Veolia (VIE.PA) has reported a robust first quarter in 2024, with CEO Estelle Brachlianoff and CFO Claude Laruelle presenting a confident outlook during the company's earnings call on May 14. The environmental services leader announced excellent Q1 results, with sales reaching €11.5 billion, a 3.9% increase excluding energy price effects. EBITDA and current EBIT also saw significant growth, and the company is on track with its GreenUp strategic program and financial targets for the year.
Key Takeaways
- Q1 sales were €11.5 billion, up 3.9% excluding energy price effects.
- EBITDA increased by 5.7% to €1.624 billion, and current EBIT increased by 11.1% to €843 million.
- Net financial debt remains under control, aligned with targets.
- Successful contracts and strategic acquisitions have bolstered Veolia's market position.
- Veolia confirms its financial targets for 2024, including a net income goal of above €1.5 billion.
Company Outlook
- Veolia is confident in achieving its 2024 targets, with a focus on organic growth, EBITDA growth of 5-6%, and efficiency gains over €350 million.
- The company expects a €100 million FX headwind at the EBITDA level for the full year but remains positive about reaching a net income above €1.5 billion.
- Veolia aims for €8 billion EBITDA by 2027, with a 6% average growth in EBITDA and a 10% average growth in net results.
Bearish Highlights
- Energy activity decreased by 16.5% due to lower energy prices and mild weather.
- The company faced increased amortization and provisions, impacting EBITDA to EBIT transmission.
- A €100 million FX headwind is anticipated at the EBITDA level for the full year.
Bullish Highlights
- Strong performance in Water and Waste sectors, with Water Tech growing by 15%.
- Veolia's strategic program, GreenUp, is off to a positive start, aiming to achieve €300 million per year in additional value.
- The company's unique positioning enables it to address the growing demand for environmental services, such as PFAS treatment.
Misses
- Despite overall strong performance, energy activity suffered due to external factors like weather and market prices.
- There was minimal capital gain in Q1, with the expectation of releasing the Sade capital gain during the H1 results.
Q&A Highlights
- Executives discussed the retention rate of efficiency plans, with the current rate at around 43%.
- Veolia's hedging policy for CO2 is expected to benefit their Energy business in 2025 and 2026.
- The impact of foreign exchange rates in Argentina is not expected to have a significant impact on EBITDA.
Veolia's first-quarter performance has set a strong precedent for the remainder of 2024, with the company successfully navigating challenges such as water scarcity and energy market fluctuations. With a balanced geographical footprint and a leadership position in environmental services, Veolia is well-positioned to capitalize on global demand trends and deliver on its ambitious financial and strategic targets.
InvestingPro Insights
Veolia (VEOEY) has demonstrated a strong start to 2024, as reflected in its first-quarter performance. Here are some key insights based on real-time data from InvestingPro and InvestingPro Tips that further illustrate the company's financial health and market position:
InvestingPro Data:
- The company's market capitalization stands at a solid $22.98 billion, underscoring its significant presence in the environmental services industry.
- Veolia's price-to-earnings (P/E) ratio is currently at 22.39, which, when adjusted for the last twelve months as of Q4 2023, is 25.24. This suggests that the stock is trading at a valuation that is in line with its near-term earnings growth.
- The dividend yield as of the latest data is 3.18%, a testament to the company's commitment to returning value to shareholders, having maintained dividend payments for 24 consecutive years.
InvestingPro Tips:
- Veolia is a prominent player in the Multi-Utilities industry and has been profitable over the last twelve months. This profitability, coupled with analysts' predictions that the company will remain profitable this year, provides investors with confidence in the company's financial stability.
- The stock is noted for its low price volatility, offering a potentially more stable investment option within the sector. Additionally, it is trading near its 52-week high, indicating strong market confidence in the company's performance.
For investors seeking a more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/VEOEY. And for those interested in subscribing to InvestingPro for yearly or biyearly plans, use the coupon code PRONEWS24 to get an additional 10% off. There are 6 more InvestingPro Tips listed on the platform that can provide further insights into Veolia's stock performance and potential investment opportunities.
Full transcript - Veolia Environnement (EPA:VIE) VE (OTC:VEOEY) Q1 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the Veolia Q1 2024 Key Figures Conference Call with Estelle Brachlianoff, CEO; and Claude Laruelle, CFO. [Operator Instructions] This call is being recorded May 14, 2024. I would now like to turn the conference over to Ms. Estelle Brachlianoff. Please go ahead.
Estelle Brachlianoff: Thank you, and good morning, everyone. Thank you for joining this conference call to present Veolia's results for the first quarter of '24. And with me is Claude Laruelle, our Chief Financial Officer. Our first quarter results are, once again, excellent. They are perfectly in line with our annual objective and enable us to start 2024 with great confidence and fully confirm our guidance for the year. And I'm on Slide 4 where you would see sales came to €11.5 billion, up 3.9%, excluding energy price, which are essentially pass-through for us, as you know. EBITDA has increased by substantial 5.7% on a like-for-like basis to €1.624 billion and current EBIT by 11.1% to €843 million. Net financial debt is well under control and in line with our target of leverage ratio below 3x at year-end. These results are the fruit of our unique positioning as the world's leader of environmental services, which, combined with the sustained effort and professional efficiency enables us to deliver both resilience and growth of our results. The last few months have confirmed the choices of our next strategic program, GreenUp, which, for instance, the critical importance for both cities and industries of deploying solutions to tackle water scarcity and onshore water quality, those challenges where Veolia has a leadership position, as you know. I'm on Slide 5. And you can see we registered very solid revenue growth of 3.9%, excluding energy price, fueled in particular by Water and Waste, which grew by 6.5% and 5.5%, respectively. Regarding Energy, as anticipated, lower energy price has weighted on our top line, but our Energy revenue has been flat, excluding the effect of energy price and has even grown by 1% if you exclude negative weather effect in the first quarter. As you know, our Energy margin as in EBITDA is well protected from the ups and downs of energy price, which showed again in the first quarter. Actually, we expect 2024 Energy EBITDA to remain at the high level we reached last year despite lower energy price. How is that so? Veolia is quite unique in the energy market since we operate in local energy only as we explained last January during our deep dive dedicated to energy. As I've said, we anticipated this, which is the reason why we have published our revenue growth, excluding energy price, each quarter since 2022 as they do not impact our performance. Energy is a profitable and growing activity for Veolia. Slide 6. In order to detail how we've delivered another quarter of very good results, I would like to start by briefly explaining Veolia's recipe for value creation, which lies in 3 key engines: top line growth, efficiency and capital allocation. Starting with revenue growth. We combined stronghold activities, which were very resilient essential services, infrastructure-like with three growth boosters, namely, water technologies and new solutions, hazardous waste treatment and bioenergies, flexibility and energy efficiency. Our stronghold activities enjoy security and high contract renewal rates. Anchored in those, our booster activities grew at mid- to high single-digit rates as they are driven by strong market trends and Veolia's unique positioning, water quality and scarcity, regulation to protect health and reshoring, just to mention a few. The second pillar of value creation is our strict management of operations and attention to delivery. Each year, we deliver €350 million of efficiency gains, which have been topped up by cost synergies of the Suez merger, an addition of €500 million over 5 years -- 4 years, sorry. The third pillar is our capital allocation. We target high value-creating projects or tuck-in acquisitions in line with our strategic priorities. So typically our 3 growth boosters, all the geographies in which we want to expand. Our internal rule is IRR above WACC plus 4% and ROCE above WACC after year 3 for these investments. Meanwhile, we constantly review our portfolio of assets to check if there is still some value creation ahead. If not or when the asset is not in line with our strategy, typically construction or FM activities or subscale presence, we