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06 Sep 2019
Green tech & Smart energy | Waste Side Story, SUEZ | Suez 2030: a complicated corner to take, VEOLIA | Shifting up a gear
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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.