SUEZ ENVIRONNEMENT - 2010 Annual Results

PARIS, Feb. 9, 2011 /PRNewswire/ --

SHARP RISE IN REVENUE ACROSS ALL BUSINESSES IN 2010

• Revenue EUR 13,869 million, +12.8% rise across all divisions
• EBITDA: EUR 2,339 million, + 13.6%, with EUR 120 million cost savings(COMPASS 2)
• Net Result group share: EUR 565 million, +40.1%, EUR 1.15 earnings per share.

CONTINUATION OF THE GROWTH AND BUSINESS PERFORMANCE STRATEGY IN 2011-13

• Annual activity growth greater than or equal to 5%(1), based on innovation and strengthened position in buoyant markets,
• Improved operating profitability with EBITDA growth greater than or equal to 10%(2) in 2011 and greater than or equal to 7%(1) in average for 2012-2013, rising faster than revenues,
• Net financial debt to EBITDA ratio around 3 times as soon as end of 2011
• Attractive return for shareholders with a dividend increasing by around 5%/year(3).

The Board of Directors, which met on February 8, 2011, approved the 2010 accounts of SUEZ ENVIRONNEMENT, which will be submitted for the approval of the General Meeting on May 19, 2011. The financial statements have been audited and certified by the auditors.

Commenting on the 2010 results, Jean-Louis Chaussade, CEO of SUEZ ENVIRONNEMENT, stated:

"In 2010, SUEZ ENVIRONNEMENT experienced sustained growth in all business lines, with a sharp rise in results.

The friendly takeover of AGBAR keeps its promises and marks a significant and consolidating step for SUEZ ENVIRONNEMENT, that strengthens its positions in the fast-growing water markets of Spain and Latin America. In addition, the acquisition of the waste activities of WSN in Australia(4) consolidates the Group's presence in a market where it has already experienced significant growth. In 2010, the Group accelerated its international development and intends to continue taking advantage of the rapidly expanding water and waste markets.

Within the context of progressive macro economic recovery, SUEZ ENVIRONNEMENT will continue its strategy of long-term growth and offer an attractive returns to its shareholders, with clearly defined medium-term objectives to create value on the large water and waste cycles.

Thanks to its innovation capability, SUEZ ENVIRONNEMENT is positioned as an environmental performance leader and major operator to promote more environmentally-friendly behaviors. With its expertise and human resources, SUEZ ENVIRONNEMENT aims at becoming a prime mover in the promotion of responsible green actions, which already form part of our daily activities."

In 2010 SUEZ ENVIRONNEMENT Posted Solid Results And Met Its Objectives

In 2010, SUEZ ENVIRONNEMENT posted highly increasing results and met all its annual targets, as raised mid-year(5).

REVENUE

As at December 31, 2010, the revenue of SUEZ ENVIRONNEMENT was EUR 13,869 million, up +12.8% gross (+EUR 1,573 million) compared to December 31, 2009 which breakdowns as follows:

• Organic change of +8.6% an increase in the three divisions:
  • increased revenues in the Water Europe division of +EUR 26 million (+0.8%)
  • strong organic growth in Waste activities of +EUR 445 million for Waste Europe (+8.4%)
  • accelerated growth of International activities, with an organic change of +EUR 560 million (+17.7%).
• External growth of +2.3% mainly linked to the unbundling of joint water companies in France and the AGBAR operation for Water Europe, the sale of London Waste and the first consolidation of recycling companies for Waste Europe, as well as the full consolidation of SITA Waste Services in the international division.
• Positive impact of exchange rates +1.9% due to the appreciation of the main operating currencies of SUEZ ENVIRONNEMENT to the euro, especially the Australian dollar, the US dollar, the pound sterling, the Chilean peso and the Swedish krona.

At constant forex (+EUR 1,297 million), revenue grew by +10.9%.

