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Veolia Environnement S.A. (NYSE:VE)

H1 2013 Earnings Call

August 05, 2013 2:30 am ET

Executives

Antoine Frérot - Chairman and Chief Executive Officer

Pierre-François Riolacci - Chief Finance Officer

François Bertreau - Chief Operating Officer

Analysts

Olivier Van Doosselaere - Exane BNP Paribas, Research Division

Nathalie F. Casali - JP Morgan Chase & Co, Research Division

Philippe Ourpatian - Natixis S.A., Research Division

Lawson Steele - Berenberg, Research Division

Martin Young - RBC Capital Markets, LLC, Research Division

James Brand - Deutsche Bank AG, Research Division

Julie Arav - Barclays Capital, Research Division

Patrick Hummel - UBS Investment Bank, Research Division

Michel Debs - Crédit Suisse AG, Research Division

Emmanuel Turpin - Morgan Stanley, Research Division

Operator

Ladies and gentlemen, welcome to Veolia Environnement First Half Results. I now hand over to Mr. Antoine Frérot. Sir, please go ahead.

Antoine Frérot

Thank you very much. Good morning, ladies and gentlemen, and thank you for being with us for this conference call for the first half results of Veolia. With me this morning, our CFO, Pierre-François Riolacci; and our COO, François Bertreau.

Let's start with me summarizing the main achievements of this semester, and I am on Slide 4 of the slide show. First half results, especially second quarter results, are encouraging, and we will now present them to you. Moreover, our company's strategy has been implemented at a vigorous pace, leading, in particular, to a further reduction in debt, raised objectives for our cost-cutting plan, the implementation of a more integrated organization with a reinforced management team, dynamic commercial success in the countries and segments we have targeted, and the reinforcement of our position in Latin America, one of our priority geographies, with the purchase of FCC's 50% stake in Proactiva underway. As a result, at the end of this first half, the company is progressing firmly on its path toward recovery and profitable growth.

Slide 5 show that first half of the results, and especially the second quarter, are encouraging. First, the refocusing and tighter management of operations have led to a better risk control. Therefore, the cleanup operations is completed. Secondly, the reduction in the level of activity has slowed down except for construction. But even in construction activities, which are result of -- from the slowdown in orders from local governments, bookings are up. Finally, the benefits of the ongoing cost-reduction plan are starting to show. Thus, in the second quarter, excluding restructuring cost, adjusted operating cash flow was up slightly. Over the first semester, it would have grown significantly due to Dalkia International and our Chinese Water concessions if they were still consolidated on a proportionate basis. But as you know, they are now consolidated by equity method. As a result, adjusted operating income and adjusted net income are up significantly.

Slide 6. At the end of June, net financial debt stood at EUR 10 billion, down EUR 800 million since last December. And we continue our objective of bringing it down to between EUR 8 billion and EUR 9 billion by the end of this year. Since September 2009, when net financial debt totaled EUR 16.9 billion, it will have been cut in half. Today, the leverage ratio is getting closer to 3, in line with our 2014 target.

Slide 7. Following the announcement of the company's reorganization last May, we raised our objectives for cost cutting to EUR 750 million net of implementation costs by 2015 and according to the time table shown on the slide. For the first half of 2013, we have achieved EUR 74 million in cost savings so that the EUR 170 million objective for 2013 is clearly within reach.

Slide 8. The new organization was put in place in July. Its main features are one Veolia per country, one Veolia headquarter, the management by country and the reinforcement of marketing and performance management. As a result, we will become a more simple, nimble and efficient company.

Slide 9. As we have announced, the company's growth have focused on the priority business segments we have selected, the most complex and remodel issues with volume and value, industrial clients and the most dynamic geographies. As you can see on this slide, commercial business success has been strong [indiscernible] in the oil and gas sector in Australia and Saudi Arabia, in the paper industry in Brazil or in the other sector as well, in Singapore, the Middle East or Bratislava. All of these significant wins are contractual operations and technology that require little CapEx.

Slide 10. Also, as part of our strategy to grow profitably by concentrating on priority segments and geographies and due to improved financial strength, we will boost our position in Latin America by purchasing our Spanish partner, FCC's stake in our joint venture, Proactiva. Proactiva is present in 8 countries of the zone and have seen a steady and significant increase in both revenue and [indiscernible] . The price of this purchase is reasonable as the closing is scheduled for the fourth quarter of this year. We intend to give Proactiva the support it needs to grow its business with the big industrial clients present in this region.

And now what about our priorities for the second half? And I'm on Slide 11. On what actions we will concentrate our efforts in this second semester? First, we will continue to execute our restructuring plan, continue with the cost-cutting plan in order to reach or even exceed the EUR 170 million objective, and complete the asset refocusing program. But the second half will also be mainly reporting to business development as we continue to deploy the company's strategy throughout our new organization. You know the themes that are at the core of Veolia's growth: the most difficult forms of pollution, the circular economy or large scale public services. These themes will be addressed through new offerings centered on the benefit promised to the customer. We will highlight the value we'll bring to each -- to our customers and share that added value with them.

We have designed how we want to build, package and promote our new global offerings, and that is on Slide 12. In the offerings listed on the left, some of which we already provide, others which are currently developing, we intend to systematically leverage our expertise worldwide, align our sales force and push these targeted offerings to the key clients we have identified. Our goal is to commercialize the first 4 offerings worldwide by the end of this year. We plan to have the next 4 offerings commercially available to the market 6 months later. We will also redeploy a network of key account managers to leverage the full scale of the group in the priority markets listed on the right by the end of this year.

And now Pierre-François will address our financial results in more detail. And after the presentation of our first half accounts, we will be happy to take your questions. Pierre-François, please.

Pierre-François Riolacci

Thank you, Antoine. Good morning, all of you.

I will start Page 14 with the key figures. Our top line is EUR 11,074 million. It's down 3.3%, minus 2% organic growth. You remember it was minus 3% in Q1, which means that Q2 was minus 1%. I will come back on that. The adjusted operating cash flow is EUR 930 million. It's down 7.6%. It's down 6.9% at constant rate. It does include more than EUR 30 million of restructuring costs. Adjusted operating income is EUR 539 million, plus 28.4%, plus 29.2% compared to last year. You remember that last year, we had a one-off -- negative one-off with Dalkia Italy. Excluding this one-off, adjusted operating income would have been up by 7%. Adjusted net income is EUR 131 million. At 2012, it's set at EUR 18 million restated. It did include at that time about EUR 50 million on the account of this Dalkia Italy write-off after minority interest so it should be compared with about -- the EUR 131 million to be compared with about EUR 70 million last year. So it's strongly up even without the one-off. We have completed a first half debt reduction despite the seasonal working cap variation, and this is thanks to the hybrid that was issued at the beginning of the year, and the debt is set at EUR 10 billion. The adjusted net financial debt is EUR 6.7 billion.

