Veolia Environnement ADRVE

Morningstar Rating

Stock Research and Analysis

by Bradley Meeks

Veolia Environnement's public-private business model, breadth of services, and long-term contracts give it a narrow moat. With more than 150 years of expertise in the environmental services business, we think Veolia is well-positioned to benefit from Read more

Bulls Say

The 2005 Water Partnership Council stated that public-private partnerships can reduce costs for municipalities by as much as 25%. The benefits of outsourcing could continue to provide long-term growth prospects.

Municipalities currently operate 85%-90% of the U.S. water market, presenting tremendous growth opportunities for Veolia. By leveraging its leading market position and solid track record, Veolia should be able to capture a large share of new opportunities as they surface.

Driven by economic growth, urban sprawl, and increasingly burdensome drinking water regulations, Veolia expects its water business in China to expand by 20%-30% annually during the next 20 years and make up 7% of total revenue. Read more

Bears Say

Fuel prices represent a significant operating expense for Veolia. If Veolia is unable to pass through higher fuel costs, its profitability could be negatively affected.

Because Veolia is a global company that provides infrastructure and environmental services such as water and transportation, the company has an increased risk to geopolitical, criminal, and terrorist threats.

Veolia is an extremely capital-intensive business, with capital spending taking up close to 60% of EBITDA in 2008. Lack of capital could cause Veolia to increase its already hefty debt load or restrain growth opportunities.

In contrast to its competitors, Veolia operates in many foreign countries, making it susceptible to foreign exchange impacts. The company is vulnerable to a rise in the euro against the dollar, which can compress the firm's operating margin if the situation doesn't change in the near future. Read more

Strategy

Veolia relies on acquisitions and sizable equity stakes in companies to grow. However, the excessive amount of leverage on the balance sheet has caused the company to institute a three-year asset disposal Read more

Management

CEO Henri Proglio began his career with Compagnie Generale des Eaux in 1972 and was appointed executive vice president of Vivendi Universal and CEO of Vivendi Water in 1999. Proglio became chairman of Veolia's board in 2000 and has held the concurrent Read more

Profile

Veolia Environnement is the world's largest publicly traded water company and provides environmental services including wastewater treatment, collecting, treating, and recycling Read more

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