Veolia searches for profit from first-world waste

Reuters News
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Posted: Jan 08, 2015 5:17 AM

By Geert De Clercq and Benjamin Mallet

PARIS (Reuters) - French environmental services group Veolia plans to rummage through the rubbish for valuable raw materials to help offset stagnation in its water business, Chief Executive Antoine Frerot said.

Frerot ruled out acquisitions in the water business and said that water, waste and energy divisions -- which made up 45, 35 and 20 percent of 2014 revenue respectively -- will move towards one third each as technological breakthroughs in waste recovery and scarcity of commodities boost recycling worldwide.

He expects the global recycling market to grow 10-15 percent per year to 40 billion euros by 2020 from 25 billion today. Veolia's recycling turnover should more than double to about 5 billion euros by 2020.

Frerot sees huge potential in the waste flow from developed countries, where high-tech sorting and recycling technologies increasingly turn household and industrial detritus into a source of new commodities and energy.

"The waste streams of developed countries are a real mine for raw materials, and even if we do not become a mining company, our recycling activities increasingly compete with the mining industry," Frerot told Reuters in an interview.

Veolia and French rival Suez Environnement are the world's top two water and waste companies, each serving populations of about 120 million worldwide.

Both saw huge growth as the share of privately operated water provision globally rose from just two percent in 1995 to about 12 percent last year. But in the past few years that growth has stopped and a trend back towards city control erodes Veolia's water turnover by 1 to 2 percent per year.

Frerot ruled out Veolia merging with Suez Environnement, which the two firms discussed in 2012. He also has no plans to buy into smaller regional competitors like Brazil's Odebrecht.

He said Veolia today has better things to do than to try to take over traditional competitors to win market share.

"Our budget is not unlimited, I prefer to use it to buy new technologies or develop new activities that are less competitive and where we can be first," he said.

Frerot said Veolia has an investment budget of about 500 million euros per year, and that a small part of that could be spent on external growth.

He also said Veolia would cut corporate costs by another 200 millions euros in 2015, for a cumulative total of 750 million euros from 2011, and that a 2016-18 cost-cutting plan will be more focused on purchasing and operational efficiency.

Frerot, who survived a boardroom coup led by shareholder Dassault early last year, thinks that results of his strategy have reassured his shareholders.

"Relations are becoming more peaceful," he said.

Veolia's first-half 2014 net profit more than doubled as its focus on waste treatment for industrial customers began to pay off. Its shares, up 20 percent over the past 12 months, are the third-best performer in the French CAC40 blue-chip index in a sign of investor approval.

Frerot said Veolia's waste division strives to automate the sorting of waste and to recover more commodities or produce additional energy from it, reducing landfill.

In Britain, Veolia recycles platinum and other precious metals from car exhaust particulates in road dust, and in Brussels it has a pilot plant where bacteria turn water purification station sludge into plastics.

While it cannot compete with plastics made by the petrochemical industry, other Veolia plants have started using bacteria to turn sludge into commercially sellable fertiliser.

(Reporting by Geert De Clercq; editing by Keith Weir)