like that, if I remember well, you know, we've enhanced A few specific local efficiency plans. We've enhanced the one in the Middle East, we've enhanced the one in Germany, we've enhanced the one in France, enhanced all. We've stayed at a very, very high level like last year, and we've enhanced the one in the US and specifically in SG&A. So in a way, the way to think about it is our ability to react fast and quick. and therefore to deliver, again, a 5% EBITDA growth despite the squeezing margin, which would have been the case if we had not done anything, if you want, given the fuel concentration. Am I targeting always higher? Yes, I am, as you can imagine when you run a company. You always ask everybody to do their best and if we can do more, we will always be in this type of mindset as well. That's what I can tell you. And I guess it would be a good guess to expect that this year, given the first half we've done, we will probably be higher than our annual target. That would be, I guess, a good guess. I won't discourage you to think that, given again that we've enhanced a few specific action plans. In terms of asset rotation, that's a good question. Are we going to stop here? The answer is no. But we want to target as well. So in a way, that's a strategic asset rotation. Strategic, I mean, we are very clear about what we want to buy and what's potential, you know, like diverse searches as well. On the plus side, you know, this is not, you know, buying for the sake of it. This is really outside European priority and in our boosters. And that's exactly what we've done with 90% of our investment in exactly those. That enhances our growth profile and margin rate as well. And that's why we are continuing with tuck-ins. Typically, like we demonstrated in the first half, and I expect to go on with a classical rhythm of tuck-ins because it enhances, again, the value added of the group. In terms of diversities, we have our rules of either non-strategic or mature, not in the top three. and you know we're constantly reviewing the portfolio to see if we can be better that's why I've mentioned in my introduction speech that we had you know like already launched processes for more than the two billion of asset diversifiers to just to have a room for maneuver and to be able to go from plan a to plan b in case so I guess you know like don't expect that we will suddenly once all that is over Just to stop and keep the portfolio exactly as it is. If we have good opportunities of talking, we will go on looking for them. And if we have a diverse structure which would make sense on value creation, we will as well.

Thank you very much.

And your next question comes from the line of Peter Crampton with Barclays. Please go ahead.

Good morning. Peter Crampton here from Barclays. We're obviously got this big heat wave going on right now in kind of, you know, Europe. And I was wondering how we should think about the related kind of, you know, impact for Veolia. In the past, you kind of sold more drinking water volumes, but it's obviously a really bad heat wave. Should we worry about risks as well? Or what are your thoughts on this? Thank you.

You're right, in Europe, but I must say it's not only in Europe, although it's particularly striking in Europe this summer. We have heatwaves. Droughts, you know, I read an article yesterday saying that, you know, three-quarters of the UK was in drought situation, in extreme drought situation now, which is probably less expected than Spain, which we've talked about for quite a few years now, which is as well, you know, in this. So altogether, I don't want to feel, to let you feel that I'm a bit cynical, but all that is pretty good for Veolia eventually. Why is that so? Because it supports the need for our services. So the immediate one is not necessarily positive, and I will elaborate on that, but the mid-long-term one is, because it supports the need for wastewater reuse projects, for desalination you need at times, for AI to detect leakage and all that. So we have incoming calls following heat waves, or for even district cooling, which we've developed in Saclay, for instance. So all together mid-long term is a positive and a support to our services which are critical needs. And even in a way in the Middle East with the critical nature of dissemination units. In terms of the immediate situation, I think, when you have a summer like that one, what do you expect? On the positive side, water volume, you know, should be on the good side, although you should remember that it was already quite good last year, so the comparison basis is relatively high. We don't have so far so much of the restriction of water distribution because the winter was relatively wet, therefore we have water that we can distribute. So that's the first bit. In terms of the large fires, which you have in France and in Spain, and to a lesser extent the heat waves, it has a modest negative impact, although, On the short-term economy, because everything is closed at times, and you have tourism going down and so on and so forth, so I guess the waste activities, or we even have motorways which are closed, where your trucks cannot just get into our plants, stuff like that. So I guess on the west side you have a modestly negative, on the water it's largely positive, just to give you a global picture. And in terms of energy, As in heating and cooling, you know, short term, we don't have that many networks, so you don't expect a lot of positives. But it's more positive for the mid-long term, as I explained, because suddenly people realize that it would be a good idea to have district cooling systems because it's more efficient, less costly, and more virtuous, unfortunately speaking. So I hope that answers your question.