If we move Page 15 to the revenues per division, you can see that Water is down 3.7% organic-wise. Operations are flat despite the lower Water revenues that we had both in France and internationally, mainly in Japan and the U.K. The construction part is down 10%. This is due to large contracts getting close to completion while the new contract that we have signed have not yet started. But as Antoine mentioned, bookings are up, and I will elaborate on that. So Water operation are down 3% organically. It does reflect the slowdown of the economy, but it does reflect, also, the stop of loss-making contracts in a number of countries that was completed last year, for example, Senegal or in Morocco. They are not big operation but they decreased the top line with, obviously, no negative impact on the margin level. For Energy Services, it's plus 4.4%, with the new consolidation rules that's mainly France and a bit of the U.S. It has been prompted by both favorable climate effect and price of energy.

If we move Page 16 to the quarter-per-quarter variation, you can see that there is a significant improvement in the second quarter. This is, first, on the account of Water operations, which were negative in Q1 by 2.4% and moved to plus 2.1% in the second quarter despite the low volumes that we had, and this has to do with the work [ph] level. It can really create some variation of the top line. It was quite negative in Q1. There was no decline in Q2 in France. So that's a positive that really helps to change the variation. We had, also, a good level of activity in Europe with the impact of salt tariff increase. In the Waste business, we moved from minus 4.6% organic to minus 1.4%, and this has to do with higher volumes in France for both solid and hazardous waste, a good level of activity with the U.K. integrated contract, the good level also of the U.S. hazardous waste business and Australia is still moving up quite sharply. Energy Services, second quarter is a small quarter because it is normally the end of the heating season. But as we had a strong climate, we were also able, in April, to have some significant revenues.

If we drill down into different activities, Page 17, for Water. Revenue is EUR 5 billion. Operations are stable at EUR 3.4 billion, minus 0.3% organically.

France, first, is down by 2.5%. This is, first, on the account of volumes, which are down by 1.9% and this has to do with the very special climate that we had in May and June. And the normal downward rate is more in the range of 0.8%. As I mentioned, we had low level of works during the first quarter. It was much better in the second quarter. We benefited from our escalation clauses. And on the bulk of our contracts, we had an indexation of about 2.6%. That obviously helps the top line. It's worth to note that during the H1, we had a limited contract erosion slightly below the yearly rate that we have announced. On the international operations, we are up by 1.6% organically. These have been achieved despite the end of construction and the low level of work in some contracts in Europe; I mentioned the U.K., but also in Asia, especially in the first quarter for Japan. We benefited, on the contrary, of the tariff increases that we completed in Eastern and Central Europe and we also had the positive impact of the start-up of a new contract in the U.S., especially the Rialto contract in California. For Technologies & Network, the top line is down by 10.4% organically. This has to do with this major contract in Kuwait like Az Zour South or with the Hong Kong sludge contract getting close to completion. So the pace of revenue recognition is slowing down with these big contracts. We had also a low level of activity in France during the winter. It was a tough and long winter for the said operations. This is -- these are marginal operations, but they are on the top line; they are sensitive. There is no downward trend in this business. On the contrary, we have been able to recognize a significant increase in bookings, which are up by more than 22% year-on-year, with the recovery of the municipal design and build contract, which is good news.

Page 18. You can see that the adjusted operating cash flow is EUR 430 million for Water. That's minus 3.2% at constant ForEx. Operations proved to be rather resilient during this H1 and this is thanks to the limited decrease of operating cash flow in France, which, as just mentioned, is a bit lower but the run rate expected. We benefit -- we had, on the contrary, a margin pinching in some German operation. You know that we operate some [indiscernible] in Germany, which include some energy contract. We sell some heat and power. And we've been hit by the lower prices in energy in this market. We had strong contribution of the cost-cutting measures. For Technology & Network, the operating cash flow is down and this has to do with the lower level of activity and also Hong Kong margin deterioration that we booked on the first half of the year. The adjusted operating income is EUR 231 million. It's down 3.2% at constant ForEx, in line with the EBITDA but also taking account some increased contribution of the joint venture net income in China. Convergence Plan contributed about EUR 36 million year-on-year.

Page 19. For Environmental Services, you know that's the business which is the most sensitive to the economic environment. The sales are close to EUR 4 billion, down 3% organically. It was minus 4.6% during the first quarter, minus 1.4% during the second quarter. The first impact has to do with recycled materials, which cost us 2.3% of total sales. That's both prices and volumes. Prices were down year-on-year by about 15% for paper, 12% for scrap metals. It cost us more than EUR 50 million of revenues. Volumes were also down in France, especially in the metals business. And this has to do with the lower activity of the automotive industry, but also down in Germany for paper. The price impact is about EUR 40 million year-on-year. For the solid waste volumes, they are down by 1.1%. We booked a decrease in solid waste in both France and Germany, especially in the municipal collection with, obviously, an improvement during the second quarter. It's even slightly positive in France during the second quarter and obviously, our growth engines, Australia, the U.K. integrated contract on hazardous waste, pushed up and allowed us to show, in Q2, a slight volumes improvement. It's worth to note that during the first half of the year, the volumes of Veolia were about plus 1% above the industrial production of the countries in which we operate, which I think is a very good performance. Price have increased with indexation, escalation clauses in our municipal collection contract, but there is still some pressure on the C&I business and it's clear that it's difficult to pass on the inflation -- cost inflation to the market in this business while volumes are under pressure.

Page 20. Just to give you some color per country. Clearly, the difficult one was Germany, which was badly hit by both prices and volumes. Overall, it's down by about 10%, but it is improving in second quarter while still being difficult. France has achieved minus 5% organically with the second quarter, which was much better, as I just mentioned, probably also on the account of the weather impact. You remember that March was very difficult, and we quoted some volumes in April. Second quarter is doing really better than the first one. In the U.K., the strong development of our integrated contract of PFI overcome the poor economic environment, and we are able to post a plus 2% organic growth. In the U.S., excluding Marine Services, which is now about to be sold, we have a good progression of hazardous waste and also in the skilled services. And Australia has been doing consistently well since the beginning of the year and still posting more than 5% increase. The level of adjusted operating cash flow stands at EUR 404 million, down 6.7%. So conversion to EBITDA of activity is rather constant. It's about 20%, a bit less for recycled materials both for price and volumes. And it's about 30% for solid waste, including the impact of pressure on prices. The service price increase of 0.9%, as I just mentioned, is not enough to cover the cost inflation. And we have a pitching effect of about EUR 20 million, which is a significant part of this 30% conversion to EBITDA of the solid waste. It could be close to 35% when the pressure is really high. The Convergence Plan is contributing for EUR 14 million for the Waste business during this first half. I think we should highlight that the performance during the second quarter was much better. And as Antoine mentioned it, we are close to a stable adjusted operating cash flow, even slightly positive during the second quarter organically.

