Veolia Environnement S.A.
Q1 2021 Earnings Call Transcript

Published: 6 May 2021

[Operator:]

Ladies and gentlemen and welcome to the Veolia Conference Call on Q1 2021 Results Publication with Antoine Frerot, CEO; Estelle Brachlianoff, COO

[Antoine Frerot:]

Thank you. Good morning, ladies and gentlemen and thank you for attending this conference call on Veolia first quarter 2021 results. This morning I am with Estelle Brachlianoff, our COO; Claude Laruelle, our CFO; and Olivier Brousse, our Head of Strategy. Before presenting you our Q1 highlights with Estelle, I will say a few words with the agreement signed on April 11 with the board of Suez to acquire the majority of Suez assets outside France and to become the undisputed leader in the ecological transformation. Claude, will give you details on Q1 key figures and we will then answer your questions.

[Estelle Brachlianoff:]

Thank you, Antoine. I am very satisfied with Q1 results in many respects, strong revenue growth and an even stronger growth in our results, both a testament to our focus on continuous delivery. Digging now into the various components of this really strong quarter revenue growth, you'll see on Slide 12 how it splits between our various business segments. Municipal water first has been super resilient, so has our 1Q business helped by cold winter. Our solid waste business has adapted very well to quit volatile C&I volume, still down in the first quarter with lockdown measures in place in most geographies, but we have driven massive efficiency measures, as well as continued price increases in most geographies as well. It has also benefited from higher levels of recycled products. Hazardous waste continues to be a success story of sustainable performance and growth. With volumes up sustained prices are no less than seven new facilities under construction in Asia, Europe, Middle East and America. Onsite services of industry are not completely back yet with our services to the automotive industry a little behind in Europe and our services to oil and gas not yet back to full capacity, although they have rebounded very strongly. I'm pleased to mention on Slide 13, a few very important wins of new contracts, which have materialized in the first quarter of 2021. As it could have been difficult to win new customers when you cannot even travel or meet them in person given COVID restrictions. I would highlight in particular for very good series in our municipal water activities, topping in France with the gain of Cholet, so as being the incumbent and Colima which was previously run mainly by the city. For the waste it was a great treatment to win the first PPP contract with the municipality of Miyagi in Japan, which represents EUR800 million backlog. It follows exactly the same model as our successful Hamamatsu concession in the same country. Many interesting wins as well with our industrial customers, for example with Petroperu, where we have managed to leverage the experience in sulfuric acid recovery of our US team. Our EUR200 million contract with BASF new factory dedicated to electrical batteries in Finland is another source of satisfaction.

[Antoine Frerot:]

Thank Estelle and I am on Page 15, where you can see our detailed 2021 objectives the combination with Suez. As I said earlier, this excellent start to the year makes us particularly confident that we will reach our annual target. Our objective for 2021 is clear. We want our level of activity and profit to be above 2019 levels. More specifically, revenue is expected above 2019. EBITDA is expected above EUR4 billion, a growth of more than 10% versus 2020. We are targeting EUR350 million of savings. Regarding our balance sheets, we are targeting a net financial debt below 12 billion with a leverage ratio below three times before the combination and in terms of dividends we clearly intend to recover our pre-crisis dividend policy in 2021. I now I'm never to Claude, who will give you details on the first quarter results. Claude the floor is yours.

[Claude Laruelle:]

Thank you, Antoine and good morning ladies and gentlemen. I'm very pleased to detail the sharper Q1 rebound with a solid growth momentum and recall profitability. As you can see on Slide 17, revenue grew by 4% in Q1 at constant forex. And thanks to a very strong operating leverage, EBITDA jumped by 13.6% with a recovery in almost all our activities, as Estelle described earlier. Current EBIT is also very encouraging at EUR459 million plus 22.7% compared to last year. And current net income is up 59.8%. Thanks to a strong and continuous focus on cash management and lower CapEx spending our free cash flow generation is excellent in Q1 and has improved by EUR468 million compared to last year, leading to a net financial debt almost flat compared to December 31.

[Operator:]

Thank you. We have one first question from Mr. Emmanuel Turpin from Societe Generale. Sir, please go ahead.

