Veolia Environnement SA (VIE.PA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Veolia H1 2025 Results Conference Call with Estelle Brachlianoff, CEO; and Emmanuelle Menning, CFO. [Operator Instructions] This call is being recorded on Thursday, July 31, 2025. I would now like to turn the conference over to Estelle Brachlianoff. Please go ahead.

Thank you, and good morning, everyone. Thanks for joining this conference call to present Veolia's H1 key figures and I'm accompanied by Emmanuelle Menning, our CFO. I'm on Slide 4 for the key takeaways. First and foremost, our H1 '25 results are very strong, with Q2 performance in line with Q1. Those results are perfectly in line as well with our annual objectives and enable us to fully confirm our guidance for the year. In a rather challenging environment, this performance is really a testimony to the strength of our business model of resilience and growth, with a successful combination of stronghold and booster activities and a diversified international portfolio. As you know, the Veolia value creation model is fueled by 3 levers: growth, performance and capital allocation. Those 3 levers were again successfully in action in H1, and I will detail each of them in a minute. Regarding capital allocation, I would like to highlight that H1 has been particularly dynamic with EUR 2.2 billion of net M&A, invested mainly in our boosters while keeping debt under control, of course. This includes the buyout of CDPQ 30% stake in Water Technologies, enabling us to accelerate value creation. As well as nearly EUR 300 million in targeted acquisition in hazardous waste treatment in the U.S., Brazil and Japan. Those excellent H1 achievements confirm the relevance of our GreenUp growth priorities. As the challenges related to health, resilience, competitiveness and sovereignty are all the more crucial and confirm the sustained demand for services. I'm now on Slide 5. Our H1 key figures are once again very strong. Revenue reached EUR 22 billion, up 3.8%, excluding energy price, which are essentially passed through for us, as you know. EBITDA increased by a substantial plus 5.5% on a like-for-like basis to EUR 3.367 billion, fully in line with our 5% to 6% guidance and shows a margin improvement of 50 basis points, thanks notably to our recurring efficiency gain, complemented by the last synergies coming from the Suez acquisition more than 3 years ago. Current EBIT was up plus 8.1% to EUR 1.834 billion, demonstrating good operating leverage. Current net income reached EUR 762 million, up apparently by plus 4.3%, but in reality, up by more than 12% if we exclude last year's capital gain from the divestiture of SADE in France. So quite a remarkable performance down to the bottom line. This means we are very confident in our 2025 guidance. Net financial debt remains well under control and leverage at 3x. We are perfectly on our trajectory to less than 3x at year-end with the usual seasonality. Our solid H1 performance enables us to fully confirm our guidance. I'm now on Slide 6. In this uncertain time, Veolia stands out as a powerful combination of resilience and growth as demonstrated over the last few years. Remember, we managed to increase our results quarter after quarter despite volatile energy price, difficult macro in Europe, political and geopolitical uncertainty, higher inflation and interest rates, just to mention a few recent shocks. And why is that so? Let me insist on a few elements of our winning formula. One, our diversified geographic footprint, and we make sure we are in the top 3 in each of our countries. Two, our very local activities with cities and industries rather than government. Consequently, we are immune to the current trade war and there are no ForEx transaction exposure, only transaction in our accounts. Three, we have protected business models, with 70% of revenue automatically indexed and solid pricing power for the remaining 30%. We have long-term contracts, 11 years on average and more than 90% renewed. And 85% of our revenue are quite macro immune. This is clearly the case of municipal activities, but also largely of our commercial and industrial