Financial Times raises concerns about Veolia’s future
Yesterday UKWIN reported that waste company profits were falling. In an article entitled Doubts persist over Veolia’s financial health Financial Times journalist Peggy Hollinger, writing from Paris, highlights what she describes as:
the persistent doubts that hang over Veolia’s prospects and its financial strength, particularly after two profit warnings last year.
She explains:
Henri Proglio is putting a brave face on events that led Veolia, the French water, waste and energy services group where he is executive chairman, to report a 56 per cent plunge in net profit to €405m ($512m) last week. But it is a tired face and one that struggles to hide frustration at the persistent doubts that hang over Veolia’s prospects and its financial strength, particularly after two profit warnings last year.
Veolia boss is traumatised and scared
In an interview with the Financial Times from his Paris head office, troubled Veolia boss Henri Proglio said:
Today everyone is traumatised and everyone is looking to be scared
According to the fT article:
Mr Proglio has managed Veolia ever since it was spun out of the media conglomerate Vivendi in 2000, and to some degree he is still paying the price of that association. The group – which treats water and waste, runs urban transport systems and manages industrial energy needs among its collection of activities – took on €19bn in debt from Vivendi.
Last week it reported net debt of €17bn, representing four times 2008 cashflow from operations. Though the first deadline for repayment is not until 2012, Veolia’s growth ambitions are clearly constrained by the burden.
The Veolia boss is described as:
undisturbed by the fact that in eight years he has not managed to bring debt down.
The FT article continues:
So what growth is there for a company with little headroom on debt and whose waste business, where the downturn continues to bite, accounts for about a third of group sales and was the big cause of the sharp fall in profits last year?
Mr Proglio says there is plenty to go for organically, but refuses to commit himself to any growth targets for 2009.
Markets are sceptical. Veolia’s share price has tumbled from €55 to €16.5 in a year. The shock of the two warnings last year and the abrupt departure of the long-serving finance director have left questions about management and internal controls in a famously decentralised group.