Page 21. For Energy Services, you remember that with the new consolidation rules, we only account there for the French operation, and March and April, U.S. operation. Revenues are close to EUR 2 billion, up 3%, 4.4% organically. It's fueled by both the energy prices, which are higher for about EUR 40 million, and by the climate, which was very strong this year, plus EUR 50 million. The adjusted operating cash flow is EUR 155 million. It's down 1.2% at constant ForEx. It's hit mainly by the cogeneration stop. Remember that this cogeneration, heating installation that were designed and set at the end at the end of the '90s and early 2000, we had indicated that it could cost us about EUR 20 million this year. It was slightly above EUR 10 million for the first half, which is in line with the heating, season wide. Adjusted operating income is EUR 177 million. We remember that we have this one-off in 2012 in Italy for EUR 89 million. So we have a very good basis of comparison, but -- however, the improvement of Dalkia International is more than EUR 140 million. So it will stop beyond the reversal of this one-off. We confirm the turnaround of our Italian operation, which is very good news, so no bad surprise. And clearly, we are on track for the recovery of this operation. And two, we posted a strong growth in Central Europe for the key countries in which Dalkia operates. That's the Czech Republic, in Poland, in Hungary and in Romania. The Convergence Plan is contributing for EUR 24 million during this first half.

So Page 22. When you look at the adjusted operating cash flow, I think we touched base on main items. Maybe to highlight that on the other line, the fourth line, you have a minus EUR 59 million. It does include a restructuring charge of more than EUR 30 million, which is due to headquarters restructuring. And excluding this charge, it does improve again, thanks to cost cutting. Excluding these 2013 restructuring charges, the adjusted operating cash flow would have been down by 3.7% during the H1, and it would have been actually stable during the second quarter.

Page 23, you got summary of the impact of Convergence Plan with our 3 IFRS 10 and 11 numbers except the footnote. So this is on the group or scope of our management. Gross savings for H1 stands at EUR 110 million. As you can see, it's increasing semester after semester. It's ramping up to the run rate that we need to achieve our EUR 750 million. So we are very confident in this ramp-up. You will note that about 50%, even more, of this EUR 110 million are achieved through what we call organization efficiency, which has a lot to do with headcount. On the cumulative '12 and '13, we have EUR 252 million of cost savings. So we are well on track for the EUR 270 million that we committed to a few months ago. The implementation costs are, for H1, EUR 36 million. I stress that it could be more in H2. It will be noncash. It will be depending upon the project that we can have on negotiation with the unions. The net impact overall for H1 is EUR 74 million. And the contribution, excluding the joint venture, is EUR 55 million at operating income level.

I cannot resist the temptation to show you the number on Page 24 of 2 of our key joint ventures that we do not consolidate any more. But as you can see, both of them posted an improvement of adjusted operating cash flow, even very significant for Dalkia International. And you know that we benefit of this impact only in the adjusted operating income.

Page 25. When you go down from the adjusted operating cash flow to the adjusted operating income, you will note that the amortization charge is stable year-on-year. This was along [ph] expected number, and I think you can see the signal of the CapEx cuts and you can see that our CapEx are slowing down now, the amortization charges stabilizing. That's good news. You will note also on the provision that we have sold of EUR 40 million, which has to do with the retirement plan. We mentioned that during the Q1; and obviously, the very large increase of joint venture's contribution, plus EUR 126 million, including the one-off reversal of EUR 89 million with Dalkia Italy. At the end of the day, the adjusted operating income is EUR 539 million. It's up 29% constant rate.

I will not comment Page 26, which is just for the record, but I think that everything has been mentioned.

Now maybe a word, Page 27, on the nonrecurring events. You can see that they account for EUR 66 million negative. They are made at the operating income of 2 things. The first one is a write-off -- goodwill write-off of EUR 48.5 million for our Environmental Services operation in Germany. And this has to do with the slowdown of the market and also some trend of pressure on municipal contract. Municipal contracts, not big ones, but they account for a bit more than 10% of the activity and they are really under pressure so we decided to reduce our exposure to German operation. After this write-off, we have a bit more than EUR 600 million of capital employed in Germany for Waste business. We booked also an increased charge of restructuring in the headquarters. And this has to do with the larger number of people who have exited the company and also the fact that they were our most senior. So the savings will increase accordingly. That's it for the operating income.

Now we're through with operation, a few words around finance and tax. Page 28. On the net finance costs, you can see that the cost of net debt is EUR 306 million. It does include EUR 43 million one-off, which is linked to the bond buyback. You remember that in June, we bought back more than EUR 600 million of bonds and close to $100 million. There was a premium attached to that, and this premium is EUR 43 million. The payback on this is 2 years. The restated cost of debt is EUR 264 million, which, compared like-for-like to last year, is down by 13%. The average financing rate -- net debt financing rate is 5.16%. It's up from 4.74%. And this is only due to the high average cash position that we had during the first half of the year, thanks to the large level of disposals that we completed last year, at the end of the year, plus the hybrid we ran during the first half with a high cash position. And the cost of carry, as you know, is significant, and that's why the rate have gone up. This position is ended at the end of June. And you will see that it's getting closer to a normal number. It's about EUR 3.7 billion of cash position in June. The cost of gross debt is 3.73%, minus 26 basis points, still moving down while we have 80% of debt which is on fixed rate.

On the tax side, the income tax charge is down from EUR 82 million in 2012 to EUR 76 million. The effective tax rate is at 106%, and this has to do with the nonrecurring item that hit the pretax income. Once you have retreated this one-off, the tax rate is 53%. And this level is due to the inefficiency of the French tax group. We have losses that cannot be recognized yet. In the midterm, 2015, 2018, we are confident that the tax rate should be back to the 35% area -- normal area, and this has to do with the savings plan, lower financial charges. This is obviously with a stable fiscal package tax regulation, which, I agree, is a difficult assumption. Anyways, the 2014 tax rate, while still being high, will be lower and will be -- over a few years, tax rate will convert to this 35%.

Moving from operating income to net income. You can see that the net income is EUR 3.6 million. As I just mentioned, it does include a German goodwill impairment for 48.5%, the one-off cost of bonds we purchased for EUR 43 million and the restructuring cost, minus EUR 17 million. You can see also that the net income from discontinued operation is minus EUR 16 million. It does reflect not a depreciation in value, but it does reflect the fact that some of these operation are loss-making. The recurring net income is EUR 131 million to be compared to EUR 18 million. I just mentioned earlier that it should be more compared to EUR 270 million without the Italy one-off. This EUR 131 million is representative of the earnings power of Veolia during this first year. It does include the retirement reversal, but it does include also some other negative one-off in the recurring income.