OPERATING PERFORMANCE

EBITDA was EUR 2,339 million in 2010, an increase of +13.6% (+EUR 279 million) and +10.5% at constant forex. The operating profitability rose thanks to positive EBITDA growth in the three divisions, at constant forex, especially in the International and Water Europe divisions with the consolidation of AGBAR. The Group's EBITDA margin increased to 16.9%.

Performance also benefited from the progression of the COMPASS 2 plan, which generated net savings of EUR 120 million over the year. The COMPASS 2 objective is raised, with net savings of EUR 300 million for 2010-2012.

In 2010, depreciation amounted to EUR 975 million, up +16.3% mainly due to the scope effects of consolidating AGBAR and accounting for the PPA(6) relating to operations performed in 2010. Current Operating Income stood at EUR 1,025 million, a gross rise of +10.7% and +6.2% at constant forex. Total growth was up in all divisions.

NET INCOME

Net Result group share stood at EUR 565 million, up 40.1% over 2009. Earnings per share for 2010 came to EUR 1.15(7), versus EUR 0.82 in 2009.

In 2010, the Group recorded net capital gains related to the AGBAR operation and the unbundling of joint water companies, as well as restructuring and impairment expenses, amounting overall to EUR 196 million.

Financial result amounted to -EUR 413 million in 2010, up from 2009, with a higher cost of debt of 4.9% (compared to 4.6% in 2009) and an increase in the average amount of debt over the period. SUEZ ENVIRONNEMENT extended the maturity of its debt to 6.2 years at the end of December 2010 (compared to 5.6 years in December 2009(8)) and maintained a fixed / floating rate debt distribution of about 70/30.

Tax was -EUR 119 million in 2010 compared to -EUR 129 million in 2009. The decrease is mainly due to the lower tax rate applied to the capital gains generated by the AGBAR takeover and the unbundling of joint water companies. Normative tax rate was 29% in 2010.

Minority interests over the year were -EUR 155 million, compared to -EUR 113 million in 2009, an increase resulting by the impact of the full consolidation of the minority interests associated with AGBAR.

FREE CASH FLOW AND BALANCE SHEET

SUEZ ENVIRONNEMENT continued its strategy of cash-generation and investment selectivity in 2010.

• Free Cash Flow rose by +20%(9) to EUR 852 million. The FCF/revenue ratio is 6.1% compared to 5.8% in 2009, benefiting from a positive working capital requirement of EUR 269 million in 2010.

• Net investments rose to EUR 1,647 million. In addition to the AGBAR operation for EUR 429 million, the Group invested in water concessions in France and in Spain, in the regulated water market in the US and in Chile, and in waste valorization assets, especially in the Netherlands (Baviro), in Great Britain (PFI), in China and in Australia.

• The net financial debt amounted to EUR 7,526 million as at December 31, 2010, a 9% drop compared to June 30, 2010. The difference compared to December 31, 2009 can be explained by the AGBAR operation and by negative exchange rate effects. The net debt/EBITDA ratio was 3.22 times, as at December 31, 2010.

• The Group's ROCE(10) is 7.2% for a weighted average cost of capital of 6.6%. Its evolution will benefit from organic growth and the improved operating profitability of existing assets, assets under construction and maintained selectivity of investments.

DIVIDEND

SUEZ ENVIRONNEMENT will propose to the Annual General Meeting of Shareholders on May 19, 2011 the payment of a 0.65 EUR  per share dividend for the 2010 financial year, this amount remains stable compared to the previous year.

MAIN EVENTS OF THE GROUP IN 2010

A Year Of Strengthened Strategic Positions And Accelerated International Development

The year was marked by finalizing the friendly takeover of AGBAR, the leader in the Spanish water market, which took place half-way through the year. This second European pillar in water, after Lyonnaise des Eaux in France, has allowed SUEZ ENVIRONNEMENT to strengthen its position in Spain, where AGBAR already manages over 1,100 long-term contracts, and to benefit from the growth of a high-potential market buoyed by the protection of water resources and improvements in wastewater services in compliance with EU regulations.