[Emmanuel Turpin:]

Good morning, everybody. I'd love to ask you one financial question and then a couple of questions on business development. On financial side, starting with CapEx, you basically spent a little bit less than last year about 30 million. Could you give us an update on your plans for the full year? It's going to be a very special year with the merger with Suez, but if we focus on Veolia on its own. How do you see the rest of the year as economy's restarting and your businesses seem to be going well? The second financial question is actually cross between business on financial. You mentioned that thanks to the nature of your PFI contracts in the UK. You ensured I understood it as a flattish EBITDA despite lower volumes on lower revenues. Would you mind explaining to us how this contract – this type of PFI contracts work on essentially protecting your EBITDA even if volumes are down? And what would be the implications when volumes are up? Would your EBITDA kind of lag this volume rebound, as they were protected as volume volumes went down? And then a couple of questions on business development, you announced your second concession in water in Japan, Japan is a large economy, one which has been – which had been historically difficult to penetrate for foreign operators. And if you look out five years or more, how big could Japan become in terms of potential market for Veolia, especially new Veolia as the two companies will combine their forces there? And the second business development questions about your service offer around air quality. I remember about a couple of years ago, you launched this business and explained to us, you had a couple of pilot projects on you strongly believed there was a great future for this type of business. Now, the COVID crisis is putting air quality at the centre of discussions. And I was wondering, to what extent you felt public authorities were becoming more aware of the need for service there. Thank you.

[Antoine Frerot:]

Thanks for your patience Emmanuel. You have questions for all of us. For the CapEx. I will let Claude. For the EBITDA UK and the good resilience of our business it will be Estelle. I will take the Japanese question and Olivier air quality.

[Claude Laruelle:]

So I'll start with the CapEx.

[Antoine Frerot:]

Yes, please.

[Claude Laruelle:]

So regarding the CapEx, if you look at what we spend over the last couple of years. 2019 was 2.2, last year, a little bit more than 2.1 with an – you know that we managed the CapEx quite well last year. So this year, because we have a lot of discretionary CapEx to spend, both on hazardous waste and also on the conversion of energy transition in Germany and in Central Europe, we expect CapEx of around EUR2.3 billion for the full year.

[Antoine Frerot:]

About the UK business, Estelle.

[Estelle Brachlianoff:]

About the UK business, very confident into it, I guess C&I, and PFI, just two parts continents. C&I was volume very down as Claude explained because there was a big lockdown in the first quarter of '21. And there had been no lockdown last year, it happened later on. So we have a very large decrease in volume compared to last year in C&I. But cost cutting managed to keep our results where they should be basically stable, something like that. With regard to the PFI, which is another type of business, it's relatively resilient to volume level short-term. Basically, we share the volume and price effect with the customer. This type of color and floor type of arrangement in each contract is different. But on majority, that's the case. So, at one point, we benefit from a little bit more volume, but not 100%. And on the other hand, when volumes are down, we are not down to 100% of the volumes on outside, so we really are sharing with the customer. So all we know, in the PFI business volume is not a big thing. As long as we manage to keep the energy from waste food, which we have from the crisis, we've prioritized them against their long fields or other types of activities. So what's really important is not the prices or price of recycling, as much as our performance, industrial wise as in different ways – level of availability. So basically resilience to volume in the large – to a large extent.

[Antoine Frerot:]

About Japan now, you remember that we were the first prime company to enter the water market in Japan about 10 years ago. It is of course, a difficult market. We need time to beat Japanese in Japan and to progress into this market. Now, we enjoyed turnover of about more than EUR600 million in this country, mainly in water business. And we take profit for year-after-year about the fact that we were the first one into this market and we are still the first one amongst the prim companies. We introduced the PPP model in this country, where the major part of water service is up from 90s, probably about 60. And regularly we make progress. Our water presence allows us also to – positively, in the waste business, usually recycling, but also in energy business. And with EUR600 million of turnover, we thought a lot – thought on what we can expect in the next year. So Japan is for sure an extension zone – an extension territory for Veolia. And now I can say that in Japan, we have seen – have four Japanese companies. Air quality, Olivier.