activities even in the Waste business, as detailed recently during our Waste deep dive. Our customer base is spread out from pharma to hospitals, macro e to retail on all continents and we are very agile with extra cost cutting when needed. And four, finally, our differentiation is reinforced by our ability to combine our different businesses, talking about Waste Energy or Water Energy, which makes us quite unique to our customers. And as you know, 25% of Veolia's revenue stems from the combination of 2 or more businesses. I'm now on Slide 7. As you know, our value creation and EPS arose from 3 pillars: top line growth, performance and capital allocation. And I'm going to go through them one by one, as always, to illustrate how they've each contributed to our performance in H1. And I'm starting with growth and growth on our stronghold activities on Slide 7. We registered very solid revenue growth of those strongholds with plus 3.4% excluding energy price. And this was fueled by our 3 activities. Let's start with water operations. Revenue increased by 3.6%. We continued to benefit from good indexation and have achieved successful tariff renegotiation in Spain, as well as rate case approval in our U.S. regulated operations, which protects altogether our future margins. We also enjoyed good commercial momentum in Europe with a few new contracts in France, for instance. Solid Waste revenue grew by plus 1.5% or 2.1%, excluding energy price despite a sluggish macro. This is thanks to good pricing and a high renewal above 90%. In particular, we signed in Q2 the renewal of our energy from Waste contract in the greater Porto area for another 10 years, totaling EUR 178 million backlog, including innovation to enhance the carbonized energy produced. Revenue from District Heating networks increased by plus 5.1% excluding energy price, which is faster than last year, thanks in particular to a favorable weather impact but also to new connections with network expansions. Let's now have a quick look at each of the boosters performance in H1, and I'm on Page 8. Those boosters have performed very well with plus 8.9% growth in H1, including targeted tuck-ins prioritized, as you know, in GreenUp; but would have been still very good organically. As expected, Water Technologies rebounded significantly in Q2 in terms of revenue and EBITDA, but also from an order book point of view, confirming the strength of our Technologies portfolio. As we explained earlier in the year, Q1's apparent stability was due to a very high comparison base in 2024 and to the timing of contract delivery. In Q2, revenue increased by plus 5.4%, with still a very high comparison base in Q2 '24. Bookings amounted to EUR 1.2 billion in Q2 alone, which is up 50%, so 50% versus Q1 and reached EUR 2 billion for H1 comparable to last year. And our pipeline, I must say, is very healthy. This will fuel revenue growth in the coming quarters. Hazardous Waste revenue increased by plus 5.4%. I would like to highlight, in particular, the continued strong growth in Europe, plus 5.8% despite the industrial macro, which is a good demonstration of our relative immunity to macro, as explained earlier. We have also delivered solid growth in the U.S. despite planned shutdown of [indiscernible] earlier in the year, and we started new operation in Saudi Arabia and the Dubai complex. Only China is still lagging behind in terms of price but we start to see some rebalancing in volumes. In BioEnergy, revenue was up plus 21.8% excluding energy price, but including our new targeted acquisition. And if I were to go to organic growth, it would still be plus 6.6%, which is very good. Now let's dive into our second lever of value creation, which is performance and efficiency. I'm now on Slide 9, which shows our first half performance. In terms of our yearly efficiency plan, we've achieved EUR 191 million in gains, in line with our annual target of EUR 350 million. As you know, this is a recurring lever embedded into operations and therefore, one we can count on for years to come. Not forever. Efficiency gains at Veolia are not discretionary cost-cutting programs, of which you could