April 26, 2019 / 8:14 AM / 25 days ago

UPDATE 1-France's Suez says 2019 started well, Spain on hold for elections

* Shares rise, company confirms 2019 targets (Adds CFO comments on Argentina and outlook)

By Geert De Clercq

PARIS, April 26 (Reuters) - French waste and water group Suez said it had enjoyed a strong start to the year and had experienced robust sales momentum across all divisions.

Chief financial officer Jean-Marc Boursier said Suez’s key European recycling division was growing and he expected to see higher volumes on a full-year basis.

The company’s industrial water and international business also saw growth accelerate. Suez confirmed its target for 2019 organic revenue growth of 2-3 percent and organic EBIT growth of 4-5 percent.

First-quarter revenues rose 3.8 percent to 4.2 billion euros ($4.7 billion) while core earnings rose 12.1 percent to 709 million, compared to a 7.4 percent increase for its 2018 full-year.

First-quarter EBIT (earnings before interest and tax) advanced 5.3 percent to 293 million euros.

Suez confirmed its target for 2019 organic revenue growth of 2-3 percent and organic EBIT growth of 4-5 percent.

The solid results and outlook lifted Suez shares up by around two percent, outperforming a flat French market.

SPAIN ON HOLD AS ELECTIONS APPROACH

Boursier said that ahead of elections in Spain - where it earned nearly 10 percent of total revenue last year - negotiations on new projects had been frozen while some scheduled tariff increases had been delayed at the request of local councils.

In Argentina, Suez has agreed on a settlement on the Aguas Argentinas contract for Buenos Aires, which the government had ended in 2006 and which had been under litigation since then. Suez said it had received 220 million euros in cash in April.

For a second disputed contract in Argentina, concerning Aguas Provinciales de Santa Fe, Boursier said the World Bank’s arbitrage center had awarded it $225 million in December and that Suez was looking forward to the implementation of that ruling.

Earlier this year, Suez had launched procedures towards possibly seizing Argentina assets and said it had talked to specialised funds about possibly selling its claims.

Asked about possible similar problems in other countries, Boursier said Suez currently had no country risk of a nature to generate difficulties as big as those in Argentina.

“We are very careful about how we allocate capital in different countries, in some countries we do not invest in order to avoid long-term problems,” he said.

Utilities operating abroad sometimes have problems with local authorities reneging on their contracts.

Sector peer Veolia, whose results are due on May 2, had similar problems in Gabon, which in 2018 terminated a water contract and seized Veolia assets. That case is also under arbitration but Veolia said in February that it had agreed to a solution.

$1 = 0.8981 euros Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta

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