SUEZ: Feedback from conference call | SELL | EUR11,5(-15%)
SUEZ - SELL | EUR11,5(-15%) Feedback from conference call Positive trend in waste except in France C&M Solutions in the US can do better Tricky context for renegotiations in Chile Weak performance for water in Spain We maintain our cautious view on the stock
31 Oct 19
A solid trajectory over 9M19
Following a smooth H1, Suez posted a solid set of results at the close of 9m19. The sustained strong top-line performance in Recycling & Recovery, the resilience of Water Europe and the continued delivery of revenue synergies in WTS led to a modest upgrade in the group’s revenue guidance, now targeting the upper end of the 2-3% organic growth range, and set a solid starting point for the execution of the new strategic plan.
31 Oct 19
SUEZ: Revenue guidance slightly upgraded | SELL | EUR11,5(-15%)
SUEZ - SELL | EUR11,5(-15%) Revenue guidance slightly upgraded Water: weak performance in Spain R&R: pricing power is still strong Revenue guidance for 2019 slightly upgraded …but we still believe that the hardest part is yet to come
30 Oct 19
The 2023 strategic roadmap leaves questions on the table
The long-awaited autumn revelation of Suez’s strategic plan has addressed many of the concerns raised by shareholders, with a focus on profitability (EPS being the word of the day) and smarter growth focused on international markets, servicing industrial clients and offering technology-focused/value-added solutions. However, key questions remain unanswered, particularly regarding the ambitious €3-4bn asset rotation programme. Investors will be eagerly anticipating Suez’s next move.
03 Oct 19
SECTOR | Green tech & Smart energy | “Waste Side Story”, SUEZ | Suez 2030 : un virage compliqué à négocier, VEOLIA | Prêt à passer la vitesse supérieure
Green tech & Smart energy | “Waste Side Story” Les métiers de la gestion des déchets sont en plein bouleversement. Les pays occidentaux ont longtemps exporté une partie de leurs déchets vers les pays asiatiques afin qu’ils y soient traités. La décision de la Chine fin 2017 de restreindre sévèrement les importations de déchets a perturbé les flux mondiaux. Les solutions de valorisation et les débouchés sont insuffisants, ce qui entraîne une accumulation des stocks de certaines matières recyclées. Les prix baissent fortement et pèsent sur la rentabilité des acteurs du secteur. • A cela s’ajoute la mauvaise orientation des indicateurs macroéconomiques. Historiquement très corrélés à l’activité économique et industrielle, les volumes et les prix des déchets pourraient souffrir d’un retournement de la conjoncture. • Pour répondre à ces défis, les différents acteurs devront innover afin de mieux traiter les déchets et se digitaliser pour gagner en productivité et défendre leurs marges. Ils devront également réinventer leur business model pour faire face à l’intérêt grandissant des GAFA pour nos déchets. • Le développement de l’économie circulaire et le renforcement des normes environnementales partout dans le monde seront non seulement des pistes de développement, mais également des facteurs de soutien importants. • L’equity story des prochains trimestres repose pour beaucoup sur les plans stratégiques qui seront présentés à l’automne. Suite au succès de sa transformation, Veolia devrait vouloir accélérer sa croissance, notamment via une politique de rotation du portefeuille plus dynamique. Suez devra pour sa part, annoncer et délivrer des changements structurels afin de redresser ses performances. • Nous initions les couvertures de Veolia à Acheter avec une FV de 25,9 EUR et de Suez à Vendre avec une FV de 11,5 EUR. SUEZ | Suez 2030 : un virage compliqué à négocier Depuis son introduction en Bourse en 2008, Suez a fait progresser son chiffre d’affaires de 3,4% par an en moyenne, une performance très correcte. Pour autant, cette croissance ne s’est pas révélée profitable pour les actionnaires. VEOLIA | Prêt à passer la vitesse supérieure Le travail réalisé par le management lors deux derniers plans stratégiques (2011-2015 et 2016-2019) a été remarquable. Veolia est passé d’un statut de société avec un portefeuille hétérogène, parfois sans réelle synergie, à celui d’une société à l’activité plus recentrée, moins capitalistique et proposant davantage de services.