[Olivier Brousse:]

We've been talking and working on mostly indoor air quality. And what we can say in the last month is the trends from – especially public authorities to deal or to improve or maintain the air quality in buildings, especially public space is accelerating. We're seeing more and more tenders, for instance, in schools, from regions, from departments in order to ensure good air quality in classrooms. What is interesting though, in the last week and I'm sure you've heard that is that air quality, it's an important risk to healthcare and public authorities are aware of that. But now with COVID it could be an element of being open for business or not. Public authorities are talking, for instance about how to ensure class – sorry, school class availability, thanks to air cleaning between sessions. The leisure industry like cinemas are talking about how to – negotiating with government and public authorities about how to stay open or reopen for business by cleaning the air between cinema sessions. So all the experience we've – that was accumulated by Veolia in the last three years on this matter could become essential for some services, public services, or business services to remain open in a case of a long COVID economy. So we're seeing the steady growth in that. And we're well positioned to take advantage of that.

[Antoine Frerot:]

Thanks Olivier. Another question?

[Operator:]

We have another question from Mr. Philippe Ourpatian from ODDO BHF. Sir, please go ahead.

[Philippe Ourpatian:]

Yes, good morning to everyone. I have several questions, let's say three or four. The first one is concerning the combined impact. You mentioned that your economies were 92. And you break down between the normal plan and the recovery plan. And out of these 24 millions, what are the level of economies which might be seen as recurrent one? I do seem that the travel still limited. And you will use more, for example, some digital meetings versus travelling. Is there some millions which could be let's say permanent or resilient in this figure? That's the first question. The second one is concerning the deviation in terms of price effect between revenues and EBITDA. You have plus 61 and minus 52. Could you just elaborate a little bit more about this deviation I would say? The third question is concerning tax carry forward, is there some additional use in the French fiscal perimeter and US perimeter of the tax carry forward inventories you have had due to the better results you extract in Q1? And the two last questions are first concerning the French pipe request of improvement. There were some articles in French press that there is clear needs of investments, what could be your thought and the impact on the various activities in the coming years? And the last one is concerning the capital increase for the Suez merger. You were mentioning previously max 2, now you're putting the range between 2 and 2.5. Why this has changed and why on higher figures? Many thanks.

[Antoine Frerot:]

Okay, I'm not sure I completely understood well, your question about the French water business. Could you repeat this Philippe?

[Philippe Ourpatian:]

Yes, I mean, I was saying that French press was mentioning during the last data there is clear needs of investments for water pipes in the French municipal business. I do think that with the solder, you are working in this area, is there some sign of, let's say, expectation of better businesses – level of businesses in this way as most of these investments are going to be done by the municipalities?

[Antoine Frerot:]

Okay, so we will begin with Estelle about the cost cutting.

[Estelle Brachlianoff:]

So thanks for the question. So if I refer to Page 14 of the presentation on our efficiency plan. The top, which is the efficiency plan, as in the traditional one is fully a recurring one. So the 68 out of the 92 and as far as the 24, which is a recovery plan. It's not meant to be necessarily recurring, but given what I know what's underlying in Q1, I would say the vast majority of it is. So we still have a little bit of travel freeze and stuff like that you need that the vast majority is more recurring measures, even in the – regarding the best plan.

[Antoine Frerot:]

Regarding the price effect.

[Olivier Brousse:]

The price effect that you see on the revenue side is coming from the price increase that you have in all our businesses. And on the other side, what we put in the EBITDA bridge with minus 52.52 million is the usual price the squeeze is a cost inflation that we are not passing to our customer plus the renewal impact of our contracts. This is the reason why that you have as usual a price net of cost inflation which is negative and that we have to offset but by more savings than this price of cost inflation.

[Philippe Ourpatian:]

What is the explanation of the difference between the two boxes?

[Antoine Frerot:]

It is usual in our presentation. And if we enjoyed listing of our prices we will discuss, we will not get it completely, that we will limit it largely.

[Olivier Brousse:]

So first of all, by example, you have a cost of oil and gasoline. So it's part of the price of – in spite of the negativities above, but it's also slightly because why we're increasing the prices but not fully regarding the level of oil price, which is the level of Q1 to the end.

[Philippe Ourpatian:]

In fact, my just my question was also there is no other let's say non-recurring or exceptional item, because I know this mechanism, but it was just too low. So if there is some specificities mainly in Q1.