Through AGBAR, SUEZ ENVIRONNEMENT also holds solid positions on the Chilean and British regulated markets. The consolidation of the Spanish company allows to generate commercial and procurement synergies and to develop a joint innovation platform.

SUEZ ENVIRONNEMENT has also consolidated its position on attractive markets internationally by pursuing an ambitious and selective development strategy. With 27% of its consolidated revenue realized outside Europe in 2010 compared to 20% in 2008, international activities have registered solid growth. An increased awareness of the future challenges involved in the water and waste sectors, the need for infrastructure and the adoption of increasingly demanding environmental standards in many countries, all indicate future areas of growth for the Group.

The Group's growth in Australia typifies the ambitious but selective development strategy that it has pursued. SUEZ ENVIRONNEMENT generated 6% of its revenue in Australia in 2010, compared to 1% in 2004, a result mainly driven by commercial momentum and tuck-in acquisitions. Thus, Degremont is building the largest desalination plant in the southern hemisphere in Melbourne and SUEZ ENVIRONNEMENT has recently strengthened its position in the country through the acquisition of WSN Environmental Solutions, which offers to the Group geographical and operational synergy with existing activities.

Innovative Offers That Position SUEZ ENVIRONNEMENT As A Leading Operator In Terms Of Environmental Performance

SUEZ ENVIRONNEMENT is pursuing an ongoing innovation policy by offering highly technological services and providing long-term solutions to environmental challenges, especially in the area of waste valorization, water resources protection, environmental footprint reduction and renewable energy generation.

In the area of waste, new valorization projects were developed, including the Cynar project that transforms end-of-life plastic materials into fuel, and the first packaging-removal unit for food waste capable of separating food from its containers. This first unit of its kind in France recycles materials and extracts energy. The treatment of this type of waste will reduce the tonnage incinerated or sent to landfill sites, enabling the objectives fixed by the Grenelle de l'Environnement to be met.

In the area of water, the Degres Bleus offer, which has already been implemented in several local authorities, recovers heat from wastewater and then uses it to heat buildings. In addition, over 120,000 private customers have already subscribed to the Dolce O offer, which allows them to monitor their water consumption in real time and which provide insurance against water leaks.

To bring new offers to the market faster, SUEZ ENVIRONNEMENT has launched an innovation fund,
BLUE ORANGE, which supports dynamic young technology companies in the environmental services industry.

All of these fast-growing innovative solutions deliver new services for customers and confirm the importance placed by the Group on pursuing a strategy focused on technological leadership and services.

SUEZ ENVIRONNEMENT Is Ahead Of The Waste Market Trends

Given the scarcity of raw materials, the strengthening of environmental regulation and energy issues, the waste treatment market is shifting from elimination to valorization.

For SUEZ ENVIRONNEMENT, this trend was reflected in a rise in valorization volumes of 9%(11) for the year, while treated volumes increased progressively in 2010 (+1%). The Group's sorting and recycling activities also strongly benefited from higher prices for secondary raw materials, with improved profitability bolstered by a more optimized cost structure.

This shift in the waste market confirms SUEZ ENVIRONNEMENT's strategy to be positioned on the full value chain and to build new treatment plants in recent years, such as the EVI energy from waste plant (Netherlands-Germany) and the Bottle to Bottle plant in Limay (France).

SUEZ ENVIRONNEMENT has major assets to fully benefit from this market trend. The Group has developed a unique European waste treatment platform, strategic international positions, and a very wide range of technical expertise in all areas of energy and materials recovery.

SUEZ ENVIRONNEMENT is thus well positioned to seize all future growth opportunities in the waste sector, including in waste valorization.

2010 PERFORMANCE BY DIVISION

Water Europe

• Revenues in 2010 of the Water Europe division were EUR 4,248 million, a +6.3% rise at constant forex, with the positive impact of the unbundling of joint water companies and the AGBAR operation. In terms of organic growth, these were up +0.8%. The operating performance of the division was also up, with a 24.4% margin and an EBITDA of EUR 1,035 million, a gross increase of +19.6% and +18.1% at constant forex. Free Cash Flow rose sharply to EUR 359 million.