may decide to sell. This value creation model is the backbone of our GreenUp plan with current net income growth of 10% per annum on average and the dividend growing in line with EPS and ROCE post-tax above 9% in 2027. I'm on Slide 8, and let me detail now each of those 3 pillars of value creation and the way they have translated into Q1 results, starting with top line growth. In Q1, we delivered solid revenue growth of 3.9%, excluding energy prices, thanks to continued strong foundation with regards to indexation, pricing, contract renewal and new wins. In addition to a particularly strong performance in the Water Tech booster, both in delivery and new order book, up 50% in Q1 to €1.8 billion. In terms of geographies, Australia, the Middle East and the U.S., which you know are our growth boosters, performed particularly well, each of them above 6% growth, which is aligned with our ambition laid in our GreenUp plan. On Page 9, you have a focus on the performance of activities defined as stronghold in our GreenUp plan, which performed very well in Q1. Water municipal operations and Solid Waste revenue progressed very well, thanks to commercial momentum, better volumes, [indiscernible] indexation and continued pricing power. So 30% of our contracts, which are not indexed. District heating networks were flat, excluding energy price, due to mild weather in Central and Eastern Europe, but will have progressed otherwise. All registered strong commercial wins, notably the renewal of the SEDIF contract, which I'm very pleased with, as you would expect. As you know, and I'm now on Page 10, this contract provides water services for 4 million inhabitants in 132 municipalities around Paris for a total revenue of €4 billion over 12 years. We managed to renew this contract, thanks in particular to a series of very innovative solutions, which will make this contract a worldwide reference of water services of the 21st century with 10 world-firsts. These include the combination of nanofiltration and reverse osmosis to treat all new pollutants from PFAS to pesticide residues or endocrine disruptors as well to AI to help improve network efficiency to 93%, just to mention a few. As you can see, innovation is really at the heart of what we do at Veolia. On Page 11, now we'll focus on the performance of our GreenUp booster activities in Q1. Water Technologies continued to perform excessively well in terms of sales, earnings and bookings. Revenue grew by 15% in all our lines of business within Water Tech, while booking increased by 50% to €1.8 billion, including another big success in desalination in Dubai at Hassyan. In local decarbonizing energy, we continue to grow in flexibility with a 430-megawatt assets acquired from Uniper in Hungary, which will complement our own asset -- set of assets in this country. As you know, with this promising and strategic market, which is critical to the grid given the development of renewables, and with this operation, Veolia now has 2.4 gigawatts of managed flexible electrical energy in Europe. Still in local decarbonizing energy. In France, we are installing a series of solar panels on our landfills, which will produce 300 megawatts of green electricity by 2027. On Slide 12, you can see a list of some of the bookings in Water Tech we have recorded in Q1 with several contracts in semiconductors or oil and gas. On the Hassyan desalination project, I'm very proud that we'll have, with this one, the most energy-efficient worldwide desalination in the world and not a small one because it will serve 2 million inhabitants. And actually, when I said energy-efficient, we have crossed the floor of 3-kilowatt hour per cubic meter of water produced, which seemed unreachable only 10 years ago and which is a 35% reduction compared to 10 years ago and even 5x lower than the project we designed 30 years ago. You can see with this example that Veolia innovation helps save energy, money and CO2. On Slide 14, now let's deep dive into our second lever of value creation, which is performance and efficiency. You can see on this slide our first quarter performance in terms of operating efficiency and synergies. In terms of efficiency, we achieved €88 million in gains, in line with our annual target of €350 million. I'm pleased to see the specific action plan launched in France late last year bear its first fruits in Q1. In addition, we have fixed or exited a few underperforming contracts, notably one in Canada. In terms of cost synergies derived from the Suez merger, we are ahead of schedule and have achieved €42 million in Q1, or cumulative of €357 million since the start of the merger with Suez. Safe to say that the efficiency program are now part of the DNA and will remain so, leveraging on our more than 3,000 plants and units worldwide. But we are constantly looking for new tools and new opportunities, such as GenAI now, which we have dozen tests underway as we speak. The last driver of our value creation is capital allocation where we were particularly active in Q1, and I'm on Slide 16. Our CapEx program continued at a sustained pace with ongoing projects to build new hazardous waste treatment facilities in the U.S., Germany and Saudi. All those projects will be commissioned in 2025 and will fuel growth and increase return in this activity, which is among the 3 boosters of our GreenUp plan. As you know, Hazardous Waste already accounts for 10% of group sales and we are the world leader present on all continents. In parallel, we continued the conversion plan of our coal-fired facilities with €95 million invested during the first quarter in Poland and the Czech Republic. We expect a double-digit return from our decarbonization CapEx and are already benefiting from the higher profitability of our new Braunschweig facility, which was converted last year. We have been quite active in terms of bolt-on acquisition as well from Uniper flexibility assets in Hungary to recycling activities in Germany. Those two tuck-ins are a perfect illustration of our business model as they complement our existing asset footprint perfectly and generate significant synergies from day 1. And on February 29, we completed the disposal of Sade, as this construction activity, mainly in France, was noncore and with an EBITDA margin of around 5% dilutive for the rest of the group. These very good results in Q1 confirms the strength of our business model, which we summarize on Slide 18. Veolia is very resilient as we provide social services, both to municipal and industrial clients, with full asset ownership and more than 90% of renewal contracts. 85% of sales are not exposed to the economic cycle. We are protected against inflation, thanks to contract indexation formulas and our pricing power as we've proven and sustained in the last 3 years. We enjoy leadership position in all our key countries, which has proven key to pricing power, in particular. We benefit from balanced geographical footprint with 40% outside Europe, of which more than $5 billion in the U.S., no country outside the U.S. with more than 10% of the group's capital employed. Of course, in addition to these strengths, Veolia enjoys growth thanks to supportive megatrends and the unique positioning as the world leader of environmental services. Water quality, water scarcity, socioeconomic challenges, hazardous waste treatment, decarbonization are here to stay and we are the key to enabling our customers to grow sustainably. To illustrate our unique positioning, I'm now on Slide 19, let me give this example of PFAS, which is the case in point. Thanks to our innovation and the set of patented technologies we've developed, which includes membranes and resins as well as high-temperature incineration, we are now ready to treat these emerging pollutants. The combination of our various businesses in Water Technologies, Water operations as well as Hazardous Waste enable us to offer an end-to-end solution. Our presence in the U.S. when those pollutants were first detected has helped us to anticipate and be ready to treat this pollutant in Europe now. And actually things are moving fast in PFAS. In the first quarter alone, we've seen in the U.S. two new regulations from the EPA, which represents an estimated market for remediation and solutions estimated to $250 billion in the U.S. alone. Veolia has already started to treat PFAS [indiscernible] with water in [indiscernible] water in France, in the U.S. and in Australia. So I'm now on Slide 20. Veolia is a unique global leader in environmental services, ideally positioned to address fast-growing demand trends across the globe from water scarcity to decarbonization and decontamination to protection and health as the case of PFAS strategy illustrates. Our international presence in 44 countries and in the top 3 niche of our key countries is a key success factor as much as our strongly engaged workforce. On Slide 21, the very strong Q1 results allow me to fully confirm our target for 2024 and are very much in line with our GreenUp objectives. The financial and nonfinancial objective of our strategic plan are summarized in this slide. They include current net income growth of an average of 10% per year with dividends growing in line with EPS. I now hand over to Claude who will detail the Q1 '24 results before we both dive to your questions. Claude?
