EuroBusiness Media (EBM): SUEZ ENVIRONNEMENT, a world leader in water and waste management, announces its full-year results for 2010. Jean-Louis Chaussade, welcome. You are the CEO of SUEZ ENVIRONNEMENT, what were the highlights and key takeaways for 2010?
Jean-Louis Chaussade (JLC): 2010 was a year of strong growth for SUEZ ENVIRONNEMENT, with many industrial and commercial successes, some strategic advances, and a strong increase in our results.
_ - Our waste valorization business increased strongly,
_ - We accelerated our international development,
_ - And we completed the friendly takeover of AGBAR, the leader in water in Spain , with strong market positions in water in Chili and the United Kingdom.
Such an intense activity lead to a strong increase in our results, with sales and EBITDA both increasing above 13%.
Our Net result group share was particularly high, at €565 million. Our balance sheet is solid with net debt at 3.2 times EBITDA. We will propose to the AGM on May 19th 2011 a dividend of sixty-five cents per share.
EBM: You just mentioned several strategic developments, notably the takeover of AGBAR. How is your group progressing in Europe, and in Spain in particular?
JLC: Europe represents 73% of our revenues today, up 6% this year for water and up 9% for waste. The growth outlook for our businesses is strong, notably in southern Europe in water, and in material and energy valorization in waste, supported by environmental regulations, energy issues, and the needs for infrastructure.
From this point of view, the Spanish water market offers attractive opportunities :
The need for infrastructures is high, notably in wastewater treatment.
Spain suffers from water scarcity, and has implemented ambitious investment programs to address it. Private operators will be largely involved, with many opportunities for public-private partnerships, such as the one we were just awarded in Mallorca for 50 years and close to €1 billion in revenues.
Water prices in Spain are also very much below the European average, and their increase is therefore more rapid than elsewhere.
In addition, AGBAR will spearhead SUEZ ENVIRONNEMENT's development in Latin America with new projects, notably in Chile and Brazil.
EBM: Precisely, beyond Europe, how well are you positioned in international markets, where the growth rates are higher?
We are pursuing an ambitious yet selective international development strategy, focusing on environmental markets that have attractive growth potentials:
_ - These are supported by dynamic macro-economic growth and the rapid expansion of cities, with major needs for modern infrastructure,
_ - And also supported by an industrial demand for state-of-the-art water treatment and waste management solutions.
We accelerated our international development in 2010; we now have 27% of our revenues outside of Europe, notably in the United States in water, in Chile via AGBAR, and in Asia-Pacific -- in Australia in particular, in water and waste management.
We are also present in the Mediterranean basin, and we offer different types of contracts depending on customer requirements.
There are many opportunities in these markets which offer a potential for rapid growth. We are in a good position to select the right ones, as we are positioned along the entire value chain in water and waste management.
EBM: How do you see the evolution of your businesses in the short term in 2011?
JLC: After 2010, which saw our results increase strongly and an acceleration in the growth of our businesses, SUEZ ENVIRONNEMENT begins 2011 with confidence.
The treated waste volumes progressively increased in 2010, and the beginning of 2011 confirms that this trend is continuing. The acquisition of WSN in Australia reinforces our positions in this fast growing market.
In water, we will benefit from the escalation formula application in France and in Spain, the development of new services and a more favorable works situation in France, new contracts notably in Spain, and a much faster international growth.
EBM: Given what you've just said, what is your guidance and outlook for 2011?
JLC: Our 2011 objectives are clear. First, at the operational level, compared to 2010, and at constant exchange rates:
_ - a revenue increase equal or greater than 5%.
_ - an EBITDA increase equal or greater than 10%, including the additional scope effect related to the AGBAR acquisition which will still apply for five months in 2011.
Second, we target a net result group share above €425 million.
Third, this increase in profitability will go hand-in-hand with an increase of our free cash flow. We therefore target a free cash flow generation equal or above 2010, namely €852 million. Year after year, our cash flow generation increases strongly. This is one of the priorities of our profitable and cash-generating growth model.
Finally, we will remain selective in our investments, with a targeted net debt to EBITDA ratio around three times as soon as end of 2011 -- that is, one year ahead of schedule compared to our previously announced objectives, which foresaw a return to this level in 2012.
We begin 2011 with a better macro economic outlook. SUEZ ENVIRONNEMENT is well-positioned to take advantage of this, in all its businesses, with its solid balance sheet, and a balanced and ambitious growth strategy, based on our competitive advantages, which allow us to position ourselves as a leader in environmental performance.
EBM: To conclude, what is your outlook in the medium term, in the next two or three years?
JLC: In a context of progressive macro-economic recovery, SUEZ ENVIRONNEMENT's medium-term outlook is solid for 2012-2013, with a balanced growth which we intend to be increasingly profitable.
Our objective is to grow our businesses globally faster than the growth rate of the economies where we are present. We target an average revenue growth rate equal to or greater than 5% at constant exchange rates.
We will also increase our profitability, targeting an average growth of EBITDA equal to or above 7% at constant exchange rates, which is faster than revenues.
The Group will also continue its cost optimization efforts, and we hereby raise our cost improvement target from €250 to €300 million for the period spanning 2010-2012.
We will keep on investing selectively, while preserving our financial equilibrium, with the objective of maintaining our net debt to EBITDA ratio at around three times.
Lastly, we want our shareholder remuneration policy to be attractive. Therefore we intend to propose -- subject to shareholder approval at the corresponding AGMs -- a dividend increase of about 5% per year for the dividends of fiscal years 2011, 2012 and 2013. Our long-term objective is a payout ratio above 60%.
EBM: Jean-Louis Chaussade, CEO of SUEZ ENVIRONNEMENT, thank you very much.
JLC: Thank you.