That was very clear. Thank you.

And your next question comes from the line of Bartek Kubicki with Bernstein. Please go ahead.

Good morning and thank you very much for the presentation and taking my questions. I would like to touch base three issues, please. Firstly, again, coming back to the guidance, but I would rather prefer to look at the Reported Net Income and two related questions. First of all, what will be the impact of the PPA on the reported net income? So let's say what will be the recognition of PPA on an annual basis and also how much the reported net income growth will lack the recurring net income growth giving, I assume, also increasing restructuring costs. That would be Question number one. Question number two on the disposals. You mentioned 500 million to be potentially signed by the end of the year. So the two related numbers I would like to get on this is what could be the impact on EBITDA from scope next year coming from this 500 million of disposals and also whether this will be ROCE dilutive or actually accretive. And the third point, more like a discussion, EU Commission has proposed to put CO2 costs on municipal waste incineration and we are just wondering how it could impact your profitability and your businesses. Thank you very much.

So the PPA and everything, so obviously we haven't done the full exercise of PPA, we just have the keys of cleaners for water bombs or something, so we are really just starting. But maybe you will be able to elaborate in a minute, Emmanuel. In terms of restricting costs, you will notice that over the years, the difference between net result current and net result net has decreased, the difference has decreased. So I guess the restricting costs are more on the management side. If you exclude, of course, the cost of synergies, which is a different category, in my opinion, than the restricting costs as such. So I guess the restricting in a classical sense is really on the reduction side and of course you have the cost of synergies but which is a benefit almost an investment that you have taken the benefit from the synergies eventually. But on that one maybe Emmanuelle?

Yes, with pleasure. So first question on PPA. So have you seen BarTech? Good morning. We have two good news. The first one is as you have seen We have increased or improved our guidance meaning that with the various contacts of the year we are able to compensate the dilution or negative impact of roughly 1% of net results. The second good news is that we are confirming you today that the PPA will be in non-current which makes sense as it's fully in line with what we did for the Suez acquisition. As mentioned by Estelle, we have 12 months to do the PPA work. The first estimation we had, it was communicated when we did the signing and closing of Clean Earth, was the first estimation was around 50 million euros. And as you know, so it will be non-current. And as you know, dividend is based on current net real. Regarding restructuring costs, it was also good news that we have communicated to you during the signing and cloning of Clean Earth. When we did the acquisition, the amount of restructuring costs was the same than the amount of synergies that we were going to deliver. and the amount that has been communicated on restructuring costs for cleaners, it was below the $120 million of synergies that we are targeting. It was around $90 million.

Although I would tend to call it cost of synergies rather than restructuring, which for me is something different. Of course, it's more integration cost than restructuring anyway. Integration cost, you're right.

And for the two other questions?

Yes, so for the disposal. You know, we are, I'm very happy that we are really exactly one on track to deliver our 2 billion by mid-2028, with 500 million signed this year. I won't give you the full detail of it. Of course, in terms of scope, there will be a bit of negative, a bit of doubt, and revenue and so on and so forth. The thing you can retain from that is, of course, what we invest has a higher margin than what we divest. In a way, this is enhancing margin and value creation altogether. I think that's the way to look at that one. Do you want to elaborate on that or should I move to EPS?

Nothing to add on that one.