Suez Veolia Environnement
06 Sep 19
Green tech & Smart energy | Waste Side Story, SUEZ | Suez 2030: a complicated corner to take, VEOLIA | Shifting up a gear
Green tech & Smart energy | Waste Side Story Waste management businesses are in the throes of change. Western countries have long exported some of their waste to Asian countries for treatment, but the decision by China to massively restrict waste imports at the end of 2017 has upset global flows. Recycling solutions and outlets are insufficient, leading to an accumulation of stocks of certain recycled materials. Prices are falling sharply and are taking a toll on the profitability of players in the sector • In addition to this, macroeconomic indicators are also sluggish. Historically highly correlated to economic and industrial activity, waste volumes and prices could suffer from a reversal in economic conditions. • To meet these challenges, the various players will have to innovate to better treat waste and digitalise their business in a bid to become more productive and defend their margins. They will also have to reinvent their business models, to face the rising interest of GAFA companies in waste. • The development of the circular economy and the strengthening of environmental standards throughout the world will not only be development paths, but also significant support factors. • Equity stories over coming quarters will rely significantly on the strategic plans that are due to be presented in the autumn. Following its successful transformation, Veolia should want to step up its growth, especially via a more dynamic portfolio rotation. Meanwhile Suez is set to announce and deliver structural changes in order to turn around its performances. • We are initiating coverage of Veolia with a BUY recommendation and a FV of EUR25.9, and Suez at SELL with a FV of EUR11.5. SUEZ | Suez 2030: a complicated corner to take Since its flotation in 2008, Suez has increased its revenue by 3.4% a year on average in a very respectable performance. However, this growth has not been profitable for shareholders. VEOLIA | Shifting up a gear The work accomplished by management during the last two strategic plans (2011-2015 and 2016-2019) has been remarkable. Veolia has taken on a new status, growing from a company with a portfolio of diverse activities, sometimes without real synergy, to a group with a renewed focus, less capital-intensive businesses and more services.
Suez Veolia Environnement
06 Sep 19
Sitting tight for the autumn reveal of the strategic plan
Suez posted a satisfactory H1 19 set of results, with all divisions contributing positively to revenues and group EBIT in organic terms. While the operational performance was solid and the group is on track to fulfilling its 2019 guidance, all eyes remain on the highly awaited strategic plan. Mark your calendars for the 30 October presentation date.
29 Jul 19
A positive Q1 19 and Argentine past woes resolved
Suez reported solid Q1 19 revenues of €4,210m (+3.7% organic growth vs +1.7% in Q1 18), mainly driven by WTS (+8.5%) and R&R Europe (+4.7%). EBIT saw a +3.3% increase, reaching €293m thanks to strong activity in the International division, particularly in China and Australia. Net debt remained relatively stable (lfl) at €9,031m (3.26x EBITDA) versus €8,954m in 2018. A resolution was finally reached on the Buenos Aires concession dispute, resulting in the collection of a €220m settlement from the Argentine government.
26 Apr 19
FY18: back on track as expected
Suez released FY18 results. Sales reached €17,331m (+9.8% and +3.6% organic), EBITDA €2,768m (+7.4%, +3.4% organic), EBIT €1,335m (+10.2%, +7.5% organic), net income €335m (+13.4%). Free cash flow reached €1,023m and net debt at year-end was €8,954m (vs. €8,470m a year ago). The dividend proposed is €0.65 (unchanged). In terms of outlook, the group expects organic growth of +2-3% topline for FY19 and +4-5% at EBIT level, +7-8% for FCF and a net debt/EBITDA ratio of c.3x (3.2x currently), with the ambition to lower it until FY20. Also, the soon-to-leave CEO, Mr. Chaussade, will be appointed as Chairman, as expected, when Mr. Camus replaces him in May (see our comment dated 21 December 2018).