Claude Laruelle: Thank you, Estelle, and good morning, ladies and gentlemen. I'm on Slide 23. And as Estelle already highlighted, our Q1 2024 results are, once again, remarkable and allow us to be very confident for the rest of the year. With €11.5 billion revenue, we experienced a good organic revenue growth of 3.9%, excluding energy prices, driven by good commercial momentum and improved Water and Waste volumes, continued favorable indexation on our long-term contracts and price increases on nonindexed businesses. Taking into account the impact of lower energy prices, revenue was down by 1.7%, as expected, without impact on EBITDA. Thanks to the operating leverage and the good delivery of synergies, we enjoyed a solid organic EBITDA growth of 5.7% at €1.624 billion and a current EBIT growth of 11.1% at €843 million. Net financial debt remained well under control at €19 billion. You can also see on the slide the detailed ForEx impact, which were negative in Q1, minus €228 million at revenue level and minus €58 million at EBITDA level. Assuming the exchange rates remain at today's level, the full year impact at EBITDA level would be between €70 million and €80 million. As a reminder, as we operate in local currency, ForEx impacts are only translation and not transaction impacts. On Slide 24, you have our usual revenue bridge detailing the different effects and showing our top line intrinsic growth of 4.5% composed of commercial wins and pricing, those two green boxes on the right-hand side of the bridge. Looking at the full bridge in more details, what do we see? First, ForEx had a negative impact of minus 1.9%, mostly in Latin America. Second, scope impact is limited, minus 0.1%, after Sade disposal in February and a few tuck-ins. As a reminder, Sade is a construction business with low margin. For organic growth, we continued to enjoy solid growth of 3.9%, excluding energy prices, which is fueled by good commercial momentum, volume growth, strong growth activities, price and indexation increase in Water and Waste. The main item on the bridge is, of course, the lower energy prices for €679 million, with almost no impact on EBITDA. Recyclate prices have stabilized and the impact is insignificant in Q1 at revenue and EBITDA levels. The weather impact was unfavorable, minus 0.4%, compared to 2023, which was already mild. We experienced, in fact, the warmest winter over the last 30 years in Central Europe. Moving to Slide 25. You can see the revenue evolution by geographical segment and I start with Water Technologies, which delivered another very strong quarter, both in terms of revenue and bookings. Revenue are up 15% with sustained growth in all our business lines. And in terms of bookings, as Estelle said, we registered a record level of bookings of €1.8 billion, including more than €600 million in the U.S. In the Rest of the World, all regions performed very well. Notably, Australia had a very strong growth of 8.5%, thanks to good Waste performance, several contract wins, strict pricing discipline and good landfill volumes. Latin America grew double digits, thanks to good Waste volumes and pricing. Underlying activity was well oriented in Brazil, Chile and Colombia with several new contracts. To take a few, Las Salinas in Chile for soil remediation or Braskem biomass in Brazil. Africa/Middle East revenue was up 4%, thanks to strong business in Morocco and new energy efficiency contracts in the Middle East in Dubai and in Abu Dhabi. North America continued to enjoy solid Hazardous Waste performance and good Water activity. In Hazardous waste, for example, we benefited from a favorable mix effect and average prices are up 7%. In Asia, solid growth in Hong Kong, plus 10%, with a very strong performance of our Waste activity and our Energy efficiency business. And in Japan, it was up 4.7% with strong performance of Water operations. Rest of Europe revenue was up 1%, excluding energy prices. In Central Europe, the impact of lower energy prices in district heating activity was partially offset by the very good Water activity. In Northern Europe, we registered an outstanding U.K. performance, good indexation and strong PFI activity with a weaker availability of 98%. Southern Europe enjoyed strong commercial and Water activity and improved tariff indexation. Finally, France and Hazardous Waste Europe. After a difficult 2023, we're turning the tide. Revenue grew by 2.7%, an improvement after only 1.4% in 2023, thanks to good performance in Water and Waste. We also initiated profitability enhancement actions in France with a strong commercial focus and very specific efficiency targets with quick returns. As a result, France EBITDA is up 5% in Q1. I'm on Slide 26. And you can see the main trend by activity that I will detail in the next slide. Water and Waste enjoyed a very good work in Q1 as we expected and are fueling the revenue and the EBITDA growth of the group. And we review our activities one by one and I'll start with Water on Slide 27, our largest activity, representing 40% of our revenue. Water business grew by 6.5%, driven actually by volume/commerce, plus 3%; and pricing, plus 3.6% thanks to, first, good volumes especially in Central Europe, plus 4.2%; Morocco, plus 2.4%; and France, plus 0.5%; continued favorable tariff indexation in France, for example, plus 4.5%; and in Central Europe, high-single digits in average. The quarter was, of course, marked by the signing of the new SEDIF contract for 12 years, which Estelle already detailed. In regulated water, in particular, in the U.S., volumes were up 3% and we concluded several favorable rate case negotiations in New Jersey and Pennsylvania. And in Chile, for Aguas Sandinas, volumes were stable and we have continued favorable price indexation. Q1 was also marked by an outstanding Water Technology performance, in particular, the membrane business with increased sales of our AERO Products, the project business with the beginning of the Samsung (KS:005930) contract and the St. Louis sludge project, both in the U.S., and the chemical products with strong volumes and price increases. The commercial activity remained very strong, and we have a very large pipeline of projects ahead of us. As Estelle highlighted, we have just booked a very large desalination project in Dubai for $320 million that