* Australian, Chile currency weakness weighs on earnings
* Waste volumes up for the first time in two years
* Suez could spend up to 700 mln euros on 2014 acquisitions
(Adds detail on takeover budget)
By Geert De Clercq
PARIS, April 24 France's Suez Environnement
said the volume of waste it treated in the first
quarter had grown for the first time in two years and that it
could spend up to 700 million euros on acquisitions this year.
Suez's first-quarter core earnings fell 2.2 percent to 552
million euros from an adjusted 564 million a year earlier,
mainly because of the depreciation of the Australian dollar and
the Chilean peso against the euro.
The world's number-two waste treatment and water company
after French peer Veolia said it endured a negative
exchange rate impact of 94 million euros on revenue, 30 million
euros on EBITDA and 55 million euros on net debt.
Chief Financial Officer Jean-Marc Boursier told an earnings
call that the problem was not the level of the euro, but that
the Australian and Chilean currencies had fallen against the
euro, reducing the contribution from its operations in those
Revenue fell to 3.35 billion euros from an adjusted 3.42
billion. The weak Australian dollar cut revenue by 41 million
euros, while the Chilean peso had an impact of 33 million.
Like Veolia, Suez is trying to offset shrinking profit
margins in its traditional municipal water business by focusing
more on industrial clients.
The companies are investing heavily in areas such as the
treatment of toxic waste, water treatment for the oil, gas and
mining industries and waste from agribusiness and food
Suez said a slight improvement in its waste business at the
end of last year had continued in the first quarter, as shown by
a 1.7 percent increase in treated volumes.
"For the first time in two years, our volume of waste
treated is on the rise," Boursier said.
He said that was due to a more stable economic environment
and to new installations. But the positive impact of higher
volumes was offset by lower prices for secondary raw materials
retrieved from waste and sold on by Suez, with metals prices
notably down 11 percent.
Lower electricity prices in Europe also reduced the income
from power generated by burning waste.
"We based our earnings guidance on the assumption of 1
percent volume growth for the entire year, and with 1.7 percent
so far we are slightly ahead," said Boursier.
March and April had been good months, he said, and the
company was hoping waste volume would grow 1 to 2 percent this
"The economic recovery is at our door, but it is uneven
across Europe, with strong growth of about 4 percent in Germany
and 3 percent in the UK, but slower growth in France and the
Netherlands, where we have a sizable business," he added.
Boursier said that Suez - which invested about 1.1 billion
euros in 2013 - would invest a similar amount this year.
"In order to reach our objective of organic growth of at
least 2 percent of EBITDA, we need to invest 1 to 1.2 billion
euros this year," he said.
Boursier also said that since the company's debt is now well
below three times core profit - or earnings before interest,
tax, depreciation and amortisation (EBITDA) - it had the
capacity to develop through targeted acquisitions.
"We have financial flexibility of about 700 million euros,"
The company said earlier this month it had a budget of about
500 million euros for acquisitions this year.
Asked which businesses and areas the company would target,
he said Suez would look to invest in new water services rather
than in the historical concessions business, in industrial water
rather than municipal.
He added Suez would invest internationally rather than in
Europe and that its waste business would focus on recycling and
Asked about possible changes in the company's shareholder
structure, Boursier said there was nothing afoot. Veolia and
Suez denied this month that they were considering a merger,
after a research report raised that possibility.
Suez shares were down about 1.5 percent in morning trading
on Thursday, underperforming the wider French blue-chip index
which was up 0.5 percent. The company's shares are up
about 12 percent in the year to date and 40 percent over the
past 12 months.
(Reporting by Geert De Clercq; editing by Andrew Callus and Tom