That's done for the P&L. We move to the cash flow statement, Page 31, with an update on disposals. As you can see, we are on track with the refocusing plan, which is close to EUR 300 million of disposal during the H1. The 2 major disposal of this month are the Portuguese Water operation, as well as the controlling interest in the Oman Water operation. Both operations have been achieved at a very reasonable evaluation level. Both of them were contributing to the EBITDA in 2012 for a total of EUR 13 million, while the net debt impact of the disposal is EUR 160 million. So we are still running with activity ratios on both gearing and variation of the company. You should know also some disposal on asset post completion of Dalkia project. You know that this biomass project that we built during 2012, 2013, they are now completed. And once they are completed, we sell them. We sell part -- we sell the asset part to financial investors while retaining, obviously, the operating contract. It does account for about EUR 70 million in 2013 and we are moving in, obviously, the better period, where this disposal of asset offset the level of CapEx that we have on the new project. For H2, we obviously expect to complete the Berlin disposal. We have ongoing discussion with the land, which are going reasonably well, and we expect the full sale by yearend. I will not comment the detail of the transaction, but we are talking about something of a EUR 600 million magnitude. The Morocco Water closing is on track and for a value of EUR 50 million, EUR 60 million, even if we get already the benefit of some debt reduction through the discount treatment. So we are confident in this disposal program.

Page 32, just an update on Transdev. First thing I wanted to mention is that Transdev is doing fine. I mean, you know that there were -- it was a difficult operation. I that think the new management team is doing a tremendous job and they've been able to book -- to stabilize the revenues despite very high level of competition. And the adjusted operating cash flow is strongly up more than 20%, in line with the business plan. And you know the business plan is important because the structure of Veolia leaving Transdev is also taking in account the external refinancing of the debt. So the plan that we've set now a few months ago with Caisse des Dépôts is still on track. You remember that EUR 800 million capital increase, external refinancing and also the disposal of asset. The disposal of assets are here again rather underway. We are confident in terms of valuation, also in terms of technical, that we could complete this disposal by the end of the year or early next year with good valuation. The key point is that this transaction has been delayed because there is a prerequisite that is at SNCM, this ferry operation south of France, are transferred to Veolia. And you know that the unions are resisting this transfer so we have ongoing dialogue with them, and we do all our best to complete this transfer by the end of October and that's the current time table that we have together with Caisse des Dépôts. And that was the content of the amendment to the MOUs that we signed on the 9th of July. The main uncertainty surrounding at SNCM are, obviously, the E.U. claims, which has been already addressed -- or which could be addressed, as well as the attribution of the Corsican contract for the lines to Corsica. As a matter of fact, we have no asset value left at June end for SNCM on the balance sheet. That's for the disposal program.

On gross investments, you will note, Page 33, that CapEx have decreased by EUR 310 million, down 1/3 compared to last year. Just -- you remember that last year, we still had some CapEx linked to asset that we have disposed of, which we have booked on discontinued operation. Discontinued operation is, again [ph] , for P&L; it's not in the cash flow statement. So the CapEx attached to these assets were EUR 72 million in the first half of 2012. So you should see that. And your remember also that during H1 2012, we had some one-off investment, very specific investment. Without that, a minority interest in Voda that's our Water operation in Central Europe for about EUR 80 million. And we also invested more than EUR 40 million in the vehicle about our U.K. regulated Water asset. So if you retreat both items plus the CapEx attached to discontinued operation, the effort, the reduction of CapEx, like-for-like, is about EUR 100 million. This EUR 100 million have been achieved half on maintenance, and we were able to bring down the rate of maintenance CapEx to sales from 2.2% to 1.9%. And I think that we are very proud of this performance. And the second part of CapEx reduction is on industrial growth CapEx, with a strong reduction mainly in French operations.

That being said, we can detail, Page 34, the statement of cash flows. You can see that the debt is down from EUR 10.8 million at the beginning of the year to EUR 10 billion. I think we commented most of the different lines. Just a word on the working cap variation, minus EUR 749 million, which is a big number. You know we have a seasonal effect which is significant. Last year, it was minus EUR 500 million. And this is seasonal effect, account for the bulk of the EUR 749 million. However, I signaled that there is one structural impact. You know that we have 13 [ph] condition in the French Water contract. In particular, we need to get back to authorities the money that we collect under our billings. It does include -- it does account for about EUR 50 million, EUR 50 million-plus on this French Water operation. We noted also has nothing to do with that, longer payment terms for certain French public customers in the Water segment, in Dalkia, in particular. So it's not a big deal. But still, we can see that they take a bit longer to pay the bills. We have no incident in terms of payment. It just that it cost us about 2 days of DSO in France. It's something that may reverse by the end of the year or may not. That's something we will follow up. And we'll talk about that again at the end of September accounts when we'll update you. Anyway, we expect to reverse, largely by yearend, this amount of EUR 749 million. We do not expect to reverse all of it. You may say that at the same time of the year, I told exactly the same thing and at the end of the day, we are able to reverse all of it. But as I just mentioned, we have identified some items that may be more structural, let's say, for about 100, 100-plus as a whole. That's our view today. Dividends are down to EUR 172 million. This has to do with the scrip option that was strongly exercised versus dividend. On the other line, you can see it's a result of EUR 1.1 billion. It does include a EUR 1.5 billion of hybrid issuance, as well as the restructuring of Dalkia International finance.

Page 35. Just a word on the debt. You see that the debt is down along the plan, in line with the EUR 8 billion to EUR 9 billion net debt target at year end. We are very confident, thanks to the disposal program and the reduction of the working cap, that we will achieve our target. As you can see also, the adjusted net debt-to-EBITDA ratio is improving again to 3.1, getting closer to the 3 target, which was set initially for 2014. As you can see, we are progressing very well.

Based on that, Page 36, we are confident to maintain all the target either for 2012, 2013 or 2013 [ph] and the year. That's it for the accounts.

Antoine Frérot

Thank you, Pierre-François. And now, ladies and gentlemen, we are ready to answer your questions with Pierre-François and François Bertreau.

Question-and-Answer Session

Operator

[Operator Instructions] We have the first question from Olivier Van Doosselaere from Exane.

Olivier Van Doosselaere - Exane BNP Paribas, Research Division

I have a couple of them. Firstly, now that we are halfway through the year, I was wondering if you could give an indication maybe of where you expect your EBITDA to end up for this year. Secondly, on D&A, you had indicated that you expected around EUR 1.2 billion of D&A for this year. The trend in H1 was a bit lower than that. I was expecting if you could maybe give a guidance if you still expect the EUR 1 billion, EUR 1.2 billion for the full year. Then on Transdev, you're indicating you expect to be able to dispose of the asset by the end of this year or early next year. Does that mean that you expect also to resolve the issues around SNCM by then? And then I was wondering, in terms of the Waste business, if you could give a bit of a feeling in terms of the trend improvement -- trend on a monthly basis, if we could potentially continue to expect that improvement and with potentially positive volumes on the second half. And then I was wondering, finally, you had indicated in the beginning of the year that you potentially could see an earnings per share in line with dividends for 2014. I would like to know if you still expect that target to be well achievable.

