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UPDATE 1-Cost-cutting drives earnings growth for utility Veolia
November 7, 2017 / 9:43 AM / 18 days ago

UPDATE 1-Cost-cutting drives earnings growth for utility Veolia

* Core 9-month EBITDA up 1.3 pct

* Earnings boosted by cost cuts (Adds CEO, CFO quotes)

PARIS, Nov 7 (Reuters) - French environmental services group Veolia said cost cuts had driven up its core earnings, as the company’s margins remain under pressure from municipal clients trying to negotiate cheaper water and waste concession contracts.

Veolia’s core earnings before interest, tax, depreciation and amortisation (EBITDA) rose 1.3 percent to 2.36 billion euros ($2.7 billion).

The EBITDA increase of 30 million euros included a 190 million euros boost from cost cuts to compensate a 104 million loss from prize squeezes and 103 million in one-off costs.

“Cost cutting remains the main contributor to our Ebitda growth, offsetting the price cost squeeze impact ...and the ongoing headwind of tarif decreases at the time of contract renewals,” chief finance officer Philippe Capron told analysts.

The company aims to cut costs by 250 million euros this year and by 800 million over the 2016-18 period.

Veolia’s key French municipal water business remains under pressure as low inflation limits price increases and cities use the threat of remunicipalising water services to push down prices each time a contract expires.

Revenues rose 3.7 percent to 18.22 billion euros, although net profit slipped 1.6 percent to 406 million euros.

Analysts polled by ThomsonReuters had expected current EBIT of 1.05 billion euros, EBITDA of 2.36 billion euros and revenue of 18.13 billion euros.

Third-quarter revenue growth at constant exchange rates, at 4.3 percent, was slightly below the first and second quarter, which saw growth of 4.5 and 4.4 percent.

The company confirmed its guidance for stable to moderate EBITDA growth in 2017, more sustained EBITDA growth in 2018 and EDITDA of 3.3 to 3.5 billion euros in 2019.

Veolia shares, which were flat in early session trading, are up by nearly 30 percent since the start of 2017.

$1 = 0.8642 euros Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta

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