Image source: Veolia.

Water, waste, and energy goliath Veolia Environnement (OTC:VEOEY) reported its annual results for 2015 last week. And even though the market had a muted response, the company continues to perform admirably in light of the significant debt and overextension it had experienced coming out of the Great Recession.

With so many moving parts in such a large company, let's focus on the story from 30,000 feet first -- it's relatively easy to understand:

  • The company benefited from favorable currency exchange rates and the divestiture of certain businesses in 2015.
  • Without those effects, revenue actually fell 0.6%.
  • But that doesn't matter, because Veolia has been all about becoming a leaner company for the past five years.
  • Net income rose almost 80% to 1.06 euros per share, and free cash flow rose to a record 856 million euros.

Digging deeper
As I said, there are a lot of moving parts here; diving too deep into any one of them would turn this into an arduously long article. Instead, I'd like to focus on results in two different lights -- by segment and by geography.

Here's how each of the company's three main segments performed in 2015.





11.35 billion



8.69 billion



4.93 billion


All figures in euros and for 2015 fiscal year. Growth is at constant scope and exchange rates. Data source: Veolia.

Water revenues were hit the hardest by contract renegotiations in France that were eventually resolved but that were unfavorable for the company on a year-over-year basis. Waste revenues grew thanks to new commercial contracts, which help offset a drop in the volume of waste in almost all corners of the globe (that's a good thing for most of us). And energy activities actually performed quite well given weak commodity prices, and contracts outside of Europe were mostly to thank for that.

But to get a better picture of the state of the company, it's worth viewing more geographically, as management spends much more time providing this type of granularity. Also, note that the "Global" business is mainly a construction business.







5.47 billion


816 million


Europe ex-France

8.57 billion


1,104 million


Rest of world

5.93 billion


805 million



4.88 billion


226 million


All figures in euros and for 2015 fiscal year. Growth is at constant scope and exchange rates. Data source: Veolia. EBITDA = earnings before interest, taxes, depreciation, and amortization.

As I stated above, the renegotiation of contracts in France along with lower energy prices and waste volumes drove both revenue and EBITDA down. And while the global construction business provides one-fifth of revenue, it is a low-margin business -- providing just 7% of EBITDA -- and the downfall didn't hurt shareholders too much.

The real strength came from cost-cutting in Europe and growth in the "Rest of World" division. Specifically, revenue growth in Latin America (+12.8%) and China (+7.9%) helped offset a decline in North America. Management went out of their way to talk about how the company's China operations benefited from the energy sold through the Jiamusi and Harbin heating networks, as well as construction of waste incinerators.

Valuing the business
It's worth noting that management also announced that the company's dividend would be raised from 0.70 euros to 0.73 euros, an increase of 4%. They further stated that they expect to grow the dividend by a hefty 10% per year between 2016 and 2018. While investors may have been hoping for more, that's promising growth on the horizon for a stock that already has a 3.5% yield.

With 856 million euros of free cash flow, the company now trades for 13 times that figure. Given the stabilization of the company's revenue streams, the promise of further dividend increases, and cost-cutting measures that will continue through 2018, the company is definitely healthier today than it was just a few years back.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.