Pierre-François Riolacci

Thank you. I mean, you know that we don't like to -- we don't want to give guidance for this 2013 year. As I just mentioned, we are still moving on with this restructuring. You know that 2013 is the second year of transformation. It's very difficult for us to face the restructuring cost. We had a bit more than expected at the very end of the first half. That was very good news. We don't know yet where we will be, including cash part, by the end of the year. It's very difficult to face really. And that's why we are not eager to give this sort of guidance on EBITDA. You're right to point out that the level of depreciation is a bit lower than from that what we had expected. I mean, if it's below EUR 1.2 billion, it won't be a big number. So I think that may be the case for a few things. And you're right to point out that an important number at the end of the day. But we -- probably, we are a bit below the EUR 1.2 billion. That's a fair comment. On SNCM, yes, we expect to move on sometime in September, October. You know who we are in troubled waters and that's pretty complex. However, we have good grounds to show that we have given all the information to the unions since a few months already. So if we get the benefit of a reasonable contract and if we don't get [indiscernible] from the sale, we believe that we can demonstrate to reasonable people that we've done all necessary efforts on its formation to SNCM unions and get the -- some green or red light. And we don't need a green light.

We just need a light, whatever color it is, to move on with SNCM. And today, our plan is clearly to execute its transfer by the end of October. And that's the plan with Caisse des Dépôts. That's where we are today. On the wait for H2, I mean, it's -- we don't have a crystal ball in which we can read the future. What we see is that clearly, the second quarter have shown some sign of improvement. We benefited, obviously, from a favorable base effect because you remember that last year, second quarter was really down. After that, during the second half of the year, we had a softer, a stable -- minus stable, minus economic environment. So we expect to be reasonably flat in Europe. One thing we are looking very carefully, what's going on outside Europe. And obviously, that makes a difference because when you look at the good things, what happened during the second quarter, it was Australia doing well, it was the U.S. into hazardous waste, and it was the U.K. PFI. The U.K. PFIs will be there. But for the rest, we are dependent about worldwide economic environment. Sorry, one last question, which is important, that's about the EPS. I mean, the reasoning that we had at the beginning of the year is still there. We have not identified any reinforcement of headwinds. The headwinds that we flagged are there, but they are not bigger than expected. We do benefit from the reversal of a nasty thing that we had last year. And so clearly, the restructuring are on track in all the difficult position. So that's good news. Our growth platforms, some of them are only -- anymore contributing at the net income level. But for EPS, it does work. Therefore, they're seeing well. And therefore, they're seeing on track. The reduction of the finance costs here again, if you retreat the one-off, which is linked to the buyback of bonds, is there. And we are on track to reach our EUR 500 million -- to be less than EUR 500 million in 2014. So that's here again there. You know that we have increased the cost-cutting plan. And this is designed to offset at least the slowdown of the economy in Europe that we have identified. So if the economic environment stay as it is, I think that there is no reason to change the reasoning that we had at the beginning of the year.

Operator

We have a question from Nathalie Casali from JPMorgan.

Nathalie F. Casali - JP Morgan Chase & Co, Research Division

I have 2 questions, please. And the first one is on looking at the net income in the first half, I mean, you mentioned that the EUR 131 million is representative of the earnings power. However, you obviously benefited from a D&A provision reversal of EUR 46 million, which is considered recurrence and obviously, also some capital gains for EUR 17 million. So if we strip this out and after we take into account the hybrid, is it fair to say the underlying level of EPS was about EUR 0.16, so EUR 18 million of net income in the first half? And clearly, that probably provides a lower basis than what you were looking at when you did your bridge to 2014. So if you could just comment on that. That was the first question. And the second question was on the levels of liquidity and the tax rates. Clearly, the high levels of liquidity are weighing on cost of financing. I mean, how do you see this evolving and when do you expect the tax rate to normalize? I think you mentioned 2015. Is that fair?

Pierre-François Riolacci

Thank you, Natalie. We have a positive one-off of EUR 40 million. But on the face of that, we have negative one-offs. And I mean, for some of you who have an experience of accounts preparers, you know that you have -- in this sort of exercise, you have always positive and negatives. What I can tell you is that the negatives that we have are smaller. But for example, for those who have good eyes, I'm sure that you will be reading carefully the numbers. And when you will find the other financial charges and income, you will see that it is down by EUR 10 million last year. So that's one that you can really spot easily. And there are a few other of that. And I can tell you that on the face of this EUR 40 million, we have also some negatives. We highlighted the EUR 40 million because it came during the first quarter. So it was a big number. It was fair to comment that to the market. But if you take from the H1, there is no special place on that. And I think you would be thinking, yourself, if you were re-treating this EUR 40 million as being a one-off because on the face of it, you have other things. If you take the hybrid cost, you can take the EBIT cost out of this EUR 130 million. But that's another story. That's a re-treatment, which is fair, which I understand. And you can work on EPS before and after hybrid. That's fair. And we will give, obviously, the data as well. That's something that we would give as well. But that's another story. That's a treatment. Bear in mind that the cost is real because we had this cash and it took a few months to reduce the cash exposure. For 2013, you should bear in mind that the cost of hybrid is only EUR 16 million, and this has to do with the accounting. So when retreating, be aware not to fool yourself on the numbers. On the tax rate, yes, the 53% is quite high. Our view is that the normal rate is 35%. We are converting to this rate over a few years, and it will start to decrease as soon as 2014. In terms of accounting on EPS, the key question will be, when do we consider that we have sufficient visibility to recognize the taxes of the French group on the balance sheet? And the very day we have this visibility, the tax rate will improve sharply. So it's not a long way. We are confident of the 35%. It is linked to the improvement of the pretax income. And accounting-wise, it will come once we have this visibility. It's difficult to say when it will come. It could be in 2014. If it was in 2013, that would have a very significant impact on the tax rate and the chart to P&L. So I state again that my view is that the EUR 130 million is representative of our earnings power today.

Operator

We have a question from Phillipe Ourpatian from Natixis.

Philippe Ourpatian - Natixis S.A., Research Division

I have, I would say, 2 question. One is regarding your Hong Kong Water operation for this contract. You mentioned there is degradation and you are close to completion. Have you taken any provisioning, I do suppose, in order to cover the possible future losses, first? And what is the amount of this provision? How are you seeing the ending of this contract? That's the first point. And secondly, you mentioned that there is some discussion for BWB. I can understand. I just cannot, I mean, develop a lot of information about the diary. But could you just give to us any information about the operation you recorded by BWB this semester in terms of EBITDA and EBIT? And what was the impact of the negative pricing effect on this German contract?

Pierre-François Riolacci

Thank you, Phillipe. On the Berlin contract, it has been accounted as discontinued operation. So there is no contribution in EBIT, no contribution in EBITDA. And it's just a net income contribution of the Berlin contract for the first 6 months. And it is accounted in the discontinued operation line. So you won't see much of it. So that's it. So when we complete, bear in mind that when we already complete this production, there will be no impact at the EBIT or EBITDA level.