question the continuity but rather, they come from a diversified series of initiatives in our thousands of plants across the globe. In terms of cost synergies derived from the Suez merger, we've achieved EUR 47 million in H1 for a cumulative total of EUR 482 million since day 1. This is in line with our objective of EUR 530 million by year-end which, as you know, we raised a year ago. I'm now on Slide 10. The third pillar of value creation and EPS growth is capital allocation with a priority to our boosters when using our balance sheet headroom as per our strategic plan, GreenUp. You will see a powerful H1 in that respect, notably in Water Tech and Hazardous Waste. I want just to highlight that the EBITDA increase in H1 of 10% in those 2 boosters gives us confidence that these are good investments to sustain future earnings. In H1, we've been successful in crystallizing EUR 2.2 billion of acquisition. First, in Water Technologies, with CDPQ 30% stake in WTS for EUR 1.5 billion, an operation which will be accretive to our current EPS from '26 and ROCE -- enhancing, thanks to EUR 90 million cost synergies by '27. But there is more to it. The merger of WTS and VWT allows us to gain full operational control of the asset, unlocking its full potential for development and innovation. In Hazardous Waste, on top of our continued strong organic growth, we signed 5 bolt-on acquisitions in Q2, for a combined EV of EUR 300 million and good multiples, notably in the U.S. and Japan for those acquisitions. Of course, we maintain our balance sheet discipline and our leverage will remain below 3x at year-end, allowing the group to retain strategic flexibility. I'm on Slide 11, and you know this slide, which summarizes our enhanced ambition in Water Technologies as detailed in our deep dive last November. We aim to grow our Water Tech operations by an average of 6% to 10% per year from '23 to '27 and increase our EBITDA even further. Including the additional synergies derived from the buyout of the CDPQ minority interest, the EBITDA CAGR for the period will now be above 10% figure, with ROCE increasing gradually. Slide 12, and you also know this slide, which summarizes our strong ambition for our Hazardous Waste business, as detailed in our last deep dive. This is thanks to supportive megatrends, notably health protection, nature protection, industrial reshoring and regulation, notably on new pollutants, such as PFAS. Our strong asset base and technologies as well as our leadership position in the world as well as in Europe and in the U.S. is further reinforced by new assets to be commissioned as well as tuck-in acquisitions. And as announced during our recent deep dive, we expect top line to grow mid- to high single digits, EBITDA to grow by 10% per year on average, resulting in margin expansion at least 200 bp, while ROCE should increase by plus 50% by '27 to 9% after that. I'm now on Slide 13. Our strong H1 results, of course, allow me to fully confirm our guidance for '25. In particular, I wanted to stress again the strength of our H1 performance in terms of growth, our booster delivered plus 8.9% top line growth, but also in terms of organic EBITDA performance and bottom line delivery. In H2, we are certainly heading towards the same momentum. So we are very confident on our 2025 guidance, which is summarized on this slide. And finally, on Slide 14. As a conclusion, I wanted to remind you of our long-term guidance, fueled by our 3 levers of value creation, namely growth performance and capital allocation, which are the backbone of our GreenUp plan and fully confirm our 2027 objective. They include current net income growth of 10% per year on average over the period, with dividend growing in line with current EPS and ROCE above 9% in 2027. As you'll remember from our yearly presentation, we decided to launch a share buyback plan from '25 to '27, sized to neutralize the impact of the employee shareholding program, so that going forward, current EPS will grow in line with current net income growth. In a nutshell, Veolia is all about resilience and growth. I'll now hand over to Emmanuelle, who will detail our H1 figures.