will continue to fuel the growth of Water Tech. I'm moving to Slide 28 on Waste. Waste activities grew at a faster pace than in previous quarter by 5.5% compared to 3.4% in 2023, thanks to continued pricing power, improved volumes in Europe and good commercial momentum in Australia and Latin America. To take a few examples. In Europe, the U.K. had a very good start to the year with very strong PFI and also C&I performance. In Germany, we had a strong commercial activity and we stabilized the volumes. France was better than last year in terms of volumes and also in terms of profitability. We managed our electricity from our sales well, thanks to our hedging policy with selling prices higher than last year. In Australia, the activity remained well oriented with the start of new municipal contracts and good volumes. Recycled prices at only minus 0.7% impact as the main drop of recycled prices happened in the second part of 2022. And our prices are more or less stabilized. Hazardous Waste remained well oriented in almost all our geographies, and we continue to experience good pricing power in the U.S. Finally, on Slide 29, Energy activity decreased by 16.5% due to energy prices and the milder weather. Intrinsic energy growth was 1.1%. Thanks to our business model with index tariff and energy prices essentially passed through and thanks to our hedging policy, we have been able to protect our results. Energy EBITDA was quite stable in Q1 and should remain stable in the full year at a very high level. Weather was again unfavorable due to a very mild winter in Central Europe with an impact of minus 1%. On our district heating business, as expected, we continued to benefit from heat price increases by the regulators in Central Europe as there is a lag effect. We also benefited from the ramp-up of our very large district heating contract in Tashkent. On the electricity side, we benefited from our hedging policy, which enabled us to mitigate the market price evolution. We also started new high-efficiency cogeneration with higher EBITDA, such as Braunschweig in Germany and [indiscernible] in Czech Republic. And we have more to come with Poznan in Poland in 2025. Finally, we signed significant new energy efficiency contracts in Belgium, Italy, the Middle East and Hong Kong. I'm now on Page 30, where you have our usual EBITDA bridge. We delivered a strong EBITDA growth of 5.7% like-for-like, fueled by the combination of the solid underlying revenue growth, strong efficiencies and synergies ahead of schedule. In detail, scope included the disposal of Sade from March 1 and the integration of bolt-on assets in Germany. ForEx negative impact reached minus €58 million, mainly in Latin America. Energy and recyclate impact was slightly negative, minus 1.8%, as we expected. EBITDA for Energy business was quite stable in Q1. Weather had an impact of minus 1.2% with the mild winter in Central Europe. EBITDA intrinsic growth was, therefore, fueled by the following effect: a more robust commerce and volume impact for plus 3.6%, continuous strong net efficiency and synergies for 5.1%. The synergy delivery continues to be ahead of target, reaching €42 million in Q1 and €357 million accumulated since the closing of the acquisition of Suez, which is remarkable. Moving to Slide 31. Let's see how the EBITDA increase is fueling the current EBIT, which is growing very strongly by 11.1% at €833 million. Renewable expense of €72 million are comparable with Q1 last year. Amortization, OFA and provision at €731 million is slightly down compared to 2023 with amortization slightly up due to the ramp-up of our contract in Uzbekistan and less impairment and provision than in 2023. JVs amounts to €22 million compared to €28 million last year, essentially due to a one-off in 2023. Our net financial debt remained well under control at €19 billion. CapEx remained quite stable and included €95 million of decarbonization CapEx with good progress on our Poznan project and €43 million of Hazardous Waste new projects, particularly in the U.S., in the Middle East and in Germany. The quarterly increase in net financial debt was due first to the seasonal reversal of working capital that was slightly higher than last year due to unfavorable calendar effects. It will not impact the free cash flow delivery of the year. We had higher payments in Q1 to water authorities in Water France and in CO2 products in Central Europe. And second, to the €200 million hybrid debt final repayment after the renewal of our €600 million hybrid debt in November last year. Our solid investment-grade rating has just been confirmed by S&P and Moody's (NYSE:MCO) with a stable outlook. Moving to Slide 33. To conclude, we, of course, confirm our ambitious guidance for 2024. Revenue, continued solid organic growth. For EBITDA, organic growth between 5% to 6%. More than €350 million of efficiency gains. More than €400 million cumulated synergies at the end of 2024. Current net income above €1.5 billion, which means a double-digit growth compared to 2023. Leverage ratio below 3x. And as usual, our dividend will grow in line with our current EPS. Thank you for your attention.
Estelle Brachlianoff: Thank you, Claude. And now we are ready to take your questions.
Operator: [Operator Instructions] Our first question comes from the line of Arthur Sitbon from Morgan Stanley (NYSE:MS).
Arthur Sitbon: So the first one would be on the synergies and cost savings. I see that the synergies in Q1 are quite strong compared to what you expect for the full year. So I was wondering if we should expect a normalization there in the next 3 quarters or if it's just that potentially you're going to deliver strong synergies on the year. And on pretty much the same topic, on cost savings, the retention rate as well seems higher than usual, close to 45%. Was there anything unusual happening in Q1? Or is it what we can expect for the whole year? So that's the first question. The second one is that you talk -- while it's been several months now that you talk a lot about your booster activities and your stronghold activities. I was wondering if there is any action that you may consider to accelerate the shift of your business profile towards more booster activities and a bit less stronghold to potentially accelerate the overall group growth profile of Veolia.
