Modest growth for Veolia and Suez

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The French giants saw small increases in revenues in 2004. Veolia is looking to China, while energy overshadows water at Suez.

Veolia and Suez revealed their top-line sales data for 2004 in early February, and met with a generally favourable market response.

With organic growth of 2.5% to €9,798 million, Veolia’s water interests fared marginally better than those of Suez, which showed organic growth of 1.6% to €6,986 million. Both companies found their home market slower in 2004 than in the drought year of 2003.

Veolia reported French water revenues up 1% (they increased by 4% in 2003), while Suez did not release data but commented that there had been “a strong increase in sanitation and service revenues in France, notwithstanding lower levies collected on behalf of third parties”.

Outside France, Veolia recorded revenues up 9%, with a 19% increase from the Asia Pacific region. Veolia water boss Antoine Frérot has been in Shanghai for the opening of the Shanghai Pudong Veolia Water Centre.

The Pudong contract represents just over half Veolia’s €500 million investment in China. With the Water Centre now complete, investors will be looking for cash starting to flow out of the project shortly.

Frérot told the local Chinese press that “Veolia Water’s business in China may grow 20% annually for 15 years and will account for 10% of our global business by 2020”. Currently, Asia generates less than 2% of the group’s revenues.

With this expansion in mind, group CEO Henri Proglio told the French financial press that he was looking to bring Chinese institutional investors into the company over the next two years.

Such a move would reduce Veolia’s political risk in that market.

Veolia’s US business was reported to have performed well, but the contracting and equipment business, Veolia Water Systems, dipped 2.7%. This follows an 8.4% decline in top-line revenues for VWS in 2003 – the result of pulling out of unprofitable businesses. Suez’s contracting arm, Degrémont, also saw revenues fall in 2004 (they were down by 3.4% compared with a 3.1% increase in 2003). Plant completions was cited as the cause. Degrémont has a strong order book as a result of recent deals in Halifax, Valenton, Moscow and Escondida in Chile.

Overall, Suez’s water interests now represent 17% of total revenues. A strong performance from the international energy division, driven by LNG sales in the US, was the main highlight of the 2004 group results.