27 Feb 19
Q3: very good at top-line level, decent in profit terms
Suez’s 9m 18 results: €12,697m (+3.8% organic, +13% reported, +15.8% at CER), EBITDA €2,048m (+3.9%, +6.7% +10.4% respectively), EBIT €963m (+7.5%, +4.4%, +9.7%). Net debt at the end of Q3 was €9.3bn (€9.3bn in H1, €8.8bn in Q1, €8.5bn at year-end 17). The group confirmed its full-year targets (Revenue growth at constant exchange rates of c.9%, EBIT growth of c.10% at CER before recognition of the impact of PPA for the acquisition of GE Water, FCF of c.€1bn, net debt/EBITDA ratio of close to 3x, dividend of at least €0.65 per share.
30 Oct 18
FY17 profit warning, uninspiring outlook
Suez reported a disappointing set of FY17 trading figures and FY18 guidance. key highlight Revenue up 1.5% organically, at c.€15.8bn EBITDA down c.2% organically, at c.€2,640m EBIT down c.2% organically, at c.€1,280m Net income at c.€300m Leverage down to 3.2x FCF above €1bn, in line Dividend stable at €0.65, in line
24 Jan 18
Stronger international helps offset calm waters
Suez released a decent set of 9M 17 results, marked by the step up of the International activities, higher revenues in Recycling due to higher secondary material prices, and flat prices in the European water division. Key highlights Revenue up +1.3%, at €11,301m EBITDA down 1%, at €1,924m EBIT up 1.4% at €926m Guidance confirmed As a reminder, GE Water was consolidated on 30 September. Consequently, the 9M 17 results do not include any contribution from GE Water. However, net debt was €1bn higher than at end 2016 (3.4x EBITDA) as it included an impact of €856m related to the finalisation of the acquisition of GE Water and a forex impact of €-346m.
27 Oct 17
A rather soft Q2 despite the unfavourable comparison basis
Suez released H1 17 numbers: revenues reached €7,455m (+1%), EBITDA €1,271m (-0.2%), and EBIT €598m (-0.6%). At the end of H1, net debt stood at €6,942m, after €8,125m in Q1 and €8,042m at the end of FY16. Note the current net debt integrates the €750m capital increase and €600m hybrid bond completed in May to finance the GE Water acquisition. The closing of the transaction is expected in Q3.
27 Jul 17
Details of the capital increase
The c. €750m capital increase (to finance part of the GE Water acquisition, see our Latest dated 9 March) will lead to the issuance of 47,468,354 new shares representing 8.4% of the company’s share capital, with a subscription price of €15.80. The offering is conducted without shareholders’ preferential subscription rights and with a priority subscription period on an irreducible basis granted to existing shareholders: - the company’s existing shareholders (as of 16 May 2017) will be granted a three consecutive trading days priority subscription period, which will run from 17 May 2017 to 19 May 2017 (inclusive); - the public offering in France begins today and will close on 19 May 2017; - the private placement launched on 16 May 2017 at around 17:45 (Paris time) was priced in the evening of the same day. Orders placed in the public offering and private placement will be subject to reduction depending on the results of the priority subscriptions on an irreducible basis in the context of the priority subscription period and final allocations will be communicated once the results are available.
17 May 17
Q1 17: on track
Q1 17 revenues were €3,721m (+4.7%, +3.8% organic), EBITDA €614m (+7.1%, +2.1% organic), and EBIT €281m (+10.8%, +2.6% organic). Net debt in Q1 was €8,125m vs €8,042m at year-end 2016. The group’s outlook is for a slight organic growth in revenue and EBIT, a free cash flow of around €1bn and a net debt/EBITDA ratio of around 3x (unchanged compared to year-end 2017). This outlook excludes the GE Water acquisition, which is in our numbers.