Philippe Ourpatian - Natixis S.A., Research Division

My question was, I know that it was in discontinued, but what was the operating performance of that contract?

Pierre-François Riolacci

I can't tell you the number right like that. I must say that the current trading is not relevant in the context of our discussion with the Land of Berlin. And you're right to point out that there is the impact of the tariff increase, but it is a negative impact. It was accounted for last year already, so there is no deterioration of performance in 2013 compared to 2012 for Berlin, no deterioration operating-wise. But as I just mentioned, that's not the core of our discussion with the Land of Berlin. So that's the first item. What was the -- on Hong Kong, yes, we had -- we decided to book a slightly negative margin. It's slightly negative during H1. The impact year-on-year is about EUR 20 million because we had a positive income last year. And you know that when you book -- when you recognize the margin for construction, it's based on the ongoing estimation that you have, of the margin at completion. So we decided to turn into slightly negative margins. We are getting close to completion because we'll start the first lines early next year. So our view is that we are getting close to it. However, we are slightly negative. It won't be much more than that. So we think we are well covered today based off existing information.

Philippe Ourpatian - Natixis S.A., Research Division

If I can just add on existing information about the working capital requirement, you mentioned some delays coming from the French institutions and municipalities. Could you a little bit develop on that, where those delay are coming from exactly? It means they are not strict on budget, I do suppose, because normally, in the French legal framework, it's very strict on the schedule of payments, municipal, you have to do. That's in the legal, too difficult framework. Could you just elaborate on that point?

Pierre-François Riolacci

We -- the hotspots that we have identified are twofold. The first one is on the works for the Water business, and this had already been flagged a few quarters ago. We noted that some customers take some time to really recognize completion of work. So it's not that they are late payers for bills. It's that they're trained to delay the timing at which we are able to build. So we have seen this game a few quarters ago. It's still there, not very increasing, still there. The new topic that we found out during this first half of the year is with Dalkia, where some public authorities are flagging the municipalities first and then, on number two, education entities, that's the high schools or things like that, that are taking their time to pay. Here, that's really a late payment in billings. We are very strong on that because you know that in this energy business, we build this entity. And if they don't pay, we can, for example, delay the time we put back the heat. And we have experienced that in the past. And I can tell you that when the cold comes in October, if it's not paid, you just don't stop the operation. And within a week, you'll usually get the money. So that's something we need to be very, very cautious, but we will. We will manage that, obviously, commercially. For us, we see that more as some pressure on the cash position than a question of budget. So it's more, I think, has to do with -- you know that in France, this cash is managed centrally by the French government. So we believe it's more instruction which have been given to delay some payment. We are confident that, given the leverage that we have on this operation, we can really manage to limit the impact.

Operator

We have a question from Lawson Steele from Berenberg.

Lawson Steele - Berenberg, Research Division

Could you comment a little bit on organization structure and where you are in implementing the new structure in terms of what pushback have you had within the company given that's sort of major shift in ethos? And then on cost-cutting, if you'd give us some additional detail on cost-cutting, that would be helpful. And perhaps, how much -- how many ideas are coming from employees themselves? Or is this all sort of top management-led? And then finally, on the tax rate, can you give us a little bit, small specifics as to what you need to do in order to bring down that tax rate? What sort of structures, perhaps, you need to create or such like?

Antoine Frérot

Yes. I will take your question, and I'll leave Pierre-François with the tax rate. About this organization, as you know, they have been announced in May and put in place on the 8th of July. The nomination has been made at that time with the head of those areas, head of country managers, and just 10 days later, head of function in every country. I could tell that it is well received by the operational teams, of course, and also by the headquarter. Of course, people behind the 2 -- between the 2 people at the head offices of our old [ph] divisions are not so happy. But it is a very few part of the group. So all the organization is in place now and is beginning to run in this new way. And especially, we will build the next year budget and our long-term plan with the new organization. We will still have to adapt, of course, the structure in each country first but also, of course, in Paris to merge the 3 headquarters. And we will save some cost doing that, of course. And you know that these savings are part of the increase of our objective of the global cost-cutting plans to EUR 750 million. We will have savings in fiscal 3 and bigger savings, of course, at the level of Paris. But I will not elaborate today about that more precisely because we have, as you could imagine, under discussion with our unions as we did last year for the first savings plan for the sole headquarter quarter [ph] of VE. Pierre-François, no?

François Bertreau

Well, just to complement on cost-cutting H1, the 80% is made by, what we call, business projects, I mean, operations and technical, all the buy activity, i.e. energy, water or waste management. And the remaining 20% are made on Transdev project. As Mr. Frérot told you, in fact, we will speed up the process of saving money, especially on Transdev project because we have a comprehensive objective of 400 by the end of 2015. And a lot -- a large part of that will be facilitated by the -- let's say, the new structures, the new organization. We expect to save a great deal of money on the structures both in France and outside France. And as Frérot told you, we started the new organization beginning of July. So in fact, the effect of the savings on, let's say, administrative cost will start by the end of the year and will improve the semesters.

Pierre-François Riolacci

On the tax rate, I mentioned that the key items was [indiscernible] the cost-cutting plan, as François and Antoine just elaborated on, and also the reduction in our financial charges on which we have, as you can imagine, growing visibility. There are a few, obviously other restructuring, that we need to complete. I will not comment on that. But obviously, the new organization is clearly a strong possibility to improve, first, the legal structure; and two, the intercompany re-invoicing. And bear in mind that for us, the key efficiency will be to bring back some tax basis in France. So we do not have to create some vehicles in some [indiscernible] countries. That's not the route that we want to take. It's just pure operational optimization.

Operator

We have a question from Martin Young from RBC.

Martin Young - RBC Capital Markets, LLC, Research Division

Just 3 quick questions. Firstly, you mentioned the conversion of revenue to operating cash flow impact in the Waste division. For recycling, I think you said 20%. So should we be looking at a 20% squeeze on the EBITDA in the first half from what happened to recycling revenues? Secondly, getting back to this issue around where the P&L might go a couple of years out to the net income level, you've mentioned that the EUR 131 million in the first half of this year is indicative of the underlying earnings ability of the group. So if we simply were to double that for the full year and then add on the delta after-tax between what you hope to achieve in cost reductions between 2013 and 2015, I think we get to something in the region of about EUR 450 million net income. Is that a reasonable ballpark number for what you're looking at? And then finally, on CapEx, I just wondered if you could give some indication of where you think CapEx will be at, turning over the next couple of years, 2014 and 2015?

