Vivendi Environnement net boosted by 35% income gains in water

Updated 3:24 PM ET March 8, 2001

By Noah Barkin and William Emmanuel

PARIS, March 8 (Reuters) - French utilities group Vivendi Environnement SA (VIE.PA) on Thursday said exceptional gains helped push net income up to 615 million euros in 2000, and it set out new three-year targets for sales and profit growth.

Unveiling its first set of financial results since being spun off from parent Vivendi Universal SA (EAUG.PA) and listed on the Paris bourse last July, the company said operating profit for the year jumped 29 percent to 1.91 billion euros for a margin of 7.2 percent, up from 7.0 percent in 1999.

Net profits were boosted by 273 million euros in after-tax non-recurring items -- a capital gain on the sale of a stake in energy services group Dalkia and provisions -- leaving pre-exceptional net profit of 342 million euros.

According to consensus estimates provided by the JCF Group, analysts had been expecting net profit before exceptionals of 372 million euros and operating income of 1.904 billion.

The company's net debt -- a source of concern in the financial markets -- totalled 13.2 billion euros at the end of 2000, down from 16.6 billion in 1999, but more than double shareholders equity of 6.2 billion euros.

Chairman Henri Proglio said future growth would take priority over debt reduction in absolute terms and he set out new targets for sales and profits.

"If we stopped growing we could not have any problem paying back the debt," Proglio said.

"Our goal is to boost sales by at least 10 percent per year over the next three years, to increase EBITDA (earnings before interest, taxes, depreciation and amortisation) by 12 percent per year and EBIT by 13 to 14 percent annually."


Profits were driven by the group's largest division, water, whose operating income rose 35.2 percent to 1.03 billion euros.

Operating income rose 44.5 percent to 399 million euros in waste management, was up 13.4 percent to 191 million euros in energy services and increased 14.6 percent to 108 million euros in transportation.

"The headline numbers look good but as you dissect them it becomes clear some elements are not necessarily recurring," said one analyst at a U.S. bank.

"The targets are achievable but potentially hostage to exchange rates since a lot of growth is likely to come from the United States."

Other analysts were more positive, pointing to the 2000 operating margin improvement and year-on-year reduction in debt levels.

"The market should take it as a positive that they have done better on the margin and net debt," said Mark Lewis of Deutsche Bank. "It looks like they are delivering on the unique defensive growth they have promised."


In the future, Proglio said the group had strong potential to grow in the area of industrial services -- a high margin sector that represented more than a quarter of total sales of 26.5 billion in 2000.

But the Vivendi Environnement chief was dismissive of domestic rival Suez Lyonnaise des Eaux's (LYOE.PA) recent pursuit of industrial gases group Air Liquide (AIRP.PA).

Suez is seeking ties with Air Liquide in order to boost its own industrial services business. The gases group has refused to talk with Suez, saying closer ties would not make good business sense.

"This pursuit can only result in a retreat (by Suez), a hostile bid or a bidding war," Proglio said. "That is not the style nor the kind of approach Vivendi Environnement prefers."

Shares in the company ended down 1.33 percent at 44.50 euros on Thursday. The stock has risen over 30 percent from its July public offering price of 34 euros.

The company is 72 percent owned by media and entertainment giant Vivendi Universal.