UPDATE 2-Suez cuts costs, eyes consolidation in EU waste industry

Wed Jul 31, 2013 6:48am EDT

* H1 EBITDA up 7.2 percent to 1.2 bln euros

* Confirms guidance for FY EBITDA at least 2.55 bln euros

* Sees dividend of at least 0.65 euro per share

* To boost cost-cutting to 180 mln euros in 2013

* Shares up 2.6 pct vs 0.2 pct rise in CAC 40 (Rewrites first paragraph, adds stock move, CEO consolidation comments)

By Geert De Clercq

PARIS, July 31 (Reuters) - France's Suez Environnement plans further cost cuts to maintain its 2013 profit targets and said it is ready to make acquisitions in Europe's waste industry, where assets prices have fallen as the economic crisis bites.

Suez Environnement, the world's No. 2 water and waste group after French peer Veolia Environnement, expects a slight improvement in waste volumes in the second half and plans to increase its cost-cutting programme to 180 million euros this year from at least 150 million in 2012.

First-half core earnings before interest, tax, depreciation and amortisation (EBITDA) rose 7.2 percent to 1.2 billion euros ($1.6 billion) even as sales fell 1.7 percent to 7.2 billion, the group said on Wednesday.

Chief Executive Jean-Louis Chaussade said Suez Environnement was prepared to make acquisitions provided good opportunities arose, especially in the waste sector in Europe, where the price of assets had fallen considerably.

"I am convinced that we will see consolidation in the European waste sector, probably very strong, and we will participate in that consolidation if necessary," Chaussade told a teleconference, noting any acquisition would have to make strategic sense, generate synergies and be reasonably priced.

"Provided these conditions are met, we can envisage anything, as long as our balance sheet equilibrium is respected," Chaussade said.

In its key European waste unit, revenue fell 3.6 percent to 3.3 billion euros and EBITDA fell by the same percentage to 382 million as industrial production in Europe contracted and prices for secondary raw material such as metal and paper decreased.

"We assume a slight improvement of economic activity in the second half, which would translate into a slightly smaller fall of volumes compared to the first half," Chaussade said.

For the full year he expects volumes to be down about 3 percent, from a drop of nearly 4 percent in the first half.

"Given these conditions, and in order to maintain our earnings guidance, we have decided to cut costs further," he said. Cuts would be achieved through reductions in operating expenses rather than jobs.

WATER VOLUMES

The group confirmed its guidance for full-year EBITDA of at least 2.55 billion euros and a dividend of at least 0.65 euro per share.

Core earnings from Suez Environnement's water business fell 2.9 percent to 562 million euros as cold and wet weather reduced water consumption. Drinking water volumes sold in France were down 2 percent, in Spain 6 percent.

The firm's international division saw sales fall 3.4 percent to 1.78 billion euros, but core earnings jumped 55 percent to 283 million, boosted by strong water and waste activity in Asia and other emerging economies and by the absence of further provisions on its Melbourne, Australia desalination plant.

Suez Environnement also announced a slew of long-term contracts, including a major wastewater contract with the metropolitan region of Barcelona, Spain, representing revenue of 3.5 billion euros over 35 years.

Net income jumped to 132 million euros from 92 million a year earlier, which was hit by several exceptional elements. Chaussade said there were no exceptionals in the first half of this year.

Chaussade said that despite the expiry of a pact between the company's shareholders on July 22, the risk of a hostile bid on the group was limited as its main shareholder GDF Suez, which has a 35.7 percent stake, has no plans to sell.

The other leading shareholder is Belgian holding company GBL with 7.2 percent.

Suez shares rose as much as 4.5 percent but fell back to stand 2.6 percent higher in late morning trade. The French CAC 40 index was up 0.2 percent.

Suez shares, which more than halved to a 2012 low of 7.88 euros in November, have since recovered strongly. They are up 14.5 percent in the year to date, pushing the firm's market capitalisation to 5.3 billion euros. ($1 = 0.7547 euros) (Editing by Christian Plumb and David Holmes)

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