PARIS (Reuters) - General Electric’s (GE.N) industrial water treatment business which is up for sale would be a good strategic fit for Suez (SEVI.PA), the French group’s chief executive said on Wednesday.
Suez last week confirmed that it might put in a bid for GE Water, which French media have estimated as being worth anywhere between 2 and 3 billion euros ($2.1-3.2 billion).
“We are interested in GE Water because its activities are in line with our strategy of boosting industrial water activities, boosting international growth and boosting digital and smart activities,” Jean-Louis Chaussade said after Suez reported a drop in underlying profits last year.
He declined to say how Suez would finance a possible acquisition but added that the company would not stray from its target of keeping its net financial debt at around three times core earnings.
The company’s shares were down 3 percent at 13.74 euros by 1016 GMT after it posted a 3.6 percent fall in core earnings, due to margin pressures in its core European water and waste treatment businesses and left the dividend payout unchanged for a second year running.
Core earnings at the Water Europe division were down 3.2 percent as a lack of inflation in Europe kept a lid on prices, with French sales volumes down 2 percent, due in part to the termination of its Lille water contract.
Core earnings in Suez’s European waste business fell 2.4 percent as prices for recycled ferrous metals and plastics fell and electricity prices hit multi-year lows last year.
Core earnings before interest, tax, depreciation and amortization (EBITDA) were down 3.6 percent to 2.65 billion euros on revenue up 1.2 percent at 15.3 billion euros. Net income was up 3.1 percent at 420 million euros.
Chaussade said Suez plans 150 million euros worth of cost cuts this year, less than the 180 million saved in 2016, but more than its average annual savings of 120-125 million euros.
“During difficult times we increase our cost-cutting efforts,” Chaussade said.
The company proposed an unchanged dividend of 65 cents, after leaving the dividend on 2015 earnings also unchanged. For 2017, it expects to pay at least 65 cents per share. It also expects “slight organic growth in revenue and EBIT” this year and free cash flow of around 1 billion euros.
Asked about a possible alliance with bigger peer Veolia (VIE.PA), Chaussade said he did not believe in big merger operations in which Suez would need to sell as many assets as it would want to merge.
Reporting by Geert De Clercq; Editing by Greg Mahlich