Thursday, August 28 08:41:51
French water and waste group Veolia Environnement said first-half 2014 net profit more than doubled as its focus on waste treatment for industrial clients over municipal water customers began to pay off.
The firm also confirmed its earnings guidance.
Consolidated net income jumped to 210 million euros from a restated 85.5 million in the year-earlier period, while revenue edged up 1.4 percent to 11.23 billion euros from 11.07 billion.
"Commercial efforts targeting the industrial sector are already bearing fruit," Veolia Chief Executive Antoine Frerot said.
As margins in its core French water business are squeezed in difficult contract negotiations with its municipal customers, the firm is focusing on waste treatment for industrial customers.
Frerot told an earnings call that 60 percent of the firm's new orders during the first half had come from industrial clients and 40 percent from municipal clients. He cited several large contracts in the oil industry and deals to dismantle industrial installations.
He said the benefit of the industrial market is that it can be less capital-intensive. Even if Veolia designs, builds and runs industrial installations, clients generally want to own them, so Veolia does not have to finance them, thereby reducing its capital needs.
He added that margins are also better in these new businesses than in Europe's mature municipal water markets.
"As these are new markets, there are not a lot of competitors yet, therefore it is a sellers' market and we are happy with the margins that we are earnings in these new industrial markets," he said.
He said that he expects Veolia's revenue to grow by at least three percent per year in coming years and that most of this growth will come from industrial clients, as he expects stable revenue in its core municipal water activities.
Besides recycling water for the oil industry, Veolia is also focusing on the mining industry, is investing in installations to handle toxic waste and energy-from-waste plants. (Reuters)
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