Veolia Earnings: Solid Start to the Year, Which Was Anticipated

We don’t plan to materially change our EUR 30.50 fair value estimate after no-moat Veolia VIE released solid first-quarter results albeit in line with the consensus it polled at the EBITDA level and maintained its 2023 guidance. Shares are in 3-star territory.

First-quarter turnover grew by 20% year on year and by 6.3% excluding the impact of higher energy prices. Growth was supported by indexation to inflation and pass-through of cost increases for the 30% of turnover that is not indexed. Price increases amounted to 4.5% for the water business and 4.1% for waste. Waste volumes were flat, slowing down from 1.2% growth in 2022.

EBITDA increased by 8% to EUR 1.57 billion. As usual, the main positive drivers were cost savings and synergies amounting to EUR 87 million and EUR 43 million, respectively. The former is in line with the EUR 350 million annual target while the latter is above the EUR 134 million target. On the negative side, margin squeeze related to contract renegotiations that shaved EUR 43 million off EBITDA. Management mentioned during the conference call that this amount should persist in the following quarter, implying an improvement versus 2022.

Veolia maintained its 2023 guidance of EBITDA growth in a 5%-7% range and current net income at around EUR 1.3 billion, 12% higher than in 2022.