By Gillian Handyside
PARIS (Reuters) - Highly-geared French utility Vivendi Environnement said Wednesday it had made progress in reducing debt and was in line to meet three-year growth targets.
"Debt will be about 13 billion euros at end-2000," chief financial officer Jerome Contamines told a news conference.
"At our initial public offering (IPO) in July we set targets of increasing turnover by 25 percent and operating profit by 50 percent in three years. We're pretty much in line with these forecasts," chief executive Henri Proglio added.
The water, waste, energy and transport company was reporting its first results since being partly spun-off in July from giant Vivendi, which also has telecoms and media interests.
Proglio said results had been boosted by internal growth, acquisitions in the United States, and water and waste contracts abroad with local authorities and large industries.
Operating profit grew to 866.1 million euros ($767.1 million) from a proforma 629.6 million in the first half, and net profit rose to 104.7 million from a proforma 38.5 million.
Its Vivendi Water unit, the world's top water firm following its buy last year of U.S. Filter, contributed over two thirds of total operating profit, up 62.5 percent at 440 million euros.
Sales in the first half grew to 12.54 billion euros from 9.05 billion, and financial charges associated with its heavy debt rose to 421 million euros from 224 million.
Proglio said the July flotation of 30 percent of the firm, which raised 4.3 billion euros for debt reduction, meant these charges would be lower in the second half.
PROGLIO UNFAZED BY 13-BILLION-EURO DEBT
After accounting for proceeds from the IPO, the sale of a 34-percent stake in its energy services unit Dalkia to generator Electricite de France and the divestment of its Kinetics business for 500 million euros, the utility's net debt stood at 13.1 billion euros at the end of June 2000, Proglio said.
In July, Vivendi Environnement said it would reduce its debt to 11 billion euros by end-2000 but analysts note that even this would leave it about 170 percent geared, against 100 percent gearing for its nearest rival Suez Lyonnaise des Eaux .
Proglio was unfazed that the debt would still be 13 billion euros at year end, saying pursuing profitable growth was more important than "cutting debt for the sake of it."
"Since January 1 we've developed our business, which has required investments," he explained, pointing out the utility still expected core earnings to be six times higher than financial charges within two to three years.
Parent Vivendi's debt was 22.8 billion euros at end-1999, and dropped to 16.8 billion at start of 2000 after the divestment of non-core assets.
Vivendi Environnement took on the 16.8-billion debt on demerger in early 2000 to allow Vivendi to focus on merging with Canada's entertainment and drinks group Seagram into a media giant to rival AOL/Time Warner
The utility's shares rose on Wednesday to a 46-euro high from 32.5 euros at flotation in July, valuing the firm at more than 10 billion euros.
But analysts concerned at its high debt said the stock was unlikely in the short-term to hold at over 45 euros.
Proglio said he could still make further large acquisitions since parent Vivendi, which has pledged not to sell any shares before 2003, was prepared to dilute its 72-percent stake.
Asked if he might bid for Britain's Anglian Water or Severn Trent, following German power utility RWE's buy of Thames Water, Proglio said he was not overly-interested in the heavily-regulated, capital intensive British water market.