In terms of EPS and CO2. So, a few things. First things first, the proposal so far hasn't been voted yet by the EU. Assuming it were to be voted tomorrow morning, which is far from being the case given the length of everything EU-wise. First things first, this is pass-through for Veolia. So in a way, it's a cost which local authorities will bear and therefore potentially the taxpayers' money rather than the company's P&L. Second, you know, the date of application is 2034. Again, potentially assuming it will be voted and blah, blah, blah. which gives a bit of time for our customers to react between 2031 and 2034. The biggest bet I have is that it will probably be 2034. The third thing is that it will leave time for local authorities to try and see what they can do to avoid hitting their own budget. and one answer to that one was in actually the project from the EU which is to support the development of district heating scheme because if you have an energy from which which is connected to district heating basically you avoid the ETS. So in a way, pass-through formula so no direct impact for us and the potential to develop offers connected to district heating eventually. And last but not least, hazardous waste incinerators are not concerned Which is normal, in my opinion, given the fact that, you know, they're protecting health and it's a very different story. But that was a confirmation.

Thank you very much.

And your next question comes from the line of Philippe, our patient, with Odo PHF. Please go ahead.

Yes, good morning. Philippe Obation speaking. I have three questions. The first one is, when we are looking at the volumes of water in France, we are at plus 2.2, which means that it was maybe the impact or the partial impact of the heat wave, I would say, of June. What could you expect looking at the fact that July was worse in terms of heatwave for the French volume and more extended for the European volume because Spain is also currently suffering from heatwave? That's the first question. The second one is I have just seen that the There is a declining maintenance capex. And my question is, is it structural, because it's almost 100 million less than the previous semester, or is it something which is conjunctural, linked to, let's say, a deviation in terms of diary? for planning outages of your units. That's the second question. And the last one is the retention rate you show in terms of efficiency is 56%, which seems to be above what we usually recorded. Is this level sustainable or there is something which is explaining the, let's say, better performance than the usual level? That's the three questions. Many thanks.

Thank you very well. All our figures I can see. So in terms of waterfronts, so first I have no idea what the weather is going to be like in August, in September, so I'm not going to try and do a weather prediction. What I can tell you is like you're right, you know, the volumes of waterfronts in the In June, it was less the case in April, but it was okay in May and very good in June, so altogether a good Q2, and altogether you're right, the 2.2% was a nice one. I expect that it should be a nice summer if things go on like they are now. You remember, though, that the indexation formulas are still negative for us in waterfronts and they will go the reverse next year, which means that altogether the revenue is not only a question of volume, there is a question of volume and price, and the price is on the opposite side because of the lag effect which we've just explained. In terms of the rest of Europe, In a way, in Spain, we can dissipate a bit the same, but the indexation formula is positive and should be positive going forward, so we should have a good revenue growth in Spain. The rest of Europe so far is good as well, you know, in Prague and other networks, so we should have A good water summer altogether in Europe. But can I give a specific figure? No, I cannot. We have no idea what the weather is going to be like in a few weeks' time. But I expect it to be relatively good. In terms of the maintenance capex, so the global figures for us is 50-50 maintenance capex, so gross capex. On your right, the maintenance capex was well under control in the first half of the year. You know, this is in part when I say we're piloting the group and the war in Iran started, we said, okay, we have to react quickly. So part of it was fuel surcharge, part of it was enhancing efficiency plans, like I explained, and part of it was to say, you know what, let's try to, you know, generate the more cash possible in the first half of the year and put maintenance capacity under control. But do you want to give a little bit of color to what's going on?

Yes, on that one, Philippe, you're absolutely right. So, very happy about the evolution of Free Cash Flow in the first half coming from stable or almost stable working capital reversal and very strict control on capex. As mentioned, you know that our budget for the year is 3.9 billion euros. We have 50% which is maintenance, 50% which is growth. It's very important for us as we are delivering essential services to secure the services that we are delivering, so maintenance capex for us is key. We don't want to have, as we say, a plant in paper, that's not the target, and we'll continue to have a balance around 50 to 50%. The important, which is important, has been mentioned by Estelle, is the capacity of the group to pilot, to react, to deliver more efficiencies when necessary, but also to have a very, very tight capex on our cost. And I think that what we have delivered in H1, with the progression of HECA-FLU, is the proof of that. And on the retention rate, we were very satisfied with the 56% retention rate we have delivered. You're right, it's above our average rate that we have usually, which is between 30% and 50%. It's linked to the additional action plan which has been launched. So it's control of cost, it's additional efficiency, it's reduction of travel, it's renegotiation of fuel prices. So you have a huge amount of measure behind that and of course also the contribution of ER which was very good last year. You remember it was 23% of our efficiency that we have delivered and it will continue to contribute in 2026.

