Waste, water, and energy management multinational Veolia on Wednesday reported a first-quarter dip in revenue and a steeper slide in net income over the prior-year period.
Revenue dropped by 3.4 percent, from €6.31 billion in first-quarter 2015 to €6.09 billion for the three-month period ending March 31 of this year. The France-based company, which provides water, waste, and energy management services, cited declining energy prices in the United States, Germany, and Central Europe, along with detrimental exchange rates and falling construction revenue.
Net income was down 18 percent from €212 million in the first quarter of 2015 to €173 million in its latest reporting period. However, “Excluding capital gains and losses on financial divestitures net of tax, current net income attributable to owners of the Company rose 16.0% to €170 million from €147 million,” according to a Veolia press release.
“The 2016 fiscal year has started out on a satisfactory note with 5 percent growth in EBITDA and 16 percent growth in our current net income excluding capital gains. As evidence of improved operational management, our margins have also continued to improve,” Chairman and CEO Antoine Frérot said in the release. “Revenue is down in the first quarter, mainly due to the impact of lower energy prices, but also related to our intent to accelerate the recovery in our construction business. Excluding these two elements, which had little impact on our profits, revenue increased by 1.6 percent. This good start to the year allows us to be confident in the achievement of our full year objectives.”
Veolia’s press release made only a passing reference to its acquisition of U.S. nuclear waste management technology company Kurion, which was finalized in April, noting that its net financial debt had been impacted by investments including by the €330 million buyout.
Management affirmed its 2016 objectives for revenue and EBITDA growth, current net income no less than €600 million, and net free cash flow before divestments and acquisitions of €650 million or more.
During Wednesday’s earnings call, Frérot was asked if any particular business segment came up short in the first quarter of 2016. He said the only disappointing area was the United States, which he described as the unfortunate confluence of low energy prices, warm climate, and low activity in industrial services. Frérot said newly assigned Veolia North America President and CEO of William J. DiCroce, who took over in February, is “tackling the issue” with an ambitious approach to remedy earnings, which included the acquisition of California-based Kurion. Because Veolia is small player in the United States, Frérot said, the company is accustomed to registering significant growth in this area, so the trend has been “an unpleasant surprise.”
“But there’s nothing worrying or nothing fundamental, which we feel should repeat itself over the next quarters,” Frérot said.
In closing, Frérot said: “We’re pleased with the way the year started. In spite of an environment that is still not boosting our volumes or prices, we still witness weak economic growth, we’re still confident that we can achieve, thanks to cost-cutting and the progressive acceleration of growth, we can achieve our objectives for this year.”
