“While we believe the largest write-downs on individual assets happened in the first half, it is likely that there is more to come,” UBS analysts including Per Lekander wrote in a report. “Selling underperforming assets, often with goodwill attached to them, in a bear market may prove challenging.”
Veolia fell 3.8 percent to 10.495 euros by 11:34 a.m. in Paris trading. UBS cut its rating on the stock to “sell” from “neutral,” saying the company was too risky for the price.
Veolia Chairman and Chief Executive Officer Antoine Frerot plans to halt operations in at least 37 countries and sell 1.3 billion euros ($1.75 billion) of assets this year to restore profit. The company, which lost half its value this year, posted a first-half loss on write-downs on operations in Italy, Morocco and the U.S. and said it uncovered fraud at a U.S. business.
Third-quarter results, due Nov. 10, aren’t expected to be strong, UBS said. Veolia plans an investor day on around Dec. 6.
Veolia, based in Paris, faces price pressure on water and waste contracts with cash-strapped municipalities and may also suffer difficulties with labor relations, the bank said.
Suez Environnement, a smaller rival also based in the city, sold 70 percent of the regulated business of Bristol Water to Capstone Infrastructure Corp. for 152 million euros, 20 times net income, according to an Oct. 5 statement.
Suez Environnement, 34 percent-held by GDF Suez SA, says 2011 will be a year of growth and in August kept its estimate for higher earnings before interest, taxes, depreciation and amortization for 2011 through 2013. CEO Jean-Louis Chaussade plans to cut its debt ratio this year after buying Sociedad General de Aguas de Barcelona SA, a Spanish water supplier.
Marie-Claire Camus, a spokeswoman for Veolia, declined to comment on how the company’s restructuring is progressing.