Highlights:

• Brisk Business Activity: Organic revenue growth of 3.7% to €4,210 m
• Strong sales momentum across all divisions
• EBIT up 3.3% in organic terms to €293m, in line with the expected trajectory
• 2019 outlook confirmed

France: SUEZ has reported revenue of €4,210m in first-quarter 2019, up 3.7% in organic terms. The group’s growth continues to be driven by increased business activity for the Water Technologies and Solutions (WTS) and International divisions, which posted organic revenue growth of 8.5% and 4.5%, respectively. In a favorable tariff environment, the Recycling & Recovery Europe division posted solid organic revenue growth of 4.7%. Volumes treated decreased slightly, the result of continued greater contract selectivity as to paper and certain plastics. Waste volumes in Europe are nevertheless expected to rise 1.5% in 2019. Water Europe business was stable as expected.

The company’s EBIT stood at €293m at March 31, 2019, up 3.3% in organic terms.

On a like-for-like accounting basis, debt remained practically stable from December 31st at €9,031m compared with €8,954m (+0.9%), and the debt ratio came out at 3.26x EBITDA on a 12-month rolling basis. This stability factors in the following three key items: seasonal growth in the WCR for €337m, an unfavorable currency effect for €124m and net proceeds from the disposal of a 20% stake in SUEZ Water Resources Inc. (USA) for €524m.

The Argentine government and SUEZ have concluded and implemented a transactional settlement agreement on Aguas Argentinas. For the SUEZ group, the cash amount received in April is €220m.

Commenting on the first-quarter 2019 results, Chief Executive Officer Jean-Louis Chaussade said: “With organic revenue growth of 3.7% and organic EBIT growth of 3.3% in the first quarter, we are off to a strong start in 2019. At each division, the strong mobilization of the teams is producing numerous commercial successes and bolstering business activity. For example, we were appointed preferred bidder by the City of Manchester for the treatment of waste of 2.3 million inhabitants, or one million tons of waste a year. In China, SUEZ has won three contracts in water management and recovery for a total of nearly €250m. In addition, I am delighted with the definitive resolution of arbitration with the Argentinian government in respect of the Buenos Aires water and sanitation concession. Overall, the performance achieved in the first quarter is in line with our forecast trajectory and we are confirming our guidance for 2019.”

Breakdown of Activity, End-March 2019

The gross revenue change of +3.8% (+€156m) versus March 31, 2018 breaks down as follows:

Organic Change of +3.7% (+€151m):

• Water Europe revenue was down slightly by -0.4% (-€5m). More advantageous tariffs in France offset in part the less favorable commercial balance over the period. The change in water volumes sold to Chile was impacted by an unfavorable base effect owing to an exceptionally warm and dry first-quarter 2018.
• Recycling & recovery Europe revenue increased 4.7% (+€72m), notably owing to the increase in tariffs on services for industrial clients.
• The international division posted a 4.5% increase in revenue (+€40m) through dynamic business activity in almost all the regions.
• WTS continues to generate solid organic growth, up 8.5% (+€42m), driven by Engineered Systems activity.

Currency effect of 0.9% (+€35m), resulting primarily from the appreciation of the US dollar (+€35m) and, to a lesser extent, the pound sterling (+€3m), while the Australian dollar and the Chilean peso both fell (by €5m) against the euro.

Scope effect of -0.8% (-€31m), stemming in particular from the 2018 disposal of a pallet recycling and medical waste collection activity in France.

EBITDA totaled €709m, down 0.8% on an organic basis, and EBIT €293m, up 3.3% on an organic basis. They include the exceptional bonus for the lowest wages in France, for €7m. The technical effects resulting from the initial application of IFRS 16 amounted to €76m on EBITDA and €3m on EBIT.

Performance by Division

Water Europe:

Revenue in France was down 4.4% (-€23m) on an organic basis:The increase in water volumes sold (up 1.6%) owing to more favorable weather conditions this winter and tariff increases (also up 1.6%) partly offset the effect of the end of the contracts in Bordeaux (January 2019) and Valenton (April 2018).

Revenue in Spain increased 0.7% (+€3m) on an organic basis:As in France, water volumes sold benefited from favorable weather, rising 0.9%. Tariffs continued to be impacted by the 1.65% decline implemented in May 2018, in Barcelona, and by the deferment on tariff increases on the rest of the contracts owing to upcoming elections in the second quarter. As a result, tariffs fell 1.1%. There will be no tariff change in Barcelona in 2019.

Revenue in Latin America grew 6.5% (+€16m) on an organic basis:The Business Unit benefited from tariff increases in Chile, up 2.8% for the period. Water volumes sold rose slightly, by 0.5%, owing to an unfavorable base effect, with the summer of 2018 in Chile (first-quarter 2018) proving particularly warm and dry. The strong organic growth in Latin America can also be attributed to considerable momentum in construction, notably in Salvador and Panama, and to the development of our activity relative to the optimization and efficiency of the water distribution networks in Brazil.