• The activities of Lyonnaise des Eaux and AGBAR were fueled with new contracts, such as Strasbourg (8 years, EUR 98 million) and Sartrouville (20 years, EUR 25 million) in France, Calvia (50 years, EUR 980 million) and Sant Vicenc dels Horts (50 years, EUR 113 million) in Spain. In the water sector, the Group is developing new services that are expanding rapidly, with major marketing and sales efforts in France.

• Price evolution in France and Spain are positive due to the application of tariff escalation formulae; the volume of water sold decreased by -0.2% in Spain and -1% in France. The works activity grew by +5% in France, rebounding in the last quarter of 2010; however, this activity decreased in Spain, a country still experiencing low business levels.

Waste Europe

• The Waste Europe division generated revenue of EUR 5,863 million, a gross increase of +10.2% and +9.3% at constant forex. The positive trend is mainly due to the high growth of the Sorting & Recycling activity (+49% in organic terms). The division's operating performance improved with an EBITDA of EUR 839 million; the margin was slightly down at 14.3% due to the dilutive impact of the secondary raw materials price on the margin. The Waste Europe division generated a Free Cash Flow of EUR 359 million, up +5.1% compared to the previous year.

• In 2010, sales activity was dynamic over the three areas of the division. SITA France was awarded the Ivry contract (6 years, EUR 210 million) and renewed the SICTRM contract at Vallee du Loing (5 years, EUR 20 million). SITA UK renewed its Aberdeenshire contract (15+5 years, EUR 230 million), signed a PFI contract in Suffolk (EUR 1.2 billion) and is a preferred bidder for the South Tyne & Wear PFI (1 billion pounds Sterling). SITA NEWS also signed the Edeka (2 years, EUR 126 million) and Magna (5 years, EUR 28 million) contracts in Germany.

• The Sorting & Recycling activity is driving growth in the division, as the price of secondary raw materials has risen sharply compared to 2009, together with higher volumes. The other activities are globally stable, both in terms of collections as well as in terms of other treatments. Market trends confirm the group's strategy to be positioned on the entire value chain, with a shift in treated volumes from elimination to valorization. Overall, the volume of waste treated increased by +1%, municipal volumes remained stable while industrial & commercial volumes have increased.

International

• In 2010, the International division reported revenue of EUR 3,743 million, up +26.1% and +18.6% at constant forex (+17.7% in organic terms), due to increased activity in all areas, especially due to the very high performance of Degremont. EBITDA in the division increased by 19.1% and +10.3% at constant forex. Free Cash Flow generation rose sharply (+56.1%) to EUR 272 million.

• In 2010, the international division activity was fueled with the well progressing building of the Melbourne desalination plant, the acquisition of the waste activities of WSN operator in Australia and the commercial wins in Acheres (EUR 110 million) in France, Mapocho (EUR 260 million) in Chile, Saidabad (EUR 90 million) in Bangladesh for Degremont, and the Chongqing Changsu Chemical Industrial Park, in China.

• The Degremont activity grew strongly (+37.8% at constant forex, +EUR 416 million) thanks to high business levels in France with Evreux and Bordeaux contracts; internationally, it also signed contracts in Melbourne, Brazil, China and Chile. The Asian-Pacific area continues to develop with revenues up +13.8% at constant forex (+EUR 95 million), with increasing volumes and prices in China and a sharp increase in Australia. Activity in North America rose +5.0% at constant forex (+EUR 30 million) with an increase of water volumes sold due to a favourable summer period and increases in prices after achieving rate cases. The growth in the CEMME areas (+5.8% at constant forex, +EUR 45 million) is due to the good performance of Lydec in Morocco and the waste activities in Poland.