Pierre-François Riolacci

Thank you, Martin. On the conversion to EBITDA, yes, you're right. Any variation of the top line on this sorting and recycling business is deemed to be converted at about 20% -- maybe a bit less 20% in adjusted operating cash flow. And this has been demonstrated with the last quarter and even last year. And we stick to this evaluation. It could be up or it can be down. It can be both ways. But that's what we consider as a good proxy of our exposure. On the EPS, you need to be careful because H1 with Veolia is always stronger than H2 in terms of adjusted operating income. And this has to do with the seasonality of Dalkia, which is much stronger during the first half than the second half of the year. It can -- it's not that big, but it is significant. And you should not double the H1 net income to assume the full year income. However, it doesn't mean that I'm not -- that your ballpark estimate is wrong. But I think that the reasoning to come to this number has more to do with the cost-cutting, the headwinds and the assumptions that you will you make on the economic environment, which are obviously important, as I just mentioned. On the CapEx, we had, at the beginning of the year, this commitment of EUR 1.7 billion of CapEx. We -- you need to add up to that the Proactiva acquisition, which will account for about EUR 270 million equity that we paid plus the consolidation of the net debt of the company. For the rest, we stick to this EUR 1.7 billion for 2013, maybe a bit less because we have, clearly, a very strong first half in terms of CapEx management. So we took some advance towards the yearly program. I hope that we'd be able to maintain it. So it could be a bit below EUR 1.7 billion, excluding Proactiva. I think that the year after, it should carry on declining because, as I just mentioned earlier, we are getting at the end of an investment cycle in some of our operation. So it's setting down. So we should reduce that as well in 2014. In 2015, that will be very dependent upon the decision we make in the second half of the year and in 2014. So it's a bit early to say. But we do not have, obviously, an increase which is -- and if we stop designing new investment, obviously, 2015 would decrease significantly compared to 2014. But that's not the policy that we have, and we will maintain a decent level of investment in 2015. That's part of the strategy. And we do not have any plan to cut down the CapEx much further in 2015. But 2014 will be slightly lower than 2013.

Operator

We have a question from James Brand from Deutsche Bank.

James Brand - Deutsche Bank AG, Research Division

It's James Brand from Deutsche Bank. I had a question on Waste volumes actually. You mentioned that the volume trends had improved in the second quarter. And for the first half as a whole, volumes were down by 1% less than industrial production. I was wondering whether you could separate that out and tell us how that's split into changes in scope and to the change in the underlying trend across your portfolio, and also whether you could give a bit more detail on volume trends in different countries.

Pierre-François Riolacci

Maybe going through the different countries, we had, in France, lower volumes in collection, in municipal collection. It was -- volumes are not that bad in the C&I during the second quarter. That's for solid waste. For hazardous waste, we had, at first quarter, with some decrease in volumes. That was countered in the second quarter. So that's what we see. And as I just indicated, clearly, in France, we had better volumes than industrial production was getting. In Germany, municipal collection volumes are hit, and the paper that we treat is down. It was down by about 10% during the first quarter. It's getting a bit better in the second quarter. In the U.K., there is a lot of pressure on the C&I business. We had some good commercial news in the municipal. So we were able to offset the trend. But in the C&I, we see some pressure. The good news for the first half of the year in the U.K. is that the landfill volumes are close to stable, which I think is a good number given the trend, which is downward and will stay downward in this country. I think that's the key items. And then obviously, Australia has been doing well consistently. So I can't tell you much more about the volumes in the Waste business.

Operator

We have a question from Julie Arav from Barclays.

Julie Arav - Barclays Capital, Research Division

Some of them have already been answered. I have 2 remaining ones. The first one is on BWB. Unless I'm wrong, the negotiations with the Land of Berlin were initiated a few months ago already. What has changed recently to make you announce the deal before yearend and can we have an idea of what kind of valuation you're targeting? Could we expect the same kind of levels achieved by RWE last year? This is my first question. The second one, you mentioned slightly lower contractual erosion in France than the expected run rate. Was this exceptional or do you think you are too conservative with your guidance of EUR 50 million hits per annum?

Antoine Frérot

Yes, I will take the question about Berlin. Yes, we've taken the discussions with the Land of Berlin for some months now. But you remember that last year, when they bought out RWE, they did not want to discuss with us. What changed is, first, 1 year has passed; and secondly, you perhaps remember the legal dispute we have with the Land of Berlin, between Veolia and the Land of Berlin and things are progressing this way. And I hope that we could solve this discussion and get the amount which will be quite close what RWE got. But it is too early to conclude about that. So it will come in the coming months, perhaps coming weeks. We hope not to be very far.

Pierre-François Riolacci

On the contract erosion in France, I wish I could tell you that we have good news and we are reviving downward the erosion rate, but that's not the case. It's just that the impact on the quarter is different because it depends on which contract is coming or not for renewal. And that's the reason why you may have some high and some lows. And clearly, we have a bit of a low during this first half of the year. It stayed closer to 20 than 30. That's the reason why we say that the contract erosion was a bit lower. It's not a downward revision of this trend, unfortunately.

Operator

We have a question from Patrick Hummel from UBS.

Patrick Hummel - UBS Investment Bank, Research Division

First one, regarding the working capital increase, and you said that the EUR 100 million or a bit more than EUR 100 million could be structural. What's the risk that this is going to be an ongoing effect, basically, going forward? And the second question relates to the cost-cutting. You say that you're optimistic to even exceed the EUR 170 million for the full year. Is that basically that you have identified further measures? Or is it just that the savings that you had expected for 2014 already, to some extent, would materialize in 2013? And the third question, can you give us your best guess what the weather effect -- the negative effect from weather was on the French Water business in the first half? And sorry if something has already been answered. I was a bit late to the call.

Pierre-François Riolacci

I will touch on the first one and the third one. Just on the weather impact, I mentioned that volumes during the first half were down by 1.9%. Normally, it should be more in the range of 0.8%, so let's say a big 1% on the account of the climate. This account for, let's say, EUR 15 million to EUR 20 million of -- for the first half. On the working cap, the part which is structural has to do also with the French Water operation. We have new contract provisions that make us to transfer the money we collect through royalties and tax of deals back to customers in a timely manner. So it does explain why the level of cash that we maintained in the operation of this contract is lower. It's because we are passing back this money rather quickly. So our view is that this accounts EUR 50 million-plus for the full year, a significant amount having incurred already during the first half of the year. I think that's why we believe it would be structural.

Antoine Frérot

And about new cost-cutting ways, I will ask François to answer.

François Bertreau

In fact, as you know, we have launched -- or we have reviewed the cost-cutting program last May. So we have not added new measures since last May. The first -- but the point is with the change in the organization, we are now able to have a very precise measures, a lot of different programs of the over 500 projects and we have people to implement them. So we are fairly confident that we will able to -- just to develop our cost-cutting program without adding, for the time being, new measures.

Patrick Hummel - UBS Investment Bank, Research Division

Right. But just to ask this then because you said that you would potentially exceed the EUR 170 million. So this is basically just that you have more savings or you have -- sorry, you have savings ahead of your plan. You basically have savings already this year that you had anticipated for 2014. Is that fair to say?

François Bertreau

We may be ahead of schedule on this cost-saving plan, yes, by the end of the year.

Operator

So we have a question from Michel Debs from Crédit Suisse.

