Bloomberg News

Veolia, Suez Environnement to Be Hurt by Slowdown, Goldman Says

October 20, 2011

Oct. 20 (Bloomberg) -- Veolia Environnement SA, the world’s biggest water company, and rival Suez Environnement will be hurt by a European economic decline as factories make less waste that needs treating, Goldman Sachs Group Inc. said.

“A deterioration of the economic environment in Europe may result in weaker business, in particular for Veolia’s and Suez Environnement’s waste activities,” analyst Dario Carradori said in a note today. “Both stocks have a high sensitivity to changes in GDP forecasts.”

The bank lowered earnings forecasts and share price targets for the utilities because of reduced profits from waste collection and treatment. Suez Environnement shares are now rated “neutral” by Goldman, downgraded from a “buy,” while the bank kept a “neutral” call on Veolia.

Veolia and Suez Environnement struggled to turn around earnings after the economic slowdown that followed the 2008 financial crisis. That decline led to factory closures and prompted the companies to shut waste sites. Veolia earlier this year unveiled a restructuring plan to curb its global reach and sell assets in a bid to reverse losses.

Suez Environnement said in August it’s keeping targets for 2011 through 2013. This year it aims for growth in earnings before interest, taxes, depreciation and amortization of at least 10 percent at constant foreign exchange rates, and at least 7 percent on average for 2012 and 2013.

Selling Assets

Goldman Sachs expects Ebitda growth of 4 percent to 5 percent in 2012 and 2013, lower than the company’s targets, according to today’s note. Suez Environnement spokeswoman Helene Enginger declined to comment.

Suez Environnement will report third-quarter earnings Oct. 26 while Veolia Environnement is scheduled for publication on Nov. 19 and will hold an investor day Dec. 6.

Veolia Chairman and Chief Executive Officer Antoine Frerot plans to halt operations in at least 37 countries and sell 1.3 billion euros ($1.8 billion) of assets this year to restore profit.

The company, which lost half its value this year, posted a first-half loss on writedowns on operations in Italy, Morocco and the U.S. and said it uncovered fraud at a U.S. business.

--Editors: Alex Devine, Amanda Jordan

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net.


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