[Antoine Frerot:]

No and you have this effect on all our publication. Regularly, you will see price increase for now some several semester and negative impact of the price got squeezed on EBITDEA level, it is cutting profits. About the tax carry forward, Claude.

[Claude Laruelle:]

So in tax – in terms of tax. If you look at the tax level of Q1, a little bit higher than the full year, because we have less contribution from France and the US, you have seen what happened in the US and in US we were further impacted by the very cold weather in Texas. With the very cold weather in Texas, we had to shut down our hazardous waste facility there for a couple of weeks. So once we're seeing less contribution from those two tax groups, the tax rate is slightly higher in Q1, but the expectation stays the same 25% for the full year.

[Antoine Frerot:]

Meaning less of the 27 was on Q1. Okay. About the French water business, I will take the question. There's good news that at least we'll hear some municipalities and some public people saying that we need more investment in the water activity in France, meaning that the prices which decreased a lot from 10 years now, we start to decrease, probably or perhaps increase a bit. It's too early to see the consequences on that fact today for – sad for example, for the West, but it will be more interesting also for our water facilities meaning that we can innovate on the water infrastructure not only for price, but also the treatment equipment, new pollutants and so on. So it is benefiting for all our services with some symptom fighting to SAD or DWT for this but also I think for all those facilities. We hope to see that in the coming months of semester the money will come probably from the water I guarantee. And you know hopefully that in France between some political announcement and the facts on the field, we need to be tied to that. About the capital increase.

[Claude Laruelle:]

Capital increase yes, what we have always said is that the capital increase will be capped at around 20% of the operation. So today with the price, the share price increase that we have targeted and that we have announced EUR20.5 is the reason why that we have put this window and we will fine tune the amount when we have a clearer view of the proceeds from the disposal. So we will give you later in the year the precise number of the capital increase.

[Antoine Frerot:]

What we said in the past was maximum 20%. I talked about maximum two, so it's around two. So we'll be around – between 2 and 2.5.

[Philippe Ourpatian:]

Very clear many thanks.

[Antoine Frerot:]

Another question?

[Operator:]

Yes, we have another question from Mr. Olivier Van Doosselaere from Exane. Sir, please go ahead.

[Olivier Van Doosselaere:]

Thank you very much and good morning, everyone. Thank you for taking questions also for me. I had a few as well, firstly, maybe on the EBITDA guidance. So you mentioned above EUR4 billion for this year. But the 4 billion is actually what you did in 2019. And with the Q1 EBITDA already up 4.5% versus Q1 2019, when, as you mentioned, in fact, activity levels are still a bit subdued because of COVID and that might get better later in the year. I wonder what your thinking is about the possibility to actually do substantially better than 4 billion in terms of EBITDA this year. And the second question, which is actually may be related to the first one, your mandate is targeted, as you mentioned previously, to begin with 12 billion by year end that will probably include disposals. I wonder if you could give us an indication of the sort of the amount of dispose that you expect to make this year, again, on a standalone basis the numbers including the CS transaction. The third question would be on working capital. So you did well in Q1, how much of that do you expect to be retained structurally, and so we expect working capital to be a positive driver for your cash flow, also at year end and if so you could give us an indication of the amount that would be very useful. And then the final question for me also coming back to the capital increase, could you – I don't know if at this stage, you can already give an indication in terms of how much of the capital increase you expect to be financed by giving part of the Suez buyout in Veolia shares, and how much of the capital increase will then be financed by a straight capital increase on your end?

[Antoine Frerot:]

Thank you. Okay. I'll take the first question Olivier. For sure, we are in advance on our guidance at the end of Q1. And we did not recover all the consequences of the crisis, for example, our waste volumes meaning that for the rest of the year, we hope to accelerate, again, our performance, but until likely, there is room to do better than – little better than the 2019 in EBITDA. But we've announced the guidance just two months ago; it is today too early to defend it. About the debt of 20 billion before the combination of Suez and Veolia, Claude.

[Claude Laruelle:]

So yes, to give you a little bit of color regarding the net debt level, it's including some disposal yes, to reduce the debt. That was 17.2 million, so what we expect in terms of disposal, slightly higher than EUR1 billion, so between EUR1 billion and EUR1.3 billion for the full year which is for the net debt combination.

