* Energy services unit Dalkia earnings down on mild weather
* Waste volumes up 2.8 pct on strength outside Europe
* CEO does not expect consolidation in sector
* Norway SWF to remain a financial investor
(Adds quotes from CEO and CFO)
By Geert De Clercq
PARIS, May 7 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 was not in talks about an alliance with Suez
Environnement 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
"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 and
other Suez Environnement owners last year and a leadership
challenge to Frerot have fed rumours about the firms'
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 manoeuvres 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.
($1 = 0.7177 Euros)
(Reporting by Geert De Clercq; Editing by David Goodman, Larry