Estelle Brachlianoff: Two very different questions, but in a way, they very much summarize 2 of the 3 levers of our value creation, be it growth and efficiency and delivery on that. So starting with synergies and cost savings. So yes, we've over-delivered in the first quarter. As usual, we will go on as fast as we can in delivering the synergies. Our commitment remains to deliver €500 million in 4 years. So at least €400 million by the end of this year. And we'll do it as quick as we can. And I guess in terms of behind figures what is there, there are quite different things throughout the various years. The first year was very much the HQ type of savings. Typically, I don't know, real estate has emerged and 2 HQs in the same city in one same building. Then we moved to, say, more operational things. Typically, I don't know, in Australia, rebooting of trucks. As you know, in Australia, we had like to 2 kind of similar in size activities in Waste, both in Suez and Veolia, which we've combined and so it's very operational. And I guess now we can see the benefits of the merger within the Water Tech zone, which was slightly delayed compared to, say, the Australia example and which I anticipate to go on for the next quarter. So no slowing down to anticipate in terms of the overall €500 million over 4 years, which we'll deliver as quick as we can. And I guess, as you know, I'm kind of repeating myself on that one. I like to deliver on our promise and this is my priority as time goes. And in those days of uncertainties in the world, I think to be able to stick to the plan is something which has some merit. In terms of cost savings, apart from synergies, who are traditional, shall I say, because it's become traditional to have cost savings, €300 million, which we've already enhanced from €200 million or €250 million, which was the initial type of figures to now €350 million per year. I'm very happy that on top of the traditional cost-savings plans we have throughout all the business units of Veolia throughout the world, we are adding specific ones depending on the specific situation. And typically, I've highlighted briefly in my introduction words the France-specific action plan. France hasn't been -- I mean has been all right, but not great last year. And that's why we've launched a specific action plan, which is starting to bear fruit. Same applies with what I mentioned on exiting some underperforming contracts like the one in Canada. So I guess, we're trying to be as agile as we can and we have been. And I guess, the next few years will be probably more of the same, plus, say, GenAI, typically, to fuel new ideas. And I tend to say kind of forever in Veolia, we always find new sources of efficiencies. In terms of your second question on growth, we've announced our strategic plan a few weeks ago. And I guess your question is very much aligned with the strategic direction I've highlighted a few weeks ago, which is booster and stronghold, both are important. In terms of stronghold, they account for roughly 70% of our revenue, the booster 30%. But in terms of investments, it will be the opposite way around and we expect the growth to come 70% from the boosters and only 30% from the stronghold. So I guess we put our money where our mouth is. And we already make a priority of those boosters, which doesn't mean that we forget the stronghold. And they are very important as well. Why is that so? They are kind of the foundations on which we anchor, we build the boosters. If I give one example, without our, I would say, classical historic activities of dry waste and municipal water, we wouldn't be able to deliver the bioenergy production from waste or from wastewater, just to give one example, which is a booster. So the two are really intertwined very much. And I guess when from the stronghold activities, the idea is to maintain our customer happy and to follow some growth. But say, it would be typically inflation plus 1%, what we expect from those type of activities. For the boosters, we're talking 5% to 10% or mid- to high single-digit growth, as we said. And I'm very happy that's exactly what we've seen in the first quarter where our boosters have grown like exactly in this range and well above the average of the group in the first quarter. That's for the activities. And for the geographies, the same applies. We said we are very happy with our history and geography, so France and Europe typically. But we will have a higher rate of growth in the U.S., in the Middle East and Australia and that's exactly what we've seen in the first quarter. Claude mentioned the Australian growth, the American one as well. And each of those 3 geographic boosters have grown by above 6%, and as we've seen in Water Tech, it's even 15%. So I guess, the priorities are translating into figures now and will be in the next few years. But I guess -- no, I was about to summarize in one more because my answer was very long. I guess it's resilience and growth, which we are aiming at delivering. Resilience comes from the strongholds. The growth comes from the boosters mainly, although you have a little bit of both in both activities, which means that when you say that a company like Veolia, which is long-term contracted activities, infrastructure-like in many ways, is able to deliver in the first quarter 3.9% in of revenue growth, I'm very happy about these results. And it's very, very much a testimony to your question about how to enhance growth. I think the figures demonstrate that.
Operator: Our next question comes from the line of Ajay Patel from Goldman Sachs (NYSE:GS).
Ajay Patel: Thank you very much for the presentation. I think my first sort of set of questions is on this teaser slide, on Slide 19, $200 billion estimated market. I don't think I, when I look at that, have the full appreciation of how Veolia's placed. I know that you have the range of technologies, but if you were to try to cater to that market, what will it take in regards to CapEx investment? What do you have already on the ground that can help to that solution? And what potentially could you invest to take advantage of this opportunity? Just helping me sort of translate the big sort of number that you presented to actually nuts and bolts, somewhat sort of lower down. And then I guess the second one is more granular, but just -- with an awful amount of wet weather, I just wondered potentially what could that mean in terms of the impact on water usage? Any sort of commentary around that would be helpful.
Estelle Brachlianoff: Sorry, I haven't understood your second question well enough.
Claude Laruelle: Total usage.
Estelle Brachlianoff: Water usage. Okay, sorry, due to PFAS, you mean, or is it a totally separate question?
Ajay Patel: Sorry, separate question. The second one is separate, but just the first one, give us more on this PFAS. Does it sound like a massive opportunity? It's just it doesn't feel -- it doesn't -- I can't really frame it in my mind in regards to Veolia, yes.
Estelle Brachlianoff: Okay. Good. So two different questions on PFAS, which is the Page 19 you were referring to. I guess a few things on that one. This is about anticipation, positioning, patents and technologies and let me explain why. PFAS, as you know, is quite an emerging market. That's why the numbers I've mentioned are publicized by third parties. As you know, they are our first estimate. But as I said, the legislation in the U.S. dates back from 3 weeks ago or something like that and it's still evolving and in Europe it's the same. So it's difficult to assess with and to answer very, very precisely to your question. But there is a unique potential market, which we know will be very, very sizable. What we know as well is it's going to take a little bit of time because legislation translates into projects and then into delivery and then into margin for Veolia. So a little bit of it will see in this GreenUp plan and probably much more in the one after, given some of the time to deliver on those. But the new opportunity is huge and we are uniquely positioned, that's for certain. How is that so? I detailed that in our deep dive in the U.S. a few weeks ago. So if you want to know more, I encourage you to watch the replay. But in a nutshell, PFAS, say, you can find it in many places in water as well as in soil and sites that you have to decontaminate. So typically, if you see a map of the world, a map of the U.S. we've shown, a map of Europe, you see PFAS pretty much everywhere where you have large industrial chemical parks as well as every single airport and airbase, basically. And you can see a map where you have PFAS. How do you treat those? You have usually to concentrate and this is with membranes or resins. It happens that we are #1 in those technologies with Water Tech business. Then you have to, say, treat as in -- I was about to say destroy and cut into pieces. And this is with our high-temperature incinerator, which typically can do that. High-temperature incinerator, meaning 150 degrees Celsius, just to give you an idea what I mean by high temperature, which our Hazardous Waste business. So in a way, this is an example where we have the municipal water activity, the Water Technologies like in resins and membranes as well as the Hazardous Waste business, and we are the leaders in every single of those three businesses, actually #1 in each of the three actually in the world and in the various geographies I've just mentioned. So in a way, we have competitors, of course, in each of those segments. I really believe in each of those segments we are the best. But what's very unique is our ability to offer the full range, the end-to-end solution. And I cannot see anyone offering the end-to-end solution. And why is it so important? It means that for customers, you would need resin, in another one you would need membrane, for the third one you have go directly to a high-temperature incinerator or whatever because every single situation is different if you talk about an airport pollution, if you talk about a refinery or if you talk about water. So this is really an example of an ecology of solutions, which is, Mr. Customer, you have a problem. We manage to design a solution to fit your needs and we have the full portfolio from end-to-end again. So difficult to assess how speed -- how quick, I guess, this market will translate into our figures because, again, the legislation is very, very recent. But given what I said, we know which we have a unique opportunity here to offer what we do very well and what we're the leader of. We already have some contracts we signed because some customers have anticipated the legislation in a way. So it's typically the Department of Defense in Australia or some specific customers in the U.S. and it even started in Europe, so we have already had a few contracts. They are not significant in numbers as in we're talking millions of euros or dozens of millions, no more, so far. But it's moving super, super quick. On the second question, which is the water usage. If your question is about billing between weather and water usage, I would like to try and understand better your question to be able to answer more precisely if you can. Was that restriction of water -- water restriction you mean or water quality? Or tell me.