[Antoine Frerot:]

Working capital at year end.

[Claude Laruelle:]

So, as you have seen, we've made a lot of progress on the working capital side even last year, so it's where you're continuously improvement and what I can say if you look at the previous year, in 2019, we made a positive contribution from working capital by EUR200 million, pretty much the same in 2020. So what we expect from 2021 with what we have done since the beginning of the year is a positive impact at year end, which will be I would say maybe in the range of the previous years. So we will hear later on the year what we will contribute, but with the effort done by all the countries, we will have a slight positive impact on the debt reduction coming from the working capital.

[Antoine Frerot:]

About working people the Suez are not going to discuss also. Today the working capital is for Veolia. So have increased a bit in the year, we forecast to be stable and the year would do better. That would – should increase perhaps at the end of the year. Capital increase, Claude.

[Claude Laruelle:]

So capital increase, so for the capital increase, we said we have $0.12, but we want to do it in one or the other alternate, but not half and half. So it will be clearly a right issue – as a normal right issue that that can be done or it could be share branch, cap share branch in the tender offer.

[Antoine Frerot:]

Yes. We accept through the deal with the Suez board to increase our price for Suez share. So we pay a good price not in excess with a very good price for this. And I think it will be fair also to leave to the Veolia shareholders part, the normal part of the regimentation of our deal. So probably we – to date we will go probably to the critical share increase especially for our actual shareholders.

[Olivier Van Doosselaere:]

Thank you very much.

[Operator:]

Thank you, sir. Next question is from Mr. Juan Rodriguez from Kepler Cheuvreux. Sir, please go ahead.

[Juan Rodriguez:]

Thank you. Good morning, everyone. Thank you for taking our questions. On the operational level most of my questions have been answered, but I still have to on the financing of Suez deal if I may. The first is on the capital increase and the new terms that you provide. And in terms of timing, can you please confirm they will be done at the same time at closing? And the second is on the financing or through disposal of the assets. It has been said that the multiples will be similar to those of the transaction, so should we expect something around nine times the EBITDA? And any color on the – what has been the leverage – or what will be the leverage of the new Suez will be useful as well? Thank you.

[Antoine Frerot:]

Okay, I begin with the second question. We deal with Suez board to have price for the new Suez in currents with the global price for the older Suez. So we will get that bit. We've already discussed and forecast with the Suez Board, so not very far from what you have in mind. The timing of the capital increase, Claude.

[Claude Laruelle:]

What we will do, we will look at the appropriate timing to see when to do the capital – the share capital increase. So it could be slightly moved from the Ford Motor takeover of Suez.

[Antoine Frerot:]

But likely before the closing maybe of the deal.

[Juan Rodriguez:]

Thank you and as a follow up, any color on what could be the leverage of the new Suez on the asset disposals?

[Antoine Frerot:]

It is a question for the new shareholder – of the new Suez that we've agreed that these shareholders while we're discussing today that propose to Veolia . And also the best price they can propose in good terms with the global price for the global Suez. And then discuss also about their governance, the governance of the new Suez and on that they will propose certainly the leverage. We decided in the agreements of April 11 that the new Suez should be at a level –

[Claude Laruelle:]

Should be lever balance in terms of debt and equity and also they have to be rated as investment grade. So this is a goal is to have an investment grade rating.

[Juan Rodriguez:]

Quite useful, thank you.

[Operator:]

Thank you, sir. We have another question. We have one other question for Mr. Philippe Ourpatian from ODDO BHF. Sir, please go ahead.

[Philippe Ourpatian:]

Yes. Just one additional question regarding the detail, in the Slide 19 about the revenues you were mentioning a commercial volumes and work negative impact of 38 million. And in terms of EBITDA you were mentioning only minus 4. And you were saying as comments thanks to operational efficiencies. Could you just a little bit illustrate which kind of or what kind of operational efficiency you're discussing about which are not in the 92. Of course, getting reducible is a really operation efficiencies.

[Antoine Frerot:]

Just a minute Philippe, we have to look of your question precisely.

