* To exit half of countries where currently operates
* Sees extra savings of 250 mln-300 mln euros a yr by 2015
* Swings to H1 loss; shares fall 12.6 pct
(Adds CEO, analyst comments, detail, updates shares)
By Caroline Jacobs and Benjamin Mallet
PARIS, Aug 4 France's Veolia Environnement
aims to dramatically shrink its operations in an effort
to return to growth, marking a clear break with an earlier
expansion strategy at the world's biggest listed water group.
Swinging to a first-half loss on Thursday, Veolia said it
would focus on fewer than 40 countries -- down from 77 -- and
quit activities such as transport in Morocco, environmental
services in Egypt and marine services in the United States.
Chief Executive and Chairman Antoine Frerot's move to speed
up a substantial overhaul of Veolia comes after the acquisition
spree under his predecessor Henri Proglio, now head of utility
EDF , ended in 2009 to focus on making cash and cutting
"We will have a smaller group in the next 18 months ... It
will be smaller but more profitable," Frerot said at Veolia's
earnings and restructuring presentation.
"The pressure we have seen on prices for our services forces
us to go faster and further," Frerot said. "The results develop
much too slow, which is why I want to accelerate very
significantly the transformation of the group."
Frerot declined to say which countries Veolia would seek to
leave, what divestments could yield or how many jobs could go.
Veolia shares were down 12.6 percent to 12.5 euros at 1057
GMT after earlier rising 3 percent, taking a further hit after
the company warned investors last week it would fail to meet
several of its financial goals and that its restructuring would
cost 800 million euros in asset impairments and writedowns.
"This heavy restructuring ... which cleans up the mistakes
and inertia inherited from the previous management, is
positive," said a Paris-based analyst who declined to be named.
"The question remains on visibility on a return to growth in
2012 and 2013 ... and on next year's dividend payment.
Veolia, which provided drinking water to more than 100
million people and processed some 63 million tonnes of waste
last year, said it would keep a high dividend pay-out ratio to
adjusted net income, down 28.5 percent at 188 million euros in
the first half of this year.
Some analysts had expected Veolia to announce a change in
its dividend policy. Veolia has left its dividend unchanged at
1.21 euros a share for the past three years, even when the world
economic crisis led it to give two profit warnings in 2008.
The group made a net loss of 67.2 million euros against a
profit of 374 million and sales rose to 16.3 billion euros from
14.1 billion a year-ago.
"The results are a mess but the restructuring is very
positive. They are really doing what we want to see: a complete
change in company strategy," RBS analyst Jean Farah said.
Veolia extended its cost savings programme to 2015 with
annual cost savings of 250 million to 300 million euros and
unveiled a team led by chief operating officer Denis Gasquet
tasked with implementing it.
Frerot took on the chairman's role in December, succeeding
Proglio, who had remained Veolia chairman after becoming EDF CEO
in November 2009. Proglio is still a director at Veolia, which
has several ties with EDF. EDF owns a 4 percent stake in Veolia
and both own Dalkia energy services.
Veolia sold assets worth more than 1 billion euros in the
first half while it has said it wants to make divestments worth
at least 1.3 billion euros this year. It has a 4 billion asset
sale programme in place for the years through to 2013.
Veolia's marine services in the United States were part of
an accounting fraud but Veolia said this had no impact on its
earnings and that the amounts were not significant.
The company plans to hold an investor day at the end of the
(Editing by James Regan and Erica Billingham)