(1) In application of IFRS 5, nine months results for 2009 have been re-presented, in order to insure assure the comparability of periods, for the reclassification into « net income from discontinued operations » of the U.K. operations in the Transport division, and the German activities and the Renewable Energies business in the Energy Services division.
Commercial development and activity
Veolia Environnement's consolidated revenue for the nine months ending September 30, 2010 increased 0.8% to 25,467.9 million compared to re-presented nine months revenue of 25,254.3 million in the same period in 2009. Third quarter 2010 revenue showed noticeable progression, with +5.3% Y-Y growth, marking a strong net inflexion following -4.0% in the first quarter and +1.9% growth in the second quarter of 2010.
This improvement is also confirmed at constant scope and exchange rates: -3.1% in Q1 2010, +1.3% in Q2 2010 and +3.0% in Q3 2010, confirming a return to positive organic revenue growth.
This evolution is explained principally by the stabilization of the economic environment and demand from certain industrial sectors, the increase in recycled raw material prices, as well as good performance in terms of commercial development.
The effect of net divestments realized in 2009 and 2010 on revenue during the first nine months of 2010 was -490.2 million (which is -1.9% impact on revenue growth) divided among the following: -138.5 million in the Water Division, -290.4 million in the Environmental Services Division (principally Veolia Propretι Nettoyage et Multiservices), -56.3 million in the Energy Services Division, and -5.0 million in the Transport Division.
The share of revenue generated outside of France amounted to 15,442.5 million, which is 60.6% of total revenue for the nine months ending September 30, 2010 versus 60.3% for the same period ending September 30, 2009.
The positive currency effect on revenue of 647.2 million reflects essentially the appreciation, compared to the euro, of the Australian dollar for 148.5 million, the U.S. dollar for 85.6 million, the Northern European currencies (Norway and Sweden) for 85.5 million, Eastern European currencies for 72.8 million, and the U.K. pound sterling for 54.3 million.
Veolia Environnement has observed a resurgence in commercial opportunities and has won several significant contracts during the last weeks.
- The design, build and operation of a sludge treatment plant in Hong Kong. Consolidated revenue for the construction phase is estimated to be 414 million for Veolia Environnement. The operation of the plant, for a duration of 15 years, will be jointly realized by Veolia Water and Veolia Environmental Services, and is expected to generate average consolidated annual revenue of 20 million.
- The reconstruction and operation of the Marquette-lez-Lille wastewater treatment plant. Construction of the plant will generate estimated cumulative revenue of 75 million for Veolia Water. Operation of the plant will start on January 1, 2011, for a duration of 6 years and estimated cumulative revenue of 28 million.
- An operations contract related to 4 wastewater treatment facilities and 30 pumping stations for Fulton County, Georgia in the United States, with estimated cumulative revenue of $58 million over 5 years.
- The construction and operation of a wastewater treatment and recycling plant at the Disneyland theme park in France for 12 years. Construction is expected to generate 17 million in revenue, while operations are expected to generate cumulated revenue of 12 million.
- The management of 24 bus lines in Macao (China) for a duration of 7 years and estimated cumulative revenue of 140 million for Veolia Transport RATP Asia (VTRA)
- The contract for collection of municipal waste, recyclables, agricultural waste and bulky items for the agglomeration of Dijon with estimated cumulative revenue of 44 million over 5 years.
Operating Performance
Adjusted operating cash flow(2) for the nine months ending September 30, 2010 grew 3.3% (+0.3% at constant exchange rates) to 2,665.6 million versus 2,581.0 million at September 30, 2009.
This progression is due essentially to the Environmental Services division, which benefited during the first nine months of 2010 from:
- Significantly higher recycled raw materials prices;
- the positive effects of the adaptation plan related to the economic environment realized in 2009;
- a moderate recovery in volumes.
In total, the adjusted operating cash flow margin improved 30 basis points to 10.5% versus 10.2% at September 30, 2009.
The results of Veolia's efficiency plan also contributed 183 million to the growth in adjusted operating cash flow.
The positive impact of the evolution of average exchange rates on adjusted operating cash flow was 76.8 million, primarily reflecting the appreciation of the Australian dollar for an impact of 14.5 million, the U.S. dollar for an impact of 10.6 million, the U.K. pound sterling for an impact of 9.7 million and the Eastern and Central European currencies for an impact of 13.0 million for the nine months ending September 30, 2010.
Operating income for the nine months ending September 30, 2010 increased 2.5% to 1,566.4 million versus 1,528.4 million for the period ending September 30, 2009. It includes positive non-recurring items totaling 99.4 million for the period ending September 30, 2009, versus 70.9 million for the period ending September 30, 2010.
Adjusted operating income for the nine months ending September 30, 2010 grew 4.7% (1.4% at constant exchange rates) to 1,495.6 million versus 1,429.0 million for the same period ending September 30, 2009. It includes the negative impact of lower discount rates utilized to calculate provisions for site rehabilitation already accounted for at June 30, 2010 for -33.2 million, compared with an unfavorable effect of -18.7 million at September 30, 2009.
Similar to the first half of 2010, the Group continues to apply selective investment criteria while preserving industrial and maintenance capital expenditures as required by contractual agreements.
The enterprise value of financial investments was 355 million for the nine months ending September 30, 2010. These investments notably include the acquisition of New World Resources Energy (NWR Energy or « Endo ») within Dalkia in the Czech Republic for 97 million in enterprise value.
Operating cash flow minus net investments* for the nine months ending September 30, 2010 was 1,720 million versus 1,561 million for the same period in 2009. After the change in operational working capital (279 million use of funds), payment of interest expense, taxes and dividends (719 million), net financial debt was 15,765 million at September 30, 2010 versus 15,127 million at December 31, 2009. Net debt was also impacted by unfavorable foreign exchange movements of 395 million.
Free cash flow* after dividend payment was -220 million.
The operational and financial performances of the Group at September 30, 2010 are consistent with the Group's objective for the 2010 fiscal year:
- adjusted operating income improvement,
- to generate positive free cash flow after dividend payment (excluding the merger between Veolia Transport and Transdev),
- generate 250 million in cost savings,
- continue to execute the previously communicated program of divestments amounting to 3 billion of divestments during the period 2009-2011,
- maintain the ratio of net financial debt(*) / (cash flow from operations + repayments of operating financial assets)
(2) As of January 1, 2010, due to the application of the new amendment to IAS 7, adjusted operating cash flow for the first nine months of 2009 has been re-presented for replacement costs by an amount of 239.8m, of which 162.7m is within the Water division and 77.1m is within the Energy Services division.
Analysis by division
Water
- Entreprise Hauts De Seine
- Conseils De Demenagement Entreprise
- De Entreprise Zinguerie
- Incubateur Entreprise
- Entreprises Haute Vienne