10 May 17
FY16 almost in line but rather uninspiring FY17 outlook
Suez released its FY16 results. Sales reached €15,322m (+1.3% and +1.1% organic), EBITDA €2,651m (-3.6%, -0.1% organic), EBIT €1,282m (-7.2%, +0.5% organic), and net income €420m (3.1%). Free cash flow reached €1,005m and net debt at year-end was €8,042m (vs €8,083m a year ago). The dividend proposed is €0.65 (unchanged). In terms of outlook, the group expects a slight increase in revenues and EBIT for FY17, free cash flow at around €1bn, net debt at around 3x EBITDA (as it is now) and a dividend of at least €0.65.
01 Mar 17
H1 16: not great but Q2 is reassuring
Suez released H1 16 results. Revenues reached €7,455m (+2.2%, +2.7% lfl at CER), EBITDA €1,271m (-1.7%), EBIT €598m (-1%) and net income €174m (+23.7%). Net income increased over-propotionately with lower minority interests (buy-out of the Sembista minorities in Australia in H2 15). Net debt at the end of H1 was €8,765m (vs €8,363m in Q1 and €8,083m at year-end 2015) after the payment of the €545m dividend. The forex impact (top-line) was €-116m in H1 (€-43m in Q1).
28 Jul 16
Q1 16: a bit weak...
Suez Q1 16 results: revenues reached €3,555m (+0.5%), EBITDA €574m (-3.9%), EBIT €253m (-4.6%). Net debt at the end of Q1 16 was €8,363m (vs €8,083m in Q4 15). The group reiterated its targets for FY16, i.e. an organic growth in revenue of at least 2%, an over-proportionate growth in organic EBIT and a free cash flow of c. €1bn.
28 Apr 16
FY15 results unsurprising, no revolution going forward
Suez released FY15 results. Sales reached €15,135m (+5.7%), EBITDA €2,751m (+4.1%), EBIT €1,381m (+10.1%), net income €408m (-2%). Free cash flow reached €1,047m and net debt at year-end €8,083m. The dividend proposed is €0.65. The group’s targets are reiterated (organic growth of at least 2% in FY16, EBIT growth higher than top-line growth, FCF of c.€1bn and net debt/EBITDA of c.3x). Longer term, the group targets a €3bn EBITDA level in FY17.
24 Feb 16
Q3 15: in line; more needed for a real take-off
Suez released 9m results. These show revenues of €11,093m (+5.7% and +2.5% lfl at CER), EBITDA of €1,952m (+6.3% reported, +1.7% lfl at CER), and EBIT of €909m (+5% reported and +3.5% lfl at CER). Net debt at the end of Q3 stood at €7,918m (vs €8,024m after H1). The group reiterated its targets for FY15, i.e. revenue organic growth of at least 3%, positive EBITDA organic growth, EBIT organic growth of at least 4%, and a net financial debt/EBITDA ratio of c.3x.
29 Oct 15
H1 15 results: no real surprise
In H1 15, revenue was up +5.9% to €7,295m (+1.9% lfl at CER), EBITDA up +8% to €1,293m (+2%), and EBIT up +14.2% to €604m (+3.7%). The group has mainly benefited from forex and a (small) change in scope impact (+0.6% at the top-line level). Note profitability changes were adjusted for the capital gain on CEM in 2014 (€129m, accounted for at the EBITDA level). Net debt at the end of H1 was €8,024m, up from €7.7bn at the end of Q1 due to the dividend payment and forex.
29 Jul 15
New investment in China
Seizing the opportunity of the visit to France by China’s Prime Minister, SUEZ environnement and New World Services (NWS) signed, through their 50/50 joint venture called Suyu, an agreement with Chongqing Water Asset to jointly create Derun Environment, a leading group in Water and Waste activities in China.
01 Jul 15