* Mild weather weighs on core earnings more than on sales
* Energy-efficient district heating is growing worldwide
* No plans to go back into French district heating for now (Adds detail on urban heating and share price detail)
By Geert De Clercq
PARIS, May 2 (Reuters) - Strong growth in new high-value activities such as hazardous waste treatment and plastics recycling boosted French utility Veolia’s earnings, although relatively warm weather weighed on its international district heating business.
First-quarter revenue increased 5.4 percent to 6.78 billion euros but core earnings grew at a slower pace of 4 percent to 1.03 billion euros ($1.15 billion), partly because of the impact of unseasonally warm weather on the firm’s district heating business, CEO Antoine Frerot said on a call.
Nevertheless, investors focused on the more positive, overall performance of the group, and Veolia shares rose 1.4 percent in early session trading to their highest level since January 2018.
The mild weather cut sales by 77 million euros or 1.2 percent, while the impact on core earnings was 2.7 percent, and even more on pre-tax earnings, added Frerot.
Energy activities account for about 20 percent of Veolia’s revenue, with district heating - distribution of hot water via urban pipeline networks - accounting for about two thirds of that 20 percent, or 12 to 13 percent of total revenue.
Following the sale of its French energy services unit Dalkia to EDF six years ago, Veolia’s district heating business is mainly in Eastern Europe, in countries including Poland, Czech Republic, Slovakia, Romania and Hungary. It also operates in northern China and on the United States east coast.
Frerot said that for now Veolia is not looking into going back into district heating in France, where 20 to 25 percent of cities have heating grids, notably Paris, whose hot-water grid heats about 15 percent of homes and is expanding.
Many of these networks were built a century ago, but were not extended to the suburbs as cities grew outward. Frerot said there was now a trend towards building heating networks in suburbs as well.
“District heating is growing globally, new networks are being built and existing networks are growing in size,” he said.
He said a well-run network can reduce consumers’ heating costs 20-25 percent because centrally operated systems are more efficient and easier to optimise than individual boilers.
When burning household waste or biomass, they also count as renewable energy as they limit CO2 emissions.
Veolia shares are up around 20 percent so far in 2019, outperforming a 9 percent rise at sector peer Suez.
$1 = 0.8924 euros Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta