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Suez exceeds its goals in 2018 with record organic growth in revenue

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  • Suez exceeds its goals in 2018 with record organic growth in revenue
  • 2018 targets exceeded:
    • Revenue and EBIT up 11.9% and 11.5%, respectively, at constant exchange rates; Free cash flow in excess of €1bn.
    • Strong performance by WTS, with organic revenue growth up 6.7% and full-year synergies exceeding the target at $30m.
    • Net income Group share up 13.4%.
    • 2018 dividend per share of €0.65 to be proposed at the Annual General Meeting on May 14, 2019.
  • 2019 outlook: 
    • Organic growth in revenue of 2%-3% and in EBIT of 4%-5%.
    • FCF growth of 7%-8%.
    • Leverage ratio (Net debt/EBITDA) of c. 3 x in 20193.
    • Continued ambition to lower leverage ratio in 2020.
    • Dividend of €0.65 to be proposed at the Annual General Meeting in May 2020.

About the entity

SUEZ
As an expert in water and waste for 150 years that is present on the 5 continents, SUEZ harnesses all its capacity for innovation to work for the efficient and sustainable management of resources.
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Themes

Meeting on February 26, 2019, the Board of Directors approved SUEZ's 2018 financial statements, which will be submitted for the approval of the Annual General Meeting on May 14, 2019. The consolidated financial statements have been audited and certified by the statutory auditors.

Commenting on these results, Jean-Louis Chaussade, CEO, said:

The Group had a strong year in 2018, exceeding the revenue, EBIT and free cash flow targets set at the beginning of the year. All divisions contributed to this excellent growth trend, with WTS and International performing particularly well. The first year of WTS’s integration was altogether promising for the future and strengthens our belief that this strategic operation was the right choice for the Group. SUEZ’s profitability also improved in 2018, despite headwinds from the sharp drop in the price of certain recycled raw materials and the rise in oil prices. The commercial results reported by each division demonstrate our ability to maintain profitable growth momentum for the Group.

Revenue In 2018

Group revenue was €17,331m, up €1,548m versus 2017, and breaks down as follows:

  • Organic change of +3.6% (+€564m), with a positive contribution from all divisions:
    • Water Europe revenue rose +0.9% (+€40m), notably thanks to price increases (+1.0% in France, +0.1% in Spain, +3.0% in Chili).
    • Recycling and Recovery Europe revenue rose +2.7% (+€165m), bolstered by higher volumes of treated waste. However, growth slowed due to the adverse trend in recycled raw materials prices, particularly for paper and cardboard.
    • International revenue increased by +5.0% (+€196m), driven especially by the strong dynamism of Italy/Central Europe (+17.7%), Asia (+13.0%) and Australia (+11.1%).
    • Water Technologies & Solutions (WTS) revenue increased by 6.7% (+€156m) relative to pro forma 20176 . Both ES and CMS segments grew.
  • Scope effect of +8.3% (+€1,314m) due to the full-year impact of GE Water in 2018 (+€1,376m) compared with three months in 2017.
  • Exchange rate change of -2.0% (-€309m) due primarily to the appreciation of the euro against the US dollar (-€131m), the Australian dollar (-€72m), and the Chilean peso (-€22m).

Operating perfomance

At constant exchange rates, and before the impact of both the change in US tax law on regulated water activities and the purchase price allocation (PPA) of GE Water, EBITDA grew by +7.9% and EBIT by +11.5%. Organic growth in EBIT remained high at +7.5%, driven by WTS and International, despite the -€30m negative impact from commodity price trends (diesel, recycled raw materials, energy) in Europe.

Furthermore, the cost savings achieved under the Compass program exceeded the Group’s target for 2018 and reached €210m; they were generated through optimized operating performance, additional savings on procurement and lower overhead costs. In France, synergies generation between the Water and Recycling & Recovery businesses has particularly been accelerated with the appointment of a joint management and the pooling of commercial and support functions.

