Veolia Environnement Reports on Financial Crisis Impacts
Veolia Environnement recently held an "Investor Day" at which the company provided an overview of its outlook for the full-year 2008 within the context of the financial crisis and global economic slowdown.
In the Waste management business, Veolia Environnement has experienced a clear slowdown in business activity since the beginning of the summer. The effects of the economic slowdown (decline in tonnages both collected and treated) and the decrease in raw material pricing (paper, metals) have been particularly felt in the French and German business activities. In addition, certain elements have also weighed upon this year's profitability: Temporary shutdown and delay of certain incineration installations in Italy, and the implementation costs for the restructuring plan and the closure of a waste disposal facility in Germany.
In the Water business, the volumes of water sold in Europe over the course of the summer were below the 2007 levels. Additionally, in certain countries, expected tariff increases have been delayed.
Overall, Veolia Environnement expects 2008 operating cash flow to be between €4.1 million and €4.2 million, or approximately the same level as the operating cash flow generated in 2007, which totaled €4.163 million (Operating cash flow from continuing operations: operating cash flow of €4,178 million less €15 million from discontinued operations).
The implementation of the plan to control investments and an asset disposal program announced on August 7 has begun to produce an impact. They are expected to result in an amount of total investments, net of disposals, on the order of €4 billion in 2008 as compared with €6.1 billion in 2007. The company also underscores its solid financial stability characterized by a strong liquidity position, the absence of any significant bond maturities prior to 2012, and an average debt maturity of more than nine years. The cost of borrowing in 2008 is expected to be in the range of 5.7 percent to 5.8 percent.
For 2009, Veolia Environnement confirms its objectives to generate cost savings of €400 million over 2 years, of which €180 million in cost savings is expected in 2009. The achievement of this plan will be reinforced by the following:
•Improvement in the profitability of the recently acquired companies;
•Implementation of an investment reduction plan;
•Increase in the asset disposal program.
Taking into account these actions, the company expects to generate positive free cash flow in 2009.