Thank you, Estelle, and good morning, everyone. The results at the end of June are solid, fully in line with our annual guidance and allow us to be very confident for the rest of the year. With EUR 22 billion in revenue we experienced a solid growth of 3.8%. Taking into account the impact of lower energy prices, revenue was up 2%, showing an improvement in the second quarter at 2.4% versus 1.5% in Q1 and an improvement compared to 2024. Thanks to the operating leverage and the good delivery of efficiencies and synergies, we enjoyed a solid organic EBITDA growth of 5.5% at EUR 3.4 billion and a current EBIT growth of 8.1%. Current net income reached EUR 762 million, up apparently by 4.3%, but in reality, up by more than 12%, excluding last year's EUR 53 million financial capital gain. Therefore, the current net income underlying growth is quite strong, and we are very confident about our 9% growth guidance for the full year. Net financial debt reached EUR 20.8 billion at the end of June, up from December '24 due to the seasonality of working capital and M&A activity, and showing a leverage ratio of 3x in spite of EUR 2.2 billion of net financial acquisitions in H1. We expect the leverage ratio to be below 3x at year-end and after full seasonal working capital reversal in the second half of the year. You can also see on the slide the detailed ForEx impact, which reversed in Q2. I remind you that we operate in local currency, meaning that our exposure is linked only to translation and not the transaction impact, largely offset at current net income level by financial, tax and minority. Slight impact with minus EUR 24 million at EBITDA level and neutral at current net income level. Moving to Slide 17, you can see the revenue evolution by geography. I will start with Water Technologies. Revenues were stable in Q1 due to a high comparison basis and the timing of project delivery. As mentioned by Estelle, Water Tech Q2 revenue had a strong rebound, as expected, by 5.4% with a still very high comparison base in Q2 '24 and EBITDA increased double digits, leading to a 9% EBITDA growth in H1. Meanwhile, bookings were up 50% in Q2 compared to Q1 and reached EUR 2 billion at the end of June, a level comparable to last year, and we expect significant further signing in H2. In Rest of the World, revenue was up 3.7%, with all regions performing well. Very strong performance in LatAm, plus 10.5%; at Africa, Middle East, up 6.7%; and in Asia, very solid waste activity in Hong Kong; and water operation in Japan. In China, Hazardous Waste is positively recovering with volume up but price is still under pressure. U.S., strong Regulated Water and Hazardous Waste revenue was up 5.3% in H1. In Rest of the World, it was up 5.6%, excluding energy prices. In Central Europe, revenue increased by 5.7%. Heating activity benefited from a cold winter, while the impact of lower energy prices was much lower than last year. In Northern Europe, we registered a solid activity for Waste in the U.K. and Energy Services in Belgium. In Southern Europe, the semester was excellent, notably in Spain and revenue was up by 8.6%. Finally, France and Hazardous Waste Europe was flat in H1 with lower solid waste volumes and indexation and timing of efficiency gain impact. Offset by strong hazardous waste and good water activity, we expect a rebound in H2. Now let's take a look at our performance by business, and I will start with Water. Water revenue was up 3.4%, fueled by the stronghold water operations, while Water Technology rebounded as expected in Q2, up 5.4%. Water operations benefited from good indexation with continued price increases in Spain, Central Europe and in the regulated U.S. and Chilean water operation, while indexation was back to 0 in France due to lower electricity prices. Volumes were on a very good trend, for example, plus 2.6% in France. Moving to Waste. Waste activities grew by 2.4%, a solid base, but a bit lower than in Q1 due to the slightly lower indexations and volumes. Revenue from the Solid Waste stronghold was up 1.5%, driven by tariff increases in all geographies. In terms of volumes and commercial development, Europe was mixed with resilient volume in the U.K. and in Germany, but down in France, notably in landfills. Activity was still progressing in the rest of the world, notably in Latin America and in Hong Kong. Commodity impacts were nonsignificant and comparable year-on-year with lower electricity prices in H1, partially offset by the increase of recycled prices. The Hazardous Waste booster had a very strong semester in all our geographies, in Europe as well as in the U.S., thanks to a favorable mix effect and good commercial momentum. Finally, moving on to Energy. I am on Slide 20. As you know, energy revenue is sensitive to energy prices, which were down as expected in H1, but to a much lesser extent than last year. Excluding the energy price impact, growth was faster, up 5.5%, thanks to good volumes helped by a colder winter. Heat prices were on average almost stable compared to last year, and electricity prices were down as expected. Strong activity and energy efficiencies up 6.6% with strong sales momentum in Belgium, Southern Europe and the Middle East. The revenue bridge on Slide 21 explain the driver of our growth in H1. Scope was negative and reached minus EUR 334 million, mainly due to the impact of last year's disposals. ForEx impact reversed in Q2 due to notably the decrease versus the euro and