Michel Debs - Crédit Suisse AG, Research Division

I have 3 questions. The first one is about your business portfolio. I would like to talk about the new businesses you're trying to get into. You mentioned the treatment of water -- wastewater from operations in the mining and oil business, things like this. Which of these new ventures is the one you are the most proud of and you think can grow the most and in the most profitable way? The second question is about the dividend. You mentioned that you were committing to a EUR 0.7 dividend in 2014 and that after that, you would go back to historical payout. Is this EUR 0.7 number a floor for 2013 or is it also a cap? In other words, could you pay more than EUR 0.7 if things go well? And the last question I have is on maintenance CapEx. You have managed to take the ratio of maintenance CapEx to revenue below 2%, which is extremely low compared to your own history and your peers. Are you confident you can sustain such a low CapEx-to-revenue ratio over time? And if yes, how -- what have you changed to be able to spend so little on maintenance?

Antoine Frérot

Okay. I will take the first question, about our new offers and our business models. Your question is, what we are the most proud of we achieved in term of business development during the first semester? I would say, first, to have been in a position to get the first big water treatment contract for -- not classical but [ph] gas extraction in Australia first. But we have -- we had also a good success with the oil and gas industry in Saudi Arabia. I wish -- I wanted for a long time to work for Aramco. We got a big diesel plant for construction and operation with them. And I'm sure that with this big oil and gas company, there is a lot of to do in term of water treatment, but also hazardous waste treatment and perhaps also recycling some materials they would have in their acreage [ph] . And the last one is a smaller one, but the contract we signed with Codelco, the mining company of Chile which is extracting copper and producing a lot of quantity of wastewater with 3% of copper in it. The contract is to -- of course, to treat the water but also to extract the 3% of copper. So it is exactly what I want to do to propose benefits to our players. And for the industry, it will be productivity and we will share this productivity and the benefit we could have from this 3% of copper in their wastewater. About maintenance CapEx, first, Pierre-François?

Pierre-François Riolacci

Yes. We have achieved to trim down to below 2%. We benefit from a lower capital intensity of activities. That's important. We are shifting the business towards less capital intensive components. So it helps. We benefit also from the mix of operation. And for example, if you get higher prices of energy with Dalkia, it would increase the top line, but there is no impact of maintenance CapEx. So it does improve also the rate. And then there is a strong challenge of each and every decision to invest. It's clear that we are putting a lot of pressure on any CapEx, and that's part of the management of the company. Also, when we have customers which are bargaining the price increase or which are asking for price rebates, then we can also discuss the level of CapEx that they won't [ph] find. For example, if, in the collection market, some customer want to stabilize the cost or even reduce the cost, then you must expect that the average age of the trucks will not be any more 5 years, but could be 7 years. And then it allows us to postpone some of our maintenance CapEx. So that's really daily management of these expenses that -- the expenditure that allow us to reduce the maintenance rate. For the dividend?

Antoine Frérot

About the dividend yes, you know that we just paid the previous one and also, we announced the next one for next year. So perhaps, it is a bit early to talk about the dividend we will pay in about 2 years from now. So you -- we discussed and Pierre-François gave to you some information about what we are thinking, about the sustainability of our rebates [ph] . So I think it is too early to comment about if this EUR 0.70 is a cap or a floor.

Operator

Yes, we have last question from Emmanuel Turpin from Morgan Stanley.

Emmanuel Turpin - Morgan Stanley, Research Division

Two questions, please. First of all, I was looking with interest at Slide 12 and with the idea of trying to get out of the new organization you're putting in place would benefit the growth on profitability of the group. I was seeing with interest that of the priorities you have, this doesn't seem new to me, especially on the ones you are looking at to implement from mid-2014, energy efficiency, methanization, plastic recycle; that's not very new in terms of group offering. So could you maybe use this slide to explain to us how the new organization will make you sell these better than you've been able in the past? And the second question is on Dalkia International, you highlighted it was doing very well indeed. And I would like to take this opportunity to ask if you were back in active discussions with your partner, EDF, on the structure of the partnership, discussions that you had entertained 1.5 years ago, if I remember.

Antoine Frérot

Yes. Emmanuel, in this -- on the left part of the Slide 12, there -- I mentioned there is some offer we already provide but some others which are currently developing. If I take the example of aluminum recycling from the famous red sludges, for example, or a nuclear site decommissioning or some recycling of some materials, not the copper, because we went with the first offer for Codelco, but that is the other rare and valuable materials we could extract from the atriums of mining sector. These ones are news as it is the case also for the municipal sector with some offers about smart cities, for example. So we have both. Some already exist. Some are under development. But what is new, it is the new organization. We want to systematically leverage our worldwide presence to be able to propose to all our targeted customers in every country these offers, meaning that the commercial plan of all of our countries will be managed with the new marketing team at the head of the company. And that is the reason why also at the end of this year, we will have deployed the old network of our key account managers for our key industrial clients. What is new is more the organization, but we have, under development today, new offer. We always beef up. But the way to systematically promote market, they [ph] impose to our field teams to commercialize it, that is new. About Dalkia, there is regular discussions with our partners. You know that we have a dispute, which began end of last year, concerning the winning of EDF to get 50% with Dalkia France. This is used on the book today and we will continue to stay and to manage the dispute on the court. We say the dispute will have about -- the financing of Dalkia International at the end of last year will continue to challenge this financing because, as you know, we don't want to be the sole partner to finance Dalkia International and we will continue to share this financing. And for the rest, discussion will not be more elaborate as you could understand this because they are not at their end today.

Emmanuel Turpin - Morgan Stanley, Research Division

Can I come back on the first question?

Antoine Frérot

Yes.

Emmanuel Turpin - Morgan Stanley, Research Division

So basically, you've put a man or a person in charge of each country. This person comes from one of the old divisions. Is it -- is my understanding correct that now this person will be responsible, will have incentives or targets to actually cross-sell the whole offer that you are listing here as opposed to the past where it was more of a divisional approach? Is that why you are rolling this offer out?

Antoine Frérot

Emmanuel, I want to mention it is not only cross-sell. It is to decide what we want to sell at priority to whom, where and how. And I want that this way will be pushed through the whole organization and applied everywhere. It could be offered in Water, in Waste, in energy or cross offers. But what I want is to have, if I could say, an industrial way to market and to make commerce with all the targets we identified everywhere in our countries. Of course, our managers would still -- will be incentivized first about numbers, free cash and operating results for around 60% of their bonuses. And the rest is linked to commerce exactly, but also some safety issues furthermore. So we have a set of quantified and qualified criteria for the businesses.

Ladies and gentlemen, thank you very much for your presence on this -- for this conference call at this day of August, which was not so easy. Thank you very much for having us [indiscernible] and to all your question, and have a good day. Bye-bye.

Operator

Ladies and gentlemen, this concludes the conference call. Thank you, all, for your participation. You may now disconnect.

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