Ajay Patel: I was just thinking the weather seems to have been quite wet. And to what extent could that impact your Waste volumes in the second half of the year or over the remaining quarters so that it could be a benefit to you?
Estelle Brachlianoff: I guess the Waste volume, you probably mean the Water volume?
Ajay Patel: Water volume. I'm sorry.
Estelle Brachlianoff: Yes, yes. Just -- Okay. So you always have a little bit of weather impact in Veolia. That's why we have shown you on the various bridge that Claude has what we call the interesting growth, which is the self-help, if you want, from growing our activities and efficiency. And we've had a negative weather effect in the winter, so we may have a positive or negative weather in the summer. I can tell you that whatever is the summer like, I commit on delivering on the guidance I repeated. So that's the usual one. Second -- so that's the short-term answer. So we can confirm the guidance, whatever. The second answer is on the, I guess, midterm trends. It's fair to say that the summary of '22 in France, the summer of '23 in the U.K. and I could go on like that and in Spain and so on and so forth means that it was such a shocker for municipalities and populations and industries alike that even when it rains, the push for solutions, be the reduction of [indiscernible] or reuse of wastewater and all the rest of it is still very much top of the list of our customers. So it's good news that it has rained, so the underground water are now a bit more full than they were a few weeks ago. But I can tell you, our customers are still very, very, very adamant to find solution because everybody has perfectly understood that this type of event is here to stay and even to reinforce because it's the first consequence of global warming, basically. A testimony to that is the survey we've conducted with Elabe in 24 countries with 26,000 people in the world, which we've just released the results a few weeks ago, where the population -- everyone in the world basically has understood that we need solution as in now. And I can tell you whatever the weather is like, this is here to stay. So we are on a megatrend, which I'm very confident is here to stay because it's pushed the demand from the population itself.
Operator: Our next question comes from the line of Olly Jeffery from Deutsche Bank (ETR:DBKGn).
Olly Jeffery: So a couple of questions. First one, I'd just like to think about how you're seeing the rest of the year in terms of the outlook for Waste growth in China and Europe, given the economic picture is looking slightly better for those regions. So are you seeing any evidence of that yet because I know that in China, obviously, it's been slightly depressed for your business there. And the other question I have was around just the specifics within the DNA. So industrial capital gains and net provisions are up €31 million versus €10 million last year. Can you just explain what's driving that, please? And my last question is for the full year is €100 million FX headwind at the EBITDA level still the right order of magnitude? Or have things improved a little bit with the movement in the Chilean peso recently?
Estelle Brachlianoff: Sorry, I don't think I heard well the third question. Okay. EBITDA to EBIT, okay, sorry.
Claude Laruelle: EBITDA to EBIT.
Estelle Brachlianoff: I guess, Claude, on the three questions.
Claude Laruelle: On the first one, the rest of the year. So we see no change in the Waste activities. So the Waste activities, as you can see, has been well performing in the start of the year, plus 5.5% in terms of revenue. And in April, we have the same -- and the start of the May, we have the same trend as in Q1. So we are starting the year very well on the Waste activity. And so far, so good. The current trending is the same as we speak, as what we have seen in Q1. And for China, this is one of your question. We had -- the China solid waste was better than the start of the year, especially on plastic recycling. So we had a slightly better momentum in China. In terms of quality of earnings, if this is your question, and the EBITDA to EBIT transmission. As I said in Q1, we have slightly more amortization than last year with the ramp-up of the Tashkent contract, so a little bit more depreciation and amortization. On the provision side, the main topic was a provision that we had to take last year to cover the risk for a contract ending for around €20 million, and we had no such risk to cover in Q1 2024, which is good news. And on the other side, for the JVs, we had a positive one-off in 2023 and no such thing in 2024. So if you look at EBITDA, EBITDA has increased by €50 million. And it translates directly into EBIT level at €55 million, so the same amount if you compare to the EBITDA evolution and the EBIT evolution.
Estelle Brachlianoff: And just to complement Claude's answer on the first question. As we've said, we are 85%, we think something like that, immune to macro, which means that, in a way, I would differentiate a little bit Veolia's result from the GDP results and how the economy is going to countries you mentioned. In a way, I can comment on China GDP, but I'd rather comment on Veolia growth in Europe or in China, which were your two questions. And again, we are -- we have some very limited impact of the GDP, say, the 15%. But more interestingly, there is a part of it which is more commerce. And it's fair to say in some geographies, it's difficult for us to distinguish. Say, the Waste volume is a little bit up in the first quarter as you've seen by 1-point-something percent, 1.2%. And part of it is probably the economy doing a little bit better, and part of it is us being better than the competition. How do I split both? You know what? It's very difficult to say. And we've seen in some geographies, our competitors complaining and us being relatively happy because our job is to try, and again, like win valuable business and not only just to follow what the economy tells us. China being a good example, we've put a specific action plan in place. So we are not waiting for the rebound of the industry in China. We've put some action plan in place. So EBITDA is on the up, although revenue is not. I mean, it's kind of flat minus, something like that. But we have the EBITDA on the up because again I would distinguish the macro picture and whether Veolia delivers from it.
Olly Jeffery: That's clear. And just following up on the last question on the FX impact. I think before, you've spoken about €100 million for the full year at the EBITDA level. Is that still the right level to think about? And what should we think about the net income line because obviously a lot of that comes out through minorities. It might be helpful just to clarify on that bit, too.
Claude Laruelle: Okay. So for ForEx impact, we said between €70 million and €80 million if the currency stays at the same level, Olly. And the impact that net income will be super small. So whatever the ForEx, we can fully confirm that the net income will be above €1.5 billion at year-end.
Operator: Our next question comes from the line of Jenny Ping from Citi.