the Argentinian peso, the Australian and U.S. dollar as well as Brazilian real. The impact was minus EUR 196 million for the first half. The impact of energy prices was, as expected, much lower than last year at minus EUR 395 million. The weather effects amount to plus EUR 169 million due to a colder winter at the beginning of the year in Europe. The contribution of commercial volumes were comparable to last year, plus 1.4%, driven by sales momentum and resilient volumes. Finally, price effects were, as expected, lower than in 2024 due to lower inflation and contribute plus 1.4% to top line growth. On Page 22, you have the EBITDA bridge detailing our organic growth of 5.5%, in line with the annual guidance between 5% and 6%. Scope amounts to minus EUR 53 million. Forex EBITDA impact was minus EUR 24 million, but its impact was very much offset down the line for EBIT, only minus EUR 13 million and neutral at current net income. Weather was favorable by plus EUR 31 million. Commerce/Volume/Works effect was positive at plus 1.4%, in line with revenue impact. Efficiency gain generated plus 2.3% in additional EBITDA, hence, a very good retention rate of 39%. And finally, synergies amounted to EUR 47 million, leading to cumulative amount of EUR 482 million, perfectly in line with our annual objective of cumulated EUR 530 million by the end of 2025. Going down to current EBIT. This slide illustrates perfectly the operational leverage of our business model. Current EBIT grew by 8.1% in H1 to EUR 1.8 billion at a faster pace than EBITDA. Renewal expenses of EUR 157 million were comparable to '24. Amortization and OFA were slightly lower than last year due to perimeter. Industrial capital gains, provisions and other were stable and are expected to decrease at year-end with fair value adjustments and full impact of IFRS 2 charges. Joint venture were comparable to last year. The cost of debt was stable at minus EUR 330 million as well as cost of financing at 3.79%. Other financial charges decreased by EUR 26 million due to variation in ForEx impact. It was partially offset by a decrease of EUR 57 million of net financial capital gains, which included the SADE disposal last year. The current tax rate was flat at 26.2%. Finally, minority interest came to minus EUR 246 million, a small increase linked to higher results in Spain and Central Europe. Current net income, therefore, reached EUR 762 million, up by 4.3%, but by 12.5% if we restate last year's financial capital gains. Therefore, we are very confident about our 9% growth guidance for the full year. I am on Slide 25. Net income group share amounted to EUR 657 million, which is stable versus last year as noncurrent items increased by EUR 25 million due to a charge associated with the end of a long-lasting litigation in Lithuania for minus EUR 35 million. Restructuring expenses were stable. Excluding SADE capital gain last year, net income group share increased by close to 10%. Net CapEx amounted to EUR 1.7 billion, which is stable compared to last year despite having increased gross CapEx from EUR 2,028 million (sic) [ EUR 228 million ] to EUR 258 million, notably in our booster activities. Net free cash flow amounted to minus EUR 451 million due to working capital seasonal variation of minus EUR 1.17 billion, which will be reversed at year-end, coming from Flint litigation cash-out, scope entries with negative working capital position in H1 and the effect of accelerated repayments of water fee ( sic ) [ royalties] in Water France. In Q2 stand-alone working capital variation was almost neutral at minus EUR 24 million, leading to a net positive free cash flow of plus EUR 455 million. We fully confirm a leverage ratio below 3x at year-end. As you can see on Slide 27, net financial debt is well under control, reached EUR 20.8 billion at the end of June versus EUR 17.8 billion at the end of 2024. This increase of EUR 3 billion is due to usual working capital seasonality and dividend payments. Net financial investment of minus EUR 2.2 billion, which includes the purchase of CDPQ 30% stake in WTS, partially offset by cash flow from operations. In spite of significant M&A activity, leverage was at 3.01x and will decrease to below 3x at year-end with a seasonal reversal of working capital variation and strong free cash flow generation expected in H2. In H1, we have successfully issued new bonds which attracted market interest and was done with very good market conditions. We anticipate partially the EUR 1.35 billion hybrid bond '26 maturity by issuing a EUR 500 million green hybrid bond in May. We also issued in June, EUR 1.5 billion in 2 tranches of 7 and 12 years at respectively 3.32% and 3.79%. We have also repaid EUR 836 million bonds during the first half and the next maturity of EUR 500 million is in September. Our balance sheet has therefore remained very strong, both rating agencies confirmed strong investment-grade ratings in H1 2025. Before concluding, I remind you on this slide of our share buyback program, which has been launched to offset the dilution of the employee shareholding program and our upcoming investor events. Our strong H1 results allow me to fully confirm our guidance for 2025. I wanted to underline again the strength of our H1 performance in terms of growth at revenue, EBITDA and underlying current net income, H2 is on track for the same momentum so that we fully confirm our ambitious guidance for 2025. Thank you for your attention.