INCREASED PROFITABILITY AND DIVIDENDS OBJECTIVES IN 2011-2013

In a context of progressive macroeconomic recovery, SUEZ ENVIRONNEMENT will continue its growth policy in 2011 and through to 2013, with the following objectives:

In 2011

- Revenue growth greater than or equal to 5% at constant forex

- EBITDA Growth greater than or equal to 10%(12) at constant forex

- Net Result group share (NRgs) > EUR 425 million

- 2011 Free Cash Flow greater than or equal to 2010 Free Cash Flow, with maintained selectivity of investments

- Net Financial Debt/EBITDA ratio at around 3 times as soon as end of 2011, one year in advance(13).

For 2012-2013

- Average revenue growth greater than or equal to 5% at constant forex

- Average EBITDA growth of greater than or equal to 7% at constant forex

- Net Financial Debt/EBITDA ratio maintained at around 3 times

Dividend policy

- EUR 0.65/share related to the 2010 results

- Around +5% annual dividend growth for the next 3 years

- Targeting long-term payout ratio > 60%.

The Group is well positioned to take advantage of the strong growth in its markets, especially in areas with high potential such as Southern Europe in water, valorization activities in waste, and an ambitious and selective international development. The Group will build on its strong competitive advantages in terms of innovation and with a presence on the full value chain to support its position as a leader in environmental performance.

Forthcoming Communications:

• April 28, 2011: Publication of the 1st quarter of 2011
• May 19, 2011: Annual General Meeting of Shareholders

Natural resources are not infinite. Each day, SUEZ ENVIRONNEMENT (Paris: SEV, Brussels: SEVB) and its subsidiaries deal with the challenge to protect resources on a daily basis by providing innovative solutions to industries and to millions of people. SUEZ ENVIRONNEMENT supplies drinking water to 91 million people, provides wastewater treatment services for 61 million people and collects the waste produced by more than 50 million people. SUEZ ENVIRONNEMENT has 79,554 employees and, with its presence on five continents, is the world's leader exclusively dedicated to environmental services. SUEZ ENVIRONNEMENT, a 35.4% GDF SUEZ affiliate, reported sales turnover of 13.9 billion euros at the end of financial year 2010.

Disclaimer

"This communication contains estimates and/or forward-looking statements and information. These statements include financial projections, synergies, cost-savings and estimates and their underlying assumptions, statements regarding plans, objectives, savings, expectations and benefits from the transactions and expectations with respect to future operations, products and services, and statements regarding future performance. Such statements do not constitute forecasts regarding SUEZ ENVIRONNEMENT COMPANY's results or any other performance indicator, but rather trends or targets, as the case may be. No guarantee can be given as to the achievement of such forward-looking statements and information. Investors and holders of SUEZ ENVIRONNEMENT COMPANY securities are cautioned that forward-looking information and statements are not guarantees of future performances of SUEZ ENVIRONNEMENT COMPANY which may materially differ and are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of SUEZ ENVIRONNEMENT COMPANY. These risks and uncertainties include, but are not limited to, those discussed or identified in the public documents filed with the Autorite des marches financiers (AMF). Investors and holders of SUEZ ENVIRONNEMENT COMPANY securities should consider that the occurrence of some or all of these risks may have a material adverse effect on SUEZ ENVIRONNEMENT COMPANY. SUEZ ENVIRONNEMENT COMPANY is under no obligation and does not undertake to provide updates of these forward-looking statements and information to reflect events that occur or circumstances that arise after the date of this document. More comprehensive information about SUEZ ENVIRONNEMENT COMPANY may be obtained on its Internet website (www.suez-environnement.com). This document does not constitute an offer to sell, or a solicitation of an offer to buy SUEZ ENVIRONNEMENT COMPANY securities in any jurisdiction."

This press release and presentation are available on www.suez-environnement.com.

A live and recorded webcast of the Analysts and Investors conference will also be available .

SOURCE SUEZ ENVIRONNEMENT

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