So the 30-50% range is still a good proxy for us on the mid-term. And of course, each time we have a specific hit, like the one around, we're trying to be on the upper range of this with the type of enhanced efficiency plan we deliver.

Many thanks.

Piloting is, I guess, the key word in everything we've just said with Emmanuel.

Thank you. And your next question comes from the line of Juan Rodriguez with Kepler. Please go ahead.

Hi, good morning. Thank you for taking our questions. I have two on my side, if I may. The first one is on margins. I would like to better understand what were the measures applied for the almost or more than 100 basis points improvement on margins that you had on the water and waste segments. As you signal that you still have the negative indexation effect on margins, so what are you expecting going forward? Are these margin levels on both waste and water sustainable or actually they're expected to improve as indexation effects kick in in the second half? So this will be the first one. The second one is what are your expectations in terms of water tech by the end of the year, both in terms of revenues on margins? Thank you.

So I guess EBITDA margin, so 70 BP for the first half. I think if I remember well in the last few years we were at 120 BP. So we are constantly trying to grow our margin. So which doesn't mean that it will be the case naturally quarter specifically on quarter. It's more a mid-term trend, which is the result of two things, efficiency plan and repositioning and strategic portfolio management. That's really the two of them. Efficiency Plan, of course each time you know it means you know like it enhances the margin rate and same applies when you invest in higher margin and diverse in low margin if you want and outside Europe versus inside Europe. So that's the global picture. You're right that in a way I'm very confident about H2 because despite this cost squeeze we had in H1, we were able to still increase our margin by 70 BP. So thanks for noticing this because I think it's a very good performance. In terms of water tech, we're talking about here a temporary slowdown of growth. and still a very very good improvement of Margin and EBITDA. The temporary nature of it is basically linked with the war in Iran directly with the typical delay in projects such as the big desalination plant which we anticipated to sign and the signing has been delayed a bit. or, you know, all the chemical industries, you know, wait and see attitude for everything to do with effluent treatment and things like that. So that's the global picture. This is temporary. That's why we've talked about a rebound starting in H2 without the project and probably including the project in 27, something like that, would be my best guess. So I'll spread the curve to move back up in terms of growth. again this is a very profitable business for us with a margin improving quite noticing that you know on the different segments we're offering services to with the water tech as I mentioned the oil and gas and the diesel will be more not the only gas refinery so the downstream data and the chemicals will be more on the negative side so will be the desalination on the negative as in you know the growth is more like a Postponed to better news from Iran. On the positive side, the microE is really, really good, and we have a good order book and a very strong pipeline. I've mentioned in my speech as an introduction that we've already been ordered 343 million euros of orders only in microE in the first half of the year in what to take alone. I cannot mention the name of the customer, but those are the big names that you can think of, which are very, very keen on our ultra-pure water, just to give you an example.

Quite useful. Thank you.

And once again, if you would like to ask a question, please press the star 1 on your telephone keypad. Your next question comes from the line of Charles Swaby with HSBC. Please go ahead.

Hi, good morning everyone. Just one question from my side. On the hazardous waste in Europe, could you provide a bit more color on the good trends you see for the second half of the year? Is that a volume rebound you're expecting or is that stronger pricing or a bit of both? Thanks.