[Claude Laruelle:]

So what we're saying about the operational efficiency is also commercial efficiency. And what we're talking about here is about the contribution of the hazardous waste contribution in China because it is one of the drivers. So one big item which is contributing to this box, Philippe, well, it's a combination of a lot of things, including that effect, and also in terms of the waste activity, we got a little boost in our incineration activity because we were also able to increase the efficiencies in that activity by a better way.

[Antoine Frerot:]

All the cost efficiency on the , when we're talking about efficiency itself not in the country because it is further efficiency for the international.

[Philippe Ourpatian:]

Very clear, many thanks.

[Operator:]

Thank you, sir. We have one last question from Mr. Andrew Fisher from Berenberg. Please go ahead.

[Andrew Fisher:]

Thank you. Good morning, everyone. Just two quick questions for me, thanks for taking the questions. One, on hazardous waste, please could you just remind us of the timing of new capacities or any new capacities that you already have in planning under construction and what that means in terms of the total size of the treatment capacity you have going forward? So how much growth will the new capacities bring and just maybe just expand on any further opportunities that you see to continue to grow in hazardous waste? And then just on industrial water services and technologies, I was just wondering if you could maybe give us a bit more color on any differences that you're seeing across industries say power, oil and gas, mining pharma, food and bev, whether or not you're seeing sort of any particular differences between the new inquiries that you're getting from the industrial water segment please. Thank you.

[Antoine Frerot:]

About waste new capacities, Estelle.

[Estelle Brachlianoff:]

About our capacities, basically we're opening new capacity say a few times in the year, every year. So I would have to go through the whole list of the seven which are the construction some of them will be detailed, some of them will be next year and it will be up to 2023. Four bills under construction now to be open. So it's really spread over the time. For instance we have started the construction of one in Germany which is going to be more opening in 2023. We have some which are – a large one, we have a large one as well in the US which will be in 2023. But in China, typically we have three which are meant to open this year or beginning of the next with short-term if you wish, and I could go on like that. So we have as well one in the Middle East which is under construction and it's going to open in 2022. So it's really like a few every year for the next few years. If you ever look at the overall increase in the capacity, if I put it in other terms we've announced in our Impact 2023 plan that we'll have a revenue higher than EUR3 billion altogether in the hazardous business at the end of the term and we are really on our way to – sorry 4 billion, so another 1 billion because we are more around free, so another – an extra 1 billion turnover compared to what we have now, so it's really – it gives you an idea of the pace of those opening of new capacities.

[Antoine Frerot:]

The new facility of Singapore is –

[Estelle Brachlianoff:]

The new facility of Singapore starting as you know we have basically half of the volume in which is a normal ramp up. So that's why Antoine was not mentioning it, but your right, that's one of the seven as well.

[Antoine Frerot:]

Just to have some figures in mind. Some of the hazardous waste was 5.2 billion in 2016, 2.5 in 2019 and we don't get volume 4 billion in 2023. Okay. So about industrial water, I didn't understand your question. Could you repeat the question please?

[Andrew Fisher:]

Yeah. Sure. I just was looking to see if you're seeing any differences between the segments of industrial clients in terms of as economies open up, whether you're seeing any particular pockets of demand from say, the food and beverages sector relative to oil and gas, just to see if there's any differences in trends between the industries, please?

[Estelle Brachlianoff:]

Yes, that's a very good question. We're seeing a very different trend of reopening from the various industries, either from our industrial workgroup, but it's the same for industrial energy, typically, or even hazardous waste. So keep the long story short, we're seeing on that won't be a surprise to you super big boom in everything to do with pharmaceutical industry, where we do a lot, typically in the hazard business. We have seen the crisis down in 2020. But it's picking back up in the oil and gas, typically in the US, where the refineries are back up to 85% capacity, they were down to around 70% last year. So it's getting back up, but not yet recovered fully. Food and bev has always been super resilient. So we haven't seen a big drop and neither is there big rebound, it's been relatively stable. And on the other end of the spectrum, the automotive sector in particular in Europe is still a bit weak and hasn't come back to pre-COVID levels. So altogether, since we're covering all the industries I've just mentioned, we have a great portfolio because it's super diversified. Of course, it depends on the various geographies we obviously have more oil and gas in the US than we have in Europe. But nonetheless very different vision from the various industries and a big boost in pharma.

[Antoine Frerot:]

So these industry all water needs, perhaps some two words about the rise of needs of water use for which will roll quickly in my mind.