Overall, EBIT reached €1,335m at December 31, 2018, up +10.2% compared with 2017

Perfomance by division

Water Europe

  • Water Europe revenue was €4,629m. In line with the Group’s expectations, the division regained to a positive organic growth of +0.9%.
  • Revenue in France decreased by 2.6% (-€58m) on an organic basis, affected in part by the end of the Valenton contract. Favorable climate conditions in July and August very slightly offset the structural erosion in water volumes sold, which were down 0.8%. Tariff increases, at +1.0%, were driven mainly by electricity price trends.
  • Revenue in Spain was slightly higher at +0.5% (+€7m) on an organic basis, mainly due to the contribution from construction activities. The -1.2% change in water volumes sold reflected the less favorable climate and the decline in tourism activity in the summer period. Tariffs were stable, at +0.1%, including the 1.65% decrease negotiated in Barcelona, effective since May 2018, and an increase in the contracts in the rest of the country.
  • Revenue in Latin America grew by a sharp 10.6% (+€91m) on an organic basis. The segment benefited from a 3.5% increase in water volumes sold in Chile and from 3.0% tariff increases, due mainly to inflation-linked indexations in the country. The region also benefited from positive commercial momentum in Panama and Mexico.
  • EBIT in the Water Europe division was €503m, i.e., close to the 2017 level in organic terms. This stability reflects the more aggressive actions taken on cost savings, particularly in France and Spain.

International

  • The International division reported revenue of €3,990m in 2018, for organic growth of +5.0% as a result of the following trends:
    • Revenue growth in the Italy/Central and Eastern Europe region was robust at +17.7% on an organic basis, driven mainly by the soil remediation and waste management activities for industrial clients in Czech Republic and Poland, and by progress on construction of the wastewater treatment plant with a sludge-to-energy plant in Glina, Romania;
    • Revenue in Australia grew by +11.1% on an organic basis, primarily due to higher volumes of waste treated in the state of New South Wales and to the positive contribution from new construction contracts; - Revenue in Asia grew by +13.0% on an organic basis, with largely positive contributions from the two water and waste activities;
    • Revenue in the Africa/Middle East/India region declined by -7.5% on an organic basis due to the end of certain construction contracts such as Doha West (Qatar) and Barka (Oman), with no comparable contracts during this period;
    • Revenue in North America was up +3.9% on an organic basis; water volumes sold in the regulated business were stable relative to 2017, in spite of unfavorable weather conditions during the summer and fall; the non-regulated activity recorded a solid increase in revenue.
  • The division reported organic growth in EBIT of +9.8% (+€54m) to €563m. Excluding non-recurring items recorded in 2017, growth in the division’s operational profitability was +4.5%.

Water technologies & solutions

  • Revenue in the new WTS division exceeded our expectations, ending at $2,830m (€2,396m), up +6.7% on an organic basis relative to pro forma 20178 . Led by the expanded SUEZ and GE Water teams within WTS, both activities, Engineered Systems (ES) and Chemical Monitoring Solutions (CMS), contributed to this strong performance.
  • ES activity, which provides equipment for water and wastewater treatment, water reuse and services outsourcing grew by +11%. It benefited from growth in product sales, particularly in ultrafiltration and reverse osmosis, and from momentum in the services activities. CMS activity, which provides integrated chemical treatment solutions for industrial water and process applications, reported organic growth of +5%, driven mainly by China, Europe and the Middle East.
  • Orders for the division as a whole rose by +10.8% compared with 2017, reflecting strong commercial momentum, notably in Engineered Systems activity, which received a strong boost from commercial synergies.
  • EBIT for the division reached €169m before depreciation of the purchase price allocation of GE Water, i.e., $200m as expected. After recognizing depreciation, EBIT ended at €128m, up sharply versus 2017. Growth in the business and operational and commercial synergies accounted for the increase in profitability.

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