Interesting question. So I guess hazardous waste Europe, you know, like was I guess good but not great in terms of growth in the first half but that was mainly the weather effect of the first half of the year so unless there is a big storm and two weeks of everything almost being shut down like we've had in the first half of the year we should be back up and EBITDA growth was very very good as well. I want to notice as well, so basically H2 should be good You know, we see a very good demand for high temperature generation in particular. And we have had a bit of volatility in the project base of decontamination, mainly linked to the municipal action in France. You know, you don't have any order for this type of thing, you know, for a few months before the election and just after the election until the new, you know, like elected members are just seated. But the demand is high, we are very happy about it. What you could expect as well, so that's why I'm optimistic about the issue, is you remember that we are progressively building and ramping up five new facilities across the globe, which will eventually give us almost 500,000 tons of new capacity, which is massive. It takes a long time to build them, and I'm very happy that we've commissioned the one in the UK in January. and we've had the first fire in Germany in June so this day as well for the second half and 4-27 and 4-28 and onwards as well and the demand is high so I'm happy about those specific ones. As the Swiss in the US was good, the first month of cleaners was good as well. and I guess I was very happy to see a rebound in Asia. The only one where, you know, it's not that good will be the Middle East because one of the plants had to be temporarily closed. That's the nuance of the very happy about the Hazardous Waste business and very promising H2.

Great, thank you.

And your next question comes from the line of Ali Jafri with Deutsche Bank. Please go ahead.

Thanks and good morning. Two questions from me, please. The first one is, well, they're both kind of medium term. So the first one is, you have a number of 2030 targets now from exiting coal, PFAS revenue, chips, data sensors. Given that, and also, you know, you'll be having much further into the cleaner integration process. Are you giving any consideration to doing an off-cycle, medium-term update of full-year results, or should we expect a normal cadence and therefore an update coming in 2028? And the second question is on corporate tax. So if the corporate tax, the high corporate tax in France is extended in the budget, should we expect what we've seen, what happened last year and presumably this year, that you're able to It was a very actual mine effect on the bottom line given where your interest costs are and low PBT within France. Thank you.

So, you know, one quarter at a time, if I may. You know, my priority is really to deliver on Green Up and to deliver on the objective we set as well beyond Green Up with the 2030. and that's exactly what we're doing. So we'll give you updates, you know, probably more, you know, like when we'll launch the new strategic plan and in the meantime we'll have a yearly update via, you know, our guidance. But you still have a lot of dots on the curve, if I may, which we've already provided you with, as you mentioned, the 2030 one, the green objective, the synergies, which will be on 27 as well. So I think you have a lot of material. And as I answered to a question which was previously asked, we're not stopping here. So we are constantly reviewing what we can do best. In terms of events, you've noticed maybe, or you haven't on slide, whatever it is, the guidance one, that we will organize an event on innovation in Asia in the autumn, and I hope lots of people will join it, either physically or online. In terms of tax, you're right, you know, we'll probably come into an interesting budget discussion, budget as in budget for the country, not budget for Veolia in the autumn. And, you know, maybe there will be tax creativity again. I guess, you know, Veolia won't be very much concerned by it, very likely, given the fact that we have a tax loss I am in Carrefour in France, for instance, just to give you an idea. And we've been through that last year. It was marginal for us and probably we will do this again this year. So I'm not nervous about that. And as you know, France is only accounting for 20% of our revenue and less than 10% of our funds employed and less than 20% of our EBIT and net result and so on and so forth. Nothing to worry about. It's not the order of magnitude and the ballpark of what would matter for us. Even if the corporate tax were to stay the same, it wouldn't change much.

So, you wanted to add something, Emmanuelle? So good morning, only just to say that for us it is and it will be non-significant for two reasons. The first one is that, as you know, we have a lost guide forward. And the second element is that, as you know, in France, we are in the riddles of France. And I think that also with the figures that we are delivering, we are showing to you that with the model of Veolia, with resilience and growth, we are able to compensate whatever happens. So for us, first, it's super small. We will be able to compensate it. and second, we have the strength of the model.

Thanks, it makes sense. It's just good to get that confirmation if that were to happen.

Let's have our politician debate. All right, thank you. I'm showing no further questions at this time. I would like to turn it back to Ms. Estelle Brachlianoff for closing remarks.

Thank you very much for your attending today. You know, very happy about the H1 result. Thank you very much. Thank you and this concludes today's conference call. Thank you all for joining YouMeNow Disconnect. Thank you for watching!