Thank you, Emmanuelle. And so you've understood a very good set of results, with Q2 and Q1 very much in line. So no slowing down and actually a very good commercial sales dynamic, if I think of Brazil, Porto, Beziers or even the plus 50% in the Water Tech order book. And I must say, the summer starts well with a good July. I will let you the floor to questions now.

[Operator Instructions] And your first question comes from the line of Arthur Sitbon with Morgan Stanley.

I have two. The first one is on the organic growth profile. Q2, while H1 was at 5.5% at EBITDA level, exactly in line with what was achieved in Q1, I was wondering if we should be aware of any seasonality, any particularly easy or tough comps in the second half that could make you deviate from that trajectory? Or if so far, it looks like it should be pretty much in line with that level. And the second question is actually on your targets for 2027. Consensus is broadly in line on 2027 recurring net income with what's implied by your constant FX 10% growth target. I was wondering if you are comfortable with that, so at EUR 1.960 billion, if you are comfortable with that given the unfavorable FX recently. Should the actual current net income in '27 be lower than what's implied by your target or the FX impact should be relatively small at net income level, all in all?

Okay. So two interesting question. In terms of H1 versus H2, you can expect really the similar type of pace in H1 and H2 in terms of EBITDA and pretty much all the rest. That's explained in a way on our bridge of EBITDA. Growth, as I said, as in top line growth, we're very happy that it should go on, on good pace in H2. In terms of efficiency on synergies. Efficiency is really a recurring one. Synergies of the Suez merger could go down a little bit, but on the reverse. As you know, we've acquired in the 1st of July, the 30% stake of CDPQ. So we will have a starting of the altogether EUR 90 million of synergies of this acquisition starting in H2. And in terms of -- so I guess it gives you a color that we don't expect anything very significantly different in H2 compared to H1 in terms of progression. In terms of the 2027, I can confirm the consensus, I can confirm our guidance for 2027. And regarding ForEx, you alluded to it in your question. Like -- ForEx, as Emmanuelle said, is a translation, not transaction for us. And if you go -- of course, you have a ForEx impact when you go to revenue and EBITDA in, again, transaction (sic) [ translation ], not transaction. But if you go down to net results, you have almost divided by 5 effect. So it's 1 -- [ 5 up, 1 down ] to the net results. So we can confirm, therefore, what we said this morning, our guidance for 2027. Emmanuelle, you want to...?

Yes. Maybe just one sentence on that one. Arthur, thank you for the questions. So regarding maybe the second question you had regarding the 2027 target, fully confirmed. The growth, as you know, will come half of it from organic growth. So organic growth and the second part, it can be organic, it can be M&A. Of course, and the second part will come from efficiency with a very strong track record. You have, of course, in mind the fact that we'll have the additional synergies coming from the combination in Water Tech that has been achieved and the closing was at the end of June. Regarding the ForEx, as mentioned by Estelle, we have an effect down the line, which is very much offset. You have seen the effect at the end of H1, EUR 24 million at EBITDA level, EUR 30 million at EBIT level and neutral and net result level. So we see that down the line, we have an effect in net income, which is neutralized. And as you see our guidance, it has considered it. So fully confirmed and on a very good pace.

And your next question comes from the line of Olly Jeffery with Deutsche Bank.

The first question I have is on volume and commerce growth with an EBITDA that was around, I think it was 1.4% in H1. I know you've had a tough comp in the Water Tech business because of the fast growth in H1 of '24. So can you talk about how you think you see that volume and commerce growth evolving in H2? I presume you expect to see that pick up as the comp in H2 '24 should be easier to beat for Water Tech. Is that the right way of thinking about it? And then the second question is just -- obviously you've had a good result here at the bottom line. Could you just explain a bit which drivers do you think in the business are making you kind of track ahead of where there's just bottom line growth at the start of the year? So what's gone better in H1 that you initially envisaged to put this kind of strong bottom line growth result out?

