Shaping SUEZ 2030 - A comprehensive plan to become the global leader in environmental services
Given the key trends in our business - the continued growth of the circular economy and its impact on our customers, the emergence of new business models and new competitors, combined with a profound shift of the mindset of citizens towards the climate crisis and a need for concrete action - SUEZ will accelerate its transformation.
With this new plan, the Group leverages its core strengths – innovation, best in class technologies and know-how, exceptional teams and an excellent reputation. The plan drives selectivity in growth, simplicity in its way of working and a renewed engagement grounded on a passion for the environment.
“Shaping SUEZ 2030” will increase value for all stakeholders by accelerating:
- Selectivity in organic growth, comprising capex discipline and also portfolio rotation for which businesses have been identified accounting for 15-20% of our capital employed
- Simplicity with a leaner organization, underpinned by a €1bn efficiency plan by 2023 which will in part improve operating profitability as well as finance a step-up in investment in innovation and digitization
- Engagement with our customers and from our employees, embracing change and reviving our winning spirit with a refreshed core of values
The plan will transform the Group at all levels in the mid-term: our ambition for the four years to 2023 is to embed our new values and culture firmly across the Group, set the scene for sustained organic growth with lower capital intensity, change our business portfolio and improve our returns on capital employed by at least two points, enhancing our capacity to increase our dividend at a normal payout ratio.
Change will be evident already by 2021 and the Group’s financial objectives for that year reflect our intention to focus going forward on profitability and sustainability:
- €0.8 recurring EPS
- €500 million recurring Free Cash Flow
- Net Debt2 at 2.8 to 3.0x EBITDA
“Shaping SUEZ 2030” will be implemented across the Group’s three business segments:
- Water (c. 40% of 2018 sales) regroups all SUEZ municipal water activities globally,
- Recycling & Recovery (c. 40% of 2018 sales) regroups all SUEZ waste activities related to non-hazardous waste with municipal as well as with Industrial & Commercial customers,
- Environmental Tech & Solutions (c.20% of 2018 sales) regroups WTS, hazardous waste and speciality environmental solutions for industrial and municipal customers.
The main drivers of the plan are:
Selectivity - Steering selectivity in growth, the Group intends to leverage its strong European innovation capabilities and accelerate where it has identified the best opportunities on the following priorities for all parts of the Group:
- International markets: The Group targets growth in selected countries where it will deploy its full-value proposition and further expand into innovative services. In addition, it plans to enter selected markets with fast-growing environmental infrastructure needs, with the ambition to reach 60% of Group revenue.
- Industrial customers: The Group accelerates on 5 key high-growth markets and prioritizes activities with the highest value-add leveraging its distinctive portfolio of solutions. Working hand-in-hand with its industrial customers, it will design custom made, integrated solutions to help them achieve their sustainability roadmap, with the ambition to be above 50% of Group revenue.
- Technology and data-driven solutions: The Group leverages proprietary technologies and innovation to develop and roll-out globally advanced solutions. It will also build new high-potential asset-light businesses such as air quality management and smart agriculture, with the ambition to exceed 30% of Group revenue.
The Group’s capital allocation will evolve, to reflect these priorities:
- Prioritize value over volume with a strong change of direction in nature of spending
- Align business portfolio with value creation ambitions: businesses representing 15-20% of capital employed have been identified as part of asset rotation program
Simplicity - Promoting simplicity in its way of working, SUEZ will improve its operational performance, in part to boost innovation and digitization to fuel future growth
- Roll out a leaner and more efficient organization, with reduced number of business units and a devolved decision-making process to best serve our customers
- Optimize and standardize industrial processes, accelerate transformation in procurement and external resources, rationalize indirect costs, notably SG&A
- The objective of the above measures is to deliver €1bn of annual savings by 2023 of which 35 to 45% are expected to benefit SUEZ’s profitability with around 45 to 50% of this annual saving already evident in 2021
Engagement with our customers and from employees - Embrace change and renew the SUEZ winning spirit
- Foster engagement around 4 new values: passion for the environment, customer first, respect, team spirit
- Upgrade talents, leadership and skills across the organization
- Promote new Centers of Excellence in emerging markets with distinctive capabilities
- Accelerate execution and performance, thanks to increased accountability
- Management team’s incentives will be realigned with financial objectives
Guidance and forward looking information:
2021 guidance3 :
- €0.8 recurring EPS
- €500 million recurring Free Cash Flow
- Net Debt4 at 2.8 to 3.0x EBITDA
Additional financial elements, including one-offs:
2019: €150-200m one-offs offsetting Argentine settlement, largely non-cash
Future: €500-700m total one-off charges, majority to be accounted for in 2020
The new reporting segments will take effect at the latest on 1 January 2020 and a reconciliation will be given with the prior framework.