[Olivier Brousse:]

Water stress is a growing concern for not only the industry, but also agriculture. You will remember that last year some of the crops in France reduced by 20%, 25%, just because of water stress during the summer, but unfortunately we are facing this year. As a consequence, the agriculture sector is talking to us with a certain sense of urgency in order to find water guarantee – water delivery guarantee, which would come from the reuse. I mean, from our water treatment plants. You don't see in our revenue line for now. But it already represents 60% of the water provided to the agriculture sector in Spain, 8% in Israel, not percent zero in France. We wouldn't be surprised if in the coming years, this was a new source of revenue for us in Europe, but also in all the regions that are affected by what stress for agriculture, so reuse of water for the agriculture should be a new business in the coming years.

[Antoine Frerot:]

And that will also bring some new needs of pipes, infrastructures treatment, but also pipes. So it will increase the water business not only for cities, not only for industry but also for agriculture.

[Olivier Brousse:]

So the wait for the treatment plants will become the new source of water. And importantly, we have to be upgraded. Do we have another question?

[Andrew Fisher:]

Thank you.

[Antoine Frerot:]

Another question, the last one fast.

[Operator:]

Yes, we have one last question from Mr. Emmanuel Turpin from Societe Generale. Sir, please go ahead.

[Emmanuel Turpin:]

Thanks. A question on your Slide 27 under quite impressive performance in cost of net financial debt improving from 112 to 86 million, I was wondering if we could basically grow gross this Q1 figure up to get to the right level for full year? Or is there any either cost of further savings we should take into account and same question for the next line on that table, the other financial income and expenses. Back on business development, would you mind updating us on your ambitious business plan for plastics recycling was one big area of growth pre-COVID. And how is this shaping up in coming years? Are you sticking to your ambitions on targets, should we expect a bit of delays for the delivery of those targets or not? Thank you.

[Antoine Frerot:]

Yes, about the first question Emmanuel, perhaps I'll pass it to Claude who'll try to answer your question.

[Claude Laruelle:]

So what I can tell you Emmanuel is when you look at the low number on Q1 2021, large part of it is coming from the low interest rate in foreign currency, so which is very good news. So it's about one quarter – one fourth coming from the interest rates in the Euro debt, and three quarters coming from the low level of interest rates in foreign currency – short term rates. So what we can say what we're expecting from the full year is something which would be slightly below EUR400 million as the cost of net financial debt and so well below that number. And in terms of other financial income and expense, this is a line where you will see the dividend that we will receive from Suez in Q2 because the dividend which are expected to be around EUR120 million. So what you will have to do is to have the usual level of financial income and expense and put these on the – straight EBITDA on top of it.

[Emmanuel Turpin:]

Thank you. Thanks.

[Antoine Frerot:]

About plastic recycling business.

[Estelle Brachlianoff:]

And about plastic recycling business the short answer is we are really sticking to our plan. Meaning as you know, we've targeted to recheck obviously the new rules by 2023. And we are really building the new facilities exactly as we had planned. Just specific comments on last year's COVID crisis with regards to plastic, it has really confirmed that our positioning this industry was really the right one because even in the midst of last year's worst part of the crisis, the combination of our plastic recycled prices against the virgin prices and the oil has been tapped by our customers, because they're really working on buying recycled plastic, because the trend is there. Demand from the consumer is there. So that was really a confirmation that we're on the right niche of you like high end quality of plastics and we are really up to on time.

[Antoine Frerot:]

So it was the last question. Thank you very much to all of you. Solid business and you can see that. And strong team is able to be together. Of course, to prepare in the big section of equity equals automation with the project Israel and to manage our actual devices quickly in the line of our Impact 2023 strategic plan. And we will there from this plan, as we protected from the beginning, you'll see that after one year of the crisis, we are doing better than just to recover up to our last one year. EBITDA plus 7.5% between 2021 and 2019, meaning that we already get the two years combination, meaning that we are doing better than just to recover. We will come positively on the term, on the initial term before the crisis and that is really good news. So yeah, we are able to do both things together during your morning, evening, weekend with essential partners. So we're in a good petition to welcome all our new colleagues in some months from now. Have a good day.

[Operator:]

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