So I guess, I will start and Emmanuelle, maybe on the bottom line element. So in terms of volume and commerce, if you look at our bridge, Q2 was at 1.6%, where Q1 was at 1.3%. So it's even slightly higher in Q2 than Q1. We are very happy again with the fact that we have a plus 5.4% in Q2 in Water Tech. That's revenue. And if you look at order, book plus 50% or EUR 2 billion altogether, which is not yet translated into revenue. And so you're right, we should expect a very good Q2 in Water Tech in particular. I wanted to highlight another one, which is Hazardous Waste. And Hazardous Waste in Europe, why do I pick this one because Europe has not been exactly great in terms of macroeconomical for industry. And nevertheless, we've enjoyed a plus 5.8% growth in Hazardous Waste in Europe for H1. This is exactly what we've tried to explain in our deep dive on Waste like, we are largely disconnected to macro. So again, volumes, commerce, order book, all that is in -- either in line or not slowing down, if not picking up. So really very confident in that respect. Emmanuelle, on the second question?

Yes. Olly, so your question was on -- if I'm not mistaken, on the trend of net results in the bottom line with strong net result delivery at the end of H1. So as you have seen, strong net delivery in terms of current net income, it grew by 12.4%, excluding last year capital gain, including the SADE disposal, and we will maintain the same pace in H2, fully confirming our 9% growth. If you are looking line by line, starting with EBITDA. So you see 5.5% EBITDA growth, 8% EBIT growth and 12% -- 12.4% at net results. In Q2, we have been helped, of course, by very strong momentum in Water Technologies, strong rebound. Our order book did plus 50% and is 5% to 6% higher than last year. Second was, of course, the performance in Water, very good volumes in Water at the end of June, so plus 2.6% for France, but it was also very well oriented in Central Europe and in Spain. What we like also, with Estelle, is that the momentum in July is also very positive because it is continuing, the water activities are doing good, and we see also on the waste activity, a good momentum in Solid Waste and in Hazardous Waste. And then finally, on your question regarding line by line on net results. Cost of financial debt was very well under control. No significant change and tax rate at 26% as expected.

And your next question comes from the line of Bartlomiej Kubicki with Bernstein.

Also two issues to discuss, please. First, on France, maybe 2 aspects I would like to split it into 2. First, when we look at the French Municipal Water, there is 0 tariff indexation in 2025. So I just wonder what does it do to your margins, meaning your tariff indexation and probably cost increase, does it mean that margins in Water France are actually shrinking in 2025 versus '24? And consequently also given different price indices developments, what do you think will happen to tariffs in France in 2026? And the second part on the France is actually on Municipal Waste with minus 4.8% revenues year-on-year. Maybe if you can elaborate a little bit on this one, meaning is it kind of a new trend? Or is it only a temporary decrease in revenues in Waste France? So that's France. And the second aspect on your 9% net income guidance, because right now, you are talking about 12.5% net income increase in the first half, excluding the capital gain from last year. So just to make it clear, 9% includes the capital gain or it excludes the capital gain? Because the capital gain from the first half '24 is around 3 percentage points to the net income increase.

Thank you for your two questions. So on France, in a way, you have 3 elements of France. France Water, France Dry Waste and France and the Rest of Europe Hazardous Waste. So to start with the last one, I already commented on it, the plus 5.8% on Hazardous Waste in France and Europe despite a sluggish macro. So super happy about that. In terms of France Water, you have, in a way, 3 different effects. One, you're right, indexation was pretty much flat, so pretty much no indexation. We anticipated that. This is really an automatic indexation rather than a tariff one, if you want. And we've done cost cutting and the efficiency program exactly on that front, so we don't anticipate a shrinking in the margin. We are used to that, and we have -- we protect our margin in that respect. I must say another element is volume. And we had a quite good June and July as Emmanuelle just mentioned, so don't anticipate a negative -- any negative in the shrinking of the margin. We are protecting the margin in France Water. In terms of France Waste, as in dry waste so not Hazardous Waste, you're right in terms of revenue being slightly negative. I wanted to comment on the fact that it was not the case in our other part of the business in Waste. So U.K., Germany, LatAm enjoyed a growth in revenue. Coming back to France Waste, you have various effects. First effect's on the energy price because we sell energy that we produce from non-recyclable waste. So that's an automatic effect. But again, we are able to protect our margin. Then you had a little bit of volume decline linked with a bit of macro. But again, what's important for me is to protect our margin, and we have. So I would encourage you to have a look if you want more detail on the waste activities altogether and how we are able to be protecting our margin, to have a look at our deep dive on the Waste, where we've demonstrated over the years that we can protect our margin. I must say that even volume-wise, H2 should be better in France Waste, as we see in July. So I'm expecting a very much better H2 than H1 even on that specific one. On net income, of course, our guidance does include the specific EUR 50 million comparison bond -- a EUR 50 million comparison in '24. So it's not -- it doesn't -- it includes everything, but maybe, Emmanuelle, you would elaborate on that.