EBIT was down on an organic basis due to the tariff decrease in Barcelona and the phasing of the commercial balance in France.

Recycling & Recovery Europe
Performance in the Recycling & Recovery Europe division was driven mainly by increases in service tariffs across all business segments, notably with industrial clients. Treated volumes fell slightly, by 0.8%, a result of the Group’s stated aim to reduce its exposure to the sorting of paper and certain plastics given the particularly low price levels of these recycled materials. Treated volumes are nevertheless expected to rise 1.5% for the year as a whole. In a further noteworthy development, average electricity sale tariffs increased in 2019 across all regions.

Revenue in the Industrial Waste Specialties segment increased by a full 18.8% (€20m) on an organic basis.
The segment was bolstered in particular by robust momentum in soil remediation, and by tariff increases for the Chemicals business in Europe.

Revenue in the Benelux/Germany region rose 8.2% (€30m) on an organic basis.
The services activities benefited from major tariff increases, particularly in the industrial and commercial segment. We note the continued solid growth of Belland Vision (licensing packaging) in Germany. Waste volumes treated fell slightly in the region, notably in Belgium and the Netherlands.

The United Kingdom/Scandinavia region posted organic growth of 4.6% (€12m).
The increase mainly resulted from tariff increases in the services business, both municipal and industrial. Volumes remained trended positively, notably in energy recovery in the UK and the industrial and commercial sector in Sweden. The region also benefited from substantial momentum in construction, notably at the Surrey site.

Revenue in France was up 1.2% (€10m) on an organic basis.
As in other countries, growth benefitted from tariff increases in the services business. In addition, sorted volumes were limited by the voluntary reduction of exposure to the price of paper/cardboard and certain plastics.

Excluding the one-off impact of the payment this quarter of an exceptional bonus for the lowest wages in France, and despite a significant increase in oil prices since the start of the year, the division posted a slight organic increase in EBIT.

International Market
Asia posted organic growth of 31.0% (€27m), with positive contributions from water and waste activities. The region’s organic performance was also positively impacted by the takeover of the water assets Shanghai Chemical Industrial Park (SCIP) as part of the Group’s determination to boost its presence in industrial parks in China.

Australia generated organic growth of 5.6% (€14m), primarily due to increased volumes of waste treated and the start-up of new collection contracts.

Revenue in the Italy/Central & Eastern Europe region was up 1.7% (€2m) on an organic basis. Business activity continued to trend positively in all the countries. Organic growth was more modest owing to a high comparison basis, following a particularly vigorous 2018 period.

Revenue in North America was up slightly, by 0.4% (€1m), on an organic basis. Regulated water activities posted volumes up very slightly (+0.6%).

Revenue in the Africa/Middle East/India region was down 1.5% (€4m) on an organic basis. Business momentum remains strong in the region, especially in India, with the start-up of the Coimbatore and Davengere contracts. However, organic growth slowed following the end of the Barka construction contract in Oman in June 2018.

Considering the phasing of contracts, the construction business backlog stood at €0.6bn for this division, down 6.4% versus end-2018.

The division posted considerable organic EBIT growth, with positive contributions from all geographical segments.

Water Technologies & Solutions
WTS revenue stood at €556m, an organic increase of 8.5% (€42m). The Engineered Systems business achieved organic growth of 11%, driven by solid growth in product sales, notably analysis and purification tools, and by promising momentum in service activities. The Chemical Monitoring Solutions business posted organic growth of 3%, benefiting in particular from tariff increases in Asia and Latin America.

WTS EBIT is not significant in the first quarter. Excluding non-recurring items in first-quarter 2018, it grew organically.

Outlook
In an environment that has become more volatile, in which the services offered by SUEZ to its customers have become increasingly necessary, the Group is fully focused on delivering a significant improvement in its results.

Maintaining a selective investment policy, achieving at least €200m in cost savings, and unlocking WTS integration synergies will help SUEZ to meet the targets it has set and confirmed for 2019:

• Organic revenue growth of 2% to 3%
• Organic EBIT growth of 4% to 5%
• FCF growth of around 7% to 8%
• Leverage ratio (Net debt/EBITDA) of c.3x in 2019
• Continued ambition to lower debt ratio in 2020

On this basis, and in accordance with the Board of Directors, the Group intends to propose a dividend of €0.65 per share in respect of 2019 at the Annual General Meeting in May 2020.

With 90 000 people on the five continents, SUEZ is a leader in smart and sustainable resource management. It provides water and waste management solutions that enable cities and industries to optimize their resource management and strengthen their environmental and economic performances, in line with regulatory standards. The Group recovers 17 million tons of waste a year, produces 3.9 million tons of secondary raw materials and 7 TWh of local renewable energy. It also secures water resources, delivering wastewater treatment services to 58 million people and reusing 882 million m3 of wastewater. SUEZ generated total revenues of €17.3 billion in 2018.

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