Veolia cuts investment and cash flow outlook

PARIS, Oct 20 - French water and waste management group Veolia said on Sunday that it had revised down its outlook for its investments and cut its forecast for operating cash flow in 2008 due to the economic slowdown.

Its shares were down 13.5 per cent in early Monday trade, underperforming a 2.6 per cent rise in France's benchmark CAC-4O index. The stock was the biggest loser on the CAC-40.

The world's largest listed water company said in a statement that it would provide an overview of its outlook for the full year at an investor day on Oct. 22.

The group said its plan to control investments was underway and would result in total investments, net of disposals, of €4bn ($5.4bn) compared with €6.1bn in 2007. The company said in August the total would be €5bn.

It said that its Veolia Environnement unit expected 2008 operating cash flow to be between €4.1bn and €4.2bn compared to €4.163bn in 2007.

That range corresponds to an expected variation of between 0.9 per cent and -1.5 per cent compared to 6 per cent growth that was forecast in August.

"In the waste management business, Veolia Environnement has experienced a clear slowdown in business activity since the beginning of the summer," the statement said.

It said the effects of the economic slowdown and the decrease in raw material pricing have been particularly felt in the French and German business activities.

Temporary shutdown and delay of certain incineration installations in Italy, and the implementation costs for the restructuring plan and the closure of a waste disposal facility in Germany had also weighed on this year's profitability.

In the water business, the volumes of water sold in Europe over the course of the summer were below the 2007 levels, it said.

"Additionally in certain countries, expected tariff increases have been delayed," he said.

The company confirmed its objectives of generating cost savings of €400m over two years of which €180m is expected to be made in 2009.

"Taking into account these actions, the company expects to generate positive free cash flow in 2009," it said.

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