French Suez targets 1 billion euros in cost cuts by 2023 to lift earnings

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By Geert De Clercq

PARIS (Reuters) – The new chief executive of Suez (PA:) wants to boost the French waste and water firm’s earnings by cutting costs by a billion euros ($1.1 billion) per year by 2023 and seeking more growth from industrial customers.

A new strategy plan for the next four years aims to boost profitability from 2021, when Suez wants to have recurring earnings per share of 0.8 euros from 0.47 in 2018, but its dividend will remain unchanged for now.

CEO Bertrand Camus said Suez is targeting annual cost savings of 1 billion euros by 2023, with nearly half of these savings already in place by 2021.

He declined to say when Suez might increase its dividend, which has been unchanged at 65 cents per share since the company’s IPO in 2008.

“We will maintain the dividend at 0.65 euro in the next two years and then we want to be able to make it grow in line with earnings, both in terms of earnings per share and recurring cash flows and as soon as the dividend is well covered by results and cash flow,” he said.

Suez shares were 2.3% lower in early trade, underperforming the index, which was down 0.7%.

Brokerage Oddo said in a note to customers the new Suez strategy plan lacked detail and downgraded the stock to neutral from buy.

Like its larger sector peer Veolia (PA:), Suez wants to target more international revenues and boost the share of turnover from industrial customers as it reduces reliance on cash-strapped municipal customers.

Camus said he wants to grow the share of revenue from outside the European Union from 38% in 2018 to 60%, and the company also wants to push the revenue share from industrial customers from 41% to 50%.

He added that a third axis for development is technology and digital, which today account for less than 20% of revenue and should grow to more than 30%.

“The plan is to focus our financial resources on these three axes, the rotation of our assets will help us reconfigure our portfolio,” Camus said on a call with reporters.

Suez said in a statement that businesses representing 15-20% of capital employed have been identified as part of a program to review its mix of business, but Camus declined to say which assets or activities might be sold.

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