Jenny Ping: I've got two questions, please. Just firstly, just going back to the PFAS point, can I ask what is the EPA regulation in terms of the removal rate because my understanding is that it's quite difficult for total removal of any PFAS substances in the water. And then secondly, linked to that, if I can also ask whether you guys have your own proprietary technology, i.e., competitive edge for the removal process, that would be great. And then just alongside of that, if I can ask for a bit more color around the recyclate prices and commodities movements that you've seen recently. Normally, you have the chart in the back of your pack, which shows the movements in commodity prices and recyclates, but I don't think it's there. So if you can give some commentary around that would be great.
Estelle Brachlianoff: Thank you. So on PFAS, I would -- again, sorry, I encourage you to have a look at our replay on the U.S. deep dive, which will explain the whole detail of the EPA legislation, which had been released a few days before we've done this deep dive. I won't go into very much detail. We had two different sets of legislation so far, I mean, if I call EPA legislation, it's more standard than legislation, as such. The first one was on potable water and the second one was more on polluted soil and such, if you want, called [indiscernible]. And in both cases, you're right, it's very difficult to talk about total renewable. So there is a list of specific PFAS because, as you know, PFAS is a family of products, some of them being very likely [indiscernible] some of them very, very likely not. And it's not for me to decide. It's the sanitary and health authorities which decide that. And It has translated into a specific list of a few PFAS, where the combined pollution level, if you want, has to be detected below a certain threshold. And I guess, so just to give you a metaphor. The threshold is very small, but it's not 0 because, as you said, the total renewable is difficult. But it's so small, it's the equivalent of the size of a sugar cube in the middle of an Olympic swimming pool, just to give you the idea of the type of threshold the legislation has said will be -- have to be implemented in the next 5 years. Do we have our own technology? Yes, we do and they are patented. Again, resin, patented; membrane, patented; and very unique as well set of technologies in the high-temperature incinerator, which are above 1,100 degrees, as I mentioned. So yes, it's patented technologies and quite unique. And as you know, in those three, we are #1 player in the world, #1 player in Water Tech in the U.S. As well and #2 in the Hazardous Waste, so just to mention the U.S. And same applies with Europe, we are #1 in Water Tech and #1 in Hazardous Waste in Europe just the same. So yes, we have our own technologies to treat those. But as I mentioned earlier on, it's not only our technology, it's a set of technologies and the broadness of the end-to-end solution, combining the Water Tech, the Hazardous Waste, which makes us very unique. In terms of recyclate price and commodities, Claude, do you want to comment?
Claude Laruelle: So recyclate, the main topic for us is the paper and cardboard. What we are seeing in the -- you know it has dropped a lot, as I said, in the second part of 2022. After, we have seen a low price since -- during the course of 2023. We have seen a slightly up movement in Q1, especially in the month of March, which is really encouraging for the rest of the year. So we see a movement up in recyclates as we speak.
Estelle Brachlianoff: So it's -- but it's a limited one. So I guess our job is to deliver the result irrespective of the commodities price in a way, be it recyclates or be it energy, as I mentioned in my introduction speech. And the plastic price is, I guess, average low. So I guess do we have a potential for improvement in the next few years? Yes, we do. The price released still relatively low as we speak. When is it going to happen? I won't make any bet on that because it's always difficult to predict any commodities, but our commitment is on delivering on our guidance.
Operator: We have our next question coming from the line of Alexandre Roncier from Bank of America (NYSE:BAC).
Alexandre Roncier: I've got two, please. The first one is just a follow-up on the EBITDA to EBIT bridge. I think in your press release, you mentioned capital gains. So that was just to confirm the size of them, and if anything material was coming out of Sade for the quarter? And then the second one is I was looking at your free cash flow, and obviously, there's some phasing quarter-over-quarter and within the year. But I think you mentioned in your press release again some disbursement from carbon. And I was just wondering really the movements there, given that carbon prices are quite much lower year-over-year. And I would have expected perhaps lower by given the mild winter in your district heating business. So maybe if you can talk about the different driving forces there or if you were maybe a bit more tactical as other industrial players have been, I think, within the market for carbon buying.
Claude Laruelle: Okay. So on the capital gain that was very minimal because, as you know, on the EBIT level we record only the industrial capital gains, so that was only a few millions. So nothing relevant in terms of capital gains for the EBITDA to EBIT translation. In terms of free cash flow, in terms of -- and Sade capital gain will be below EBIT and will be released during the H1 results, but it's a positive one, I can confirm. In terms of free cash flow and the CO2. So it's a matter of calendar. So as I said, it's just a calendar effect. In CO2, as you know, we have a hedging policy, the same hedging policy in terms of CO2 as what we have on energy. Because we don't want to take market risk, so we hedge when we sell the energy in the market, we hedge the CO2 in the meantime. So we have a CO2 price, which is slightly above the market today, but we are buying CO2 on the market for the years to come and that will be also good news for our Energy business in 2025 and in 2026. And in terms of payments, it's just, as I said, the calendar effect Q1 versus the end of the year. So no impact on the delivery of free cash flow regarding this calendar effect.
Operator: Our next question comes from the line of Juan Rodriguez from Kepler.
Juan Rodriguez: I have two in my side, if I may. The first one is, again, coming back on working capital and this seasonal, but increasing effect. I just want to confirm that you're expecting the end of the year towards normalization and relatively flat? And the second on this working cap is on the higher CO2 quotas. I want to confirm that it does not include U.K. as there was kind -- has been a recent article signaling a possible cost increase on incinerators in the country. So this is the first one -- kind of 1.2 question. And the second one is on acquisition. So if you can give us more color on the acquisition price and valuation of Hofmann in Germany and any color as well on the price evaluation of the Uniper CGT assets in Hungary will be helpful.
Claude Laruelle: So I'll start with the working capital. So no topic about the U.K. So it's not a topic at all on the working capital. And in terms of -- yes, we will reverse the working capital at year-end as usual, Juan. It's -- and we know that we start always with Q1 with a stronger negative working capital and it's always reversed progressively in Q3 and Q4. So no change regarding working capital for Veolia. Estelle...
Estelle Brachlianoff: Yes. On the others, so as you know, the U.K. CO2 for incineration, which was your second question, we're talking 2028, if, so going into the ETS scheme. So nothing to do with neither this year nor the years of the GreenUp plan. But in anticipation, in a way, we knew it were likely to come. Hence, we've started a few projects to capture CO2 from our incinerator, which is a very specific CO2, as I explained in London, actually following a question I had on that one because it's biogenic CO2, which is in a way that kind of, let's call it, the good CO2 as opposed to the bad CO2, which is a non-biogenic one. So no impact at all to expect. And by the way, the various costs will be bear-ed eventually by the municipalities in the end, not by Veolia. But we want to help, and therefore, we've launched a few projects. And you can see a press release in the U.K. about CO2 capture and storage and so on and so forth. In terms of the Uniper and off-line prices, there is a reason why we don't publish the price. And usually, it's because the sellers don't want us to. And I guess you can see that it's usually good news when the sellers doesn't want to publish the price of an acquisition made by Veolia. For us, I mean, good news for us. I guess, I will stay there, but highly value creative. So I think it's a very good example of, what I call, the third pillar of our value creation, which is, I guess, the optimization of the balance sheet and the portfolio of activities while constantly reviewing the plus and the minuses. And on those two, which are on the acquisition side, quick value creation because it's synergistic in both cases with our existing activities, in one case in Germany recycling; and the other one, flexibility in Hungary, which we do already have activities in Hungary in the same type of things. So value creation, relatively quick. I would say, a little bit plug and play, if you allow me the metaphor. So quite good illustration of that. So it's going to be value creation relatively quickly.