Note: Concerning targets previously given for 2019, under its current reporting framework and excluding any impact of the plan announced today, the Group confirms these targets5 :
- Organic revenue growth of 2% to 3%
- Organic EBIT growth of 4% to 5%
- FCF growth of around 7% to 8%
- Leverage ratio (Net debt/EBITDA) of c.3x in 20196
- Continued ambition to lower debt ratio in 2020
On this basis, and in accordance with the Board of Directors, the Group intends to propose a dividend of €0.65 per share in respect of 2019 at the Annual General Meeting in May 2020.
Upgraded sustainable development commitment for 2030:
- Reduce GHG emissions by 45% (vs. 30% previously), in line with +1.5°C trajectory/carbon neutrality in 2050
- 100% sustainable solutions
- c.20 million tons of CO2 emissions saved, yearly, for our customers.
Appendix: Alternative performance indicators
Recurring EPS (Earning per share):
(net income group share – (hybrid coupon + all one-off costs cash and non-cash +/- capital gain/losses on disposals) x (1 - applicable tax rate))/ number of shares.
By way of comparison, the 2018 recurring EPS is estimated at €0.56.
Recurring Free Cash Flow:
Cash Flow from operating activities – hybrid coupon + restructuring (cash expenses) – property plant, equipment – intangible capex – lease expenses – net financial charges – flows including dividends to/from minorities
By way of comparison, the 2018 recurring Free Cash Flow is estimated at €95m.
ROCE (Return on capital employed):
((EBIT - Share in net income of equity-accounted companies) x (1 – normative tax rate) + Share in net income of equity-accounted companies) / (Simple average of the capital employed at the end of the year before and at the end of the current year including, incl. IFRS 16)
By way of comparison, the 2018 ROCE is estimated at 4.9%.
SUEZ presents Shaping SUEZ 2030 on 2 October 2019 at an investor meeting in Paris. The meeting, which starts at 10.00 CET (9.00BST) will be webcasted live and supporting documents made available on SUEZ website.
- October 30, 2019: Publication of nine-month revenue 2019 (conference call)
1 2021 guidance assumes no material change in economic and market conditions (incl. interest rates, forex and commodity prices) vs. those observed over the past 12 months. Please, see definition of alternative performance indicators in appendix.
2 Debt including IFRS 16.
3 2021 guidance assumes no material change in economic and market conditions (incl. interest rates, forex and commodity prices) vs. those observed over the past 12 months. Please, see definition of alternative performance indicators in appendix.
4 Debt including IFRS 16.
5 2019 guidance assumes water volumes sold remain in line with historic trends, volumes of waste treated rise by +1.5% in Europe and raw materials prices are stable relative to December 31, 2018.
6 Excluding impact of application of IFRS 16 accounting standard
This press release contains unaudited financial data. Unless specified, the aggregates presented are those normally used and communicated on markets by SUEZ.
This press release contains estimates and/or forward-looking statements and information. These statements include financial projections, synergies, estimates and their underlying assumptions, statements regarding plans, expectations and objectives with respect to future operations, products and services, and statements regarding future performance. Such statements do not constitute forecasts regarding SUEZ’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 securities are cautioned that forward-looking information and statements are subject to various risks and uncertainties, which are difficult to predict and generally beyond the control of SUEZ, and that such risks and uncertainties may entail results and developments that differ materially from those stated or implied in forward-looking information and statements. These risks and uncertainties include, but are not limited to, those discussed or identified in the public documents filed with the Autorité des Marchés Financiers (AMF), the French Financial Markets Authority. Investors and holders of SUEZ securities should consider that the occurrence of some or all of these risks may have a material adverse effect on SUEZ. SUEZ 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 may be obtained on its Internet website (www.suez.com). This document does not constitute an offer to sell, or a solicitation of an offer to buy SUEZ securities in any jurisdiction.