(Updates with analyst’s comment in third paragraph.)
Oct. 27 (Bloomberg) -- Suez Environnement, Europe’s second- biggest water company, dropped the most in more than two years in Paris trading after it took a charge for an Australian project and failed to reiterate a growth target for 2012.
The utility, based in Paris, fell as much as 7.1 percent to 10.995 euros, the biggest intraday drop since March 2009, and was trading at 11.625 euros at 2:51 p.m. in Paris. Suez Environnement, which has lost about 25 percent since the start of the year, said a 185 million-euro ($261 million) charge on an Australian desalination plant will cut full-year earnings.
“The one-off charge is not the primary issue,” Deutsche Bank analyst Bertrand Lecourt wrote in a report today which downgraded the rating from “buy” to “hold.” “The main concern is the removal of the 2012-2013 guidance of 7 percent Ebitda growth and the risk of witnessing a flat dividend for 2012.”
Suez Environnement, which is 34 percent-owned by energy utility GDF Suez SA, said bad weather and strikes at the building site of the sea-water treatment plant outside Melbourne led the board to recommend keeping its dividend at 65 euro cents this year, the same as 2010. The utility had planned a 5 percent increase in annual payouts to shareholders.
There is a “risk of the economic slowdown affecting Suez Environnement’s waste business next year, although limited signs of a slowdown have emerged so far,” according to Deutsche Bank. The “momentum” of higher volumes of waste treated in the first nine months of the year could slow in the fourth quarter, it said.
The utility had said 2011 would be a year of growth after struggling, like larger rival Veolia Environnement SA, to boost industrial waste sorting following the 2009 recession that shut factories. Earnings at both utilities will be hurt by another slowdown in European economies, Goldman Sachs Group Inc. said in an Oct. 20 note to clients.
The company had planned average growth in earnings before interest, taxes, depreciation and amortization of at least 10 percent in 2011 at constant exchange rates and at least 7 percent on average for 2012 and 2013. Net income was likely to exceed 425 million euros this year, the company said on Aug. 3.
Yesterday, Chief Financial Officer Jean-Marc Boursier said Ebitda would be around 2.5 billion euros this year and net income could be about 300 million euros. He declined to reiterate targets for 2012, saying details will be given in February.
Veolia, which has announced a plan to curb its global reach and sell assets, reports nine-month earnings Nov. 10 and will hold an investor day Dec. 6.
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