Operator: Our next question comes from the line of Arnaud Palliez from CIBC Market Solutions -- sorry, CIC Market Solutions.
Arnaud Palliez: I have just one remaining follow-up question on the changes in scope. Can you give us the impact on full year revenue and margin for the acquisitions of Uniper and Hofmann -- or the deal with Uniper. And a reminder also about Morocco, Lydec, what can be the impact on annual sales and margin? And the same question on the disposal side regarding the Italian water concessions.
Estelle Brachlianoff: So you made a quite a long list on the plus side, Uniper and Hofmann. On the minus side, Italia and maybe the Lydec one. So if I summarize all that is included in our guidance for the year, obviously. And whatever the date I'm going to briefly detail, I guess it won't change our €1.5 billion net result target, I would say, in absolute value irrespective of the scope for the end of the year. I think that's the important bit. So you have the plus and the minuses compensated. And altogether, of course, we expect all that to create value and be a plus. Uniper is not closed yet. We're talking about later in the year, probably the autumn, something like that. Hofmann, it will be in the account, I think, it varies, a little bit in Q1 and there will be the rest in Q2 onwards. Lydec, I guess, no impact on net results because it's very, very, I guess, limiting in terms of net results contribution. And in terms of Sade, in a way, it has a large impact on revenue, but not on margins because, as I said, we're talking about an EBITDA percentage of roughly around 5%. So it's a good business. And the reason why we've sold it is not the 5%, it's a good performance for a construction type of business. But we're not keen to keep construction businesses, as we've highlighted a few times. And Italia, it was not consolidated because it was a series of minority shares where we didn't have an operational impact on and that's exactly why we sold. So it's a very different situation and very small.
Claude Laruelle: Very small EBIT impact, nonsignificant. Absolutely nonsignificant at group level. So very happy.
Estelle Brachlianoff: That's why all that -- so yes, so all that will again contribute to the €1.5 billion target at current.
Operator: And our last question comes from the line of Philippe Ourpatian from ODDO BHF.
Philippe Ourpatian: Yes. I have two follow-up questions. The first one is concerning ForEx. You confirmed a €70 million, €80 million impact. But just could we have, as it's very difficult and mainly linked to Argentina where the situation is a little bit troubled view from Europe, could you just have a kind of sensitivity about what's going to happen if, let's say, your forecast in terms of Argentinian pesos is not exactly aligned with the figure at the end of the year as you are accounting through inflationary-trained accounting principle. It means that you are taking, let's say, the last day of the quarter or the full year. And just to have a kind of sensitivity concerning the main LatAm ForEx impact at the EBITDA level, please? That's the first one. And the second one is in the Slide 30, you mentioned some good retention rate. When I'm taking the €33 million net efficiencies, let's say, and the €88 million on the gross value, it seems that we are always around the 50%. Is this means that we are starting to have a better retention rate in terms of efficiency versus the past? Or is it something specific to Q1?
Claude Laruelle: Okay. So maybe on the first one, the best guess that we can make, Philippe, is to take the actual assumption with the actual exchange rate and have a projection on the full year. Argentinian business is very small and EBITDA is very small, so it will not have additional significant impact when you have the full year with the hyperinflation in December resetting the entire year of ForEx impact. So because it's small, we don't expect this to be at the end of the year material in terms of ForEx impact in Argentina. That's what we see today.
Estelle Brachlianoff: So on the retention rate, which is your second question, it made me realize that I didn't answer on that question already asked a few minutes ago. Yes, you're right, 38 divided by 88 is now 43% than 50%. But nevertheless, it's on the upper part of our range, which we said is always between 30% and 50% depending on the quarters. So does it mean that we'll stay at this type of range as in 43%? You know, 30% to 50% is traditional for us, so I guess the middle part of the range is a good assumption for me going forward. And the specificity of Q1 was more what I mentioned on the Water Tech, which was really, I guess, volume-based and growth-based rather than, I guess, SG&A, which at times necessitates a bit of cost to be able to extract efficiencies. So I guess the retention rate depends more on the type of efficiency than anything else. When you're talking SG&A at times, you have a bit to pay to get them extracted. Therefore, the net is a little bit on the lower range. When you talk about, say, purchasing, it's more on the upper end of the range. And the mix makes it different from quarter to the other. And the upper part of the range is due, again, mainly on the Water Tech efficiency plan in the first quarter.
Philippe Ourpatian: Yet in fact, my question was also linked to the GreenUp strategy. It means that are you forecasting to have a better, maybe, retention rate due to this, let's say, new strategy more -- mainly focused on having additional value, making more complex, let's say, technical contract and so on? That's also part of my question.
Estelle Brachlianoff: So I guess, the way to see the GreenUp objective is €300 million per year plus the second part of the synergies, of course, plus the top line growth, all that fueling EBITDA. So in a way, what is important for me is really the 6% average basically growth of EBITDA, which we've published which is 8% -- sorry, €8 billion EBITDA target for 2027. I guess this is more the figure because you have pluses and minuses. Of course, if we can retain more in efficiency plan, we will. But we can have weather impact as well as we've seen in this quarter or not great commodities, so I guess you have pluses and minuses. That's why the way to see it is really the target of EBITDA and the target even more so in net results, which is 10% on average over the duration of the plan. I guess that's what the attention is focused on. And usually at Veolia, when we have a specific things happening, we react with an extra specific plan as we've done particularly in France, which is starting to bear fruit. So I guess, instead of talking about average of retention, I'd rather [indiscernible] on, again, net results over the duration of the plan, which is what we are focusing our attention upon with EPS in line in terms of growth.
Operator: Thank you. There seems to be no further questions at this time. I'd now like to turn the call back over to Ms. Brachlianoff for final closing comments.
Estelle Brachlianoff: Thank you very much for attending this conference call. And again, very good result, which helps me to see 2024 with great confidence and confirm our objective for the year and a very good start of our GreenUp plan. Thank you.
Operator: Thank you, ma'am. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines. Have a lovely day.
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