PARIS Veolia's first-quarter revenue slipped as Europe's warm winter weighed on its energy services unit, but volumes in waste were up for the first time in many quarters and the firm confirmed its earnings guidance.
The water and waste group's CEO, Antoine Frerot, also said Veolia (VIE.PA) was not in talks about an alliance with Suez Environnement (SEVI.PA) and he does not expect any consolidation in their industry.
Veolia said first-quarter revenue fell 1.2 percent to 5.7 billion euros ($7.9 billion), with revenue of its energy services unit, Dalkia, down 21 percent to 934 million euros because of an exceptionally mild winter. Adjusted operating income fell 7.3 percent to 376 million euros.
"Europe had the warmest winter in more than 100 years, while last winter was rather cold," Frerot said on a conference call.
Revenue at Veolia's water business was flat at 2.5 billion euros. Waste revenue was up 4.8 percent to 2 billion.
Volumes in the cyclical waste business were up 2.8 percent, which Frerot said he had not seen in several quarters. He added that French waste volumes were flat and the increase was driven by the United States, Australia, China and Britain.
"Waste volume growth comes from outside Europe, where economic growth looks to be well under way," Frerot said.
He added 60 pct of its waste volume is linked to industrial production, the rest to household consumption.
Suez, the world's second-largest environmental services group after Veolia, said in April its first-quarter waste volume had also grown for the first time in two years.
Frerot said the strong euro had had a 1.7 percent negative impact on revenue as earnings abroad were translated into euros, but Veolia was not suffering from a currency squeeze like some companies who are caught between producing in strong-currency countries and selling in weak-currency countries.
Veolia CFO Philippe Capron told analysts the warm winter's impact on Dalkia did not threaten Veolia's earnings guidance.
"In spite of Dalkia, we are still well ahead of budget. The safety layers in our budget have not been used up," he said.
Veolia confirmed its earnings guidance, saying it expects 2014 revenue will grow. It sees 10 percent growth of adjusted operating cash flow and "significant growth" in adjusted net income. It also confirmed plans to propose a 0.70 euro dividend on 2014 earnings.
From 2015, the company aims to achieve organic revenue growth of more than three percent per year.
Capron said he hoped the agreed split of Dalkia between Veolia and EDF would get European Union antitrust clearance by the end of the third quarter. Veolia and EDF each own 50 percent of Dalkia.
"We do not expect difficulties for the Veolia part of the deal, but the EDF part is more complex," he said. EDF dominates the French energy market, a position the Dalkia France acquisition would reinforce, analysts say.
Frerot denied persistent media reports about reopening alliance talks with Suez. They discussed the idea two years ago but dropped it over antitrust concerns.
The end of a shareholders pact between GDF Suez GSZ.PA and other Suez Environnement owners last year and a leadership challenge to Frerot have fed rumours about the firms' shareholder base.
Veolia's board approved a second term for Frerot in February, following an unsuccessful attempt to oust him.
Frerot said he did not expect any alliances or major consolidation in the sector.
"I do not have the impression that our sector is set to see major maneuvers in the coming months," he said.
Frerot denied a media report that Veolia was in talks with Norway's sovereign wealth fund about doubling its 3 percent Veolia stake and taking a seat on the board.
He said the fund is a financial investor and does not engage itself for the long term. "There are no talks with the fund about becoming a structural investor in Veolia," he said.
State-owned holding company Caisse des Depots (CDC), Veolia's lead shareholder with an 8.85 percent stake, said last month it no longer saw the stake as strategic.
Veolia's second-biggest shareholder, Groupe Industriel Marcel Dassault, resigned from Veolia's board last month after an unsuccessful attempt to oust Frerot. Frerot has said Dassault could sell its 6 percent stake if Veolia's stock price rises.
"Neither Dassault or (third-biggest shareholder) Groupama have indicated, in public or to me in person, that they want to sell their shares," Frerot said.
(Reporting by Geert De Clercq; Editing by David Goodman, Larry King)