Bartlomiej, thank you for your question. You're absolutely right. The capital gain was fully taken into account in our 9% guidance. It was spotted last year and well discussed with you and the other analysts and when we have defined the guidance and the budget, it was all in, including capital gain.

And as we explained earlier, including ForEx as well. So it's all in.

And your next question comes from the line of Zach Ho with Jefferies.

I have two questions on my end. Firstly, on M&A. Yes, so I see press reports that EDF is looking to sell their French district heating and cooling business, which I assume is a stronghold type business for you. Can I confirm...

Sorry, the line was a little bit blurred. So we barely could hear you. So if you could repeat because...

Okay, yes. Can you hear me now?

Yes, I think we can. But if you can slow down a little bit because since the line is a bit blurred, it's a bit difficult, but please go on.

Okay. I will try. So I see press reports that EDF is looking to sell their French district heating and cooling business. Can I just confirm that this is not the type of transaction that you're looking for? And on that note, are there any particular booster areas that you will be interested in using the remaining GreenUp headroom for? And my second question would be regarding the U.S. business. I would be interested to know what you are currently seeing on the ground regarding big increases that I think would incorporate the cost of PFAS treatment? Are you seeing any pushback from regulators regarding bill affordability? Or are you really only seeing support from these regulators?

Okay. Good, two questions. So on M&A, I'm used to not commenting on potential something one day. So I haven't seen that there is any specificity apart from press articles, and I won't comment on press articles. In terms of priorities of Veolia, value creation and boosters investment, as you've seen in our GreenUp, this is where we have a priority of our investment like we've demonstrated in H1. In terms of PFAS, the short answer is we don't see any pushback neither from potential tariff increase associated with PFAS treatment nor from regulators. If I detail that a bit more, in terms of regulators or sanitary authorities because that's what we're talking about, it was more than confirmed in Europe and even in the U.S., the PFAS regulation, I remind you, the PFAS regulations started in the U.S. during Trump 1 administration, and it was confirmed by the recent administration and EPA. So no pushback there. It's more how do we act, what type of pace, what type of threshold. But it's not an if, it's how that everything is being discussed about. In terms of costs, I remind you that drinking water is already -- it's something like 1 out of 1,000 compared to buying bottled water and at times, it's even of better quality. So it's not a question of cost. And altogether, in all the countries we operate, the typical average bill for family would be 1% of the family like average income and family spend. So honestly, nothing here in terms of pushback. I guess it's quite the contrary. We see a ramping up of not only measurement but then solution. We've sold a few very interesting contract to treat PFAS in France. We are going on with ramping up our revenues in PFAS treatment in the U.S. and in Australia in the same way. So it's really quite the reverse. I said we would have an objective of EUR 1 billion revenue by the end of the decade and I'm very confident we should achieve the target.

And I'm showing no further questions at this time. I would like to turn it back to Estelle Brachlianoff for closing remarks.

So thanks very much for today. We are very happy about this very strong set of results. We're confirming our guidance for the year and for the GreenUp 2027. And as I said earlier on, very good order book as well as a good start of the summer in July. And I will let you have a nice summer season. See you in early September for some of you for our roadshows or in Poland on the 25th of November if you want to hear about decarbonization and district heating. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.