Operator: I'd like to turn the conference over to Ms. Estelle Brachlianoff. Please go ahead.
Estelle Brachlianoff: Thank you, and good morning, everyone, and thanks for joining us for this conference call to present Veolia's H1 results, and I'm accompanied by Emmanuelle Menning, our CFO. I'll start on Slide 4, and let me start by highlighting the key achievements of the first half. We delivered a new semester of strong performance with another improvement of our EBITDA margin and an excellent 10.4% growth in current net income, well in line with annual guidance. Given the volatile geopolitical and macro environment, these results show how much Veolia is standing out with resilient growth quarter after quarter. This is showing the strength of our model with a strong combination of stronger and booster activities and international presence and a rigorous operational execution. If anything, this semester has shed a light on the importance of water security in the context of recurring heat waves, desalination unit become geostrategic and data centers hitting wall of acceptability in arid regions. Our unique positioning as a powerhouse of ecological security and resource sovereignty has become even more precious. This semester was moreover a good illustration of active portfolio transformation designed to enhance value creation and boost growth. We will have created more than EUR 8 billion of assets in 4 years through targeted acquisitions such as Clean Earth closed earlier than expected early June and asset divestitures, which I expect to sign EUR 500 million this year. Last but not least, our excellent H1, the good beginnings of Clean Earth within Veolia and our confidence in our business model allows me to improve our full-year guidance. We now expect to grow current net income but at least 8%, including and not excluding Clean Earth. Our grid of trajectory is, of course, fully confirmed. Now let's look at our H1 results, and I'm on Slide 5. Revenue reached EUR 22.193 billion, up 1.5% at current ForEx and excluding energy price as usual. Our EBITDA came in at EUR 3.552 billion. This is up 5% at constant scope and ForEx, in line with our guidance and a very good performance given the complex macro and geopolitical environment. And this is, of course, in the absence of any contribution of sales synergy we had used previously. Noteworthy is our EBITDA margin expansion of another 70 basis points, reaching now 16%, which is an increase of 120 basis points in 2 years. This margin improvement quarter after quarter is fueled by two levers: our strategic choices towards more international and technology-driven activities as well as our continuous operational efficiencies. This is EUR 195 million this semester alone. Current EBIT was up 6.4% at constant scope and ForEx, demonstrating strong operating leverage. Our net free cash flow improved significantly by EUR 164 million compared to H1 last year, driven by strict management of capital expenditure and working cap requirements. Net financial debt stood at EUR 24.5 billion, including Clean Earth acquisition. As anticipated, we are perfectly on track in terms of leverage, slightly above 3x at year-end. These results give us strong confidence for the full year '26 and even raise our guidance. On Slide 6, you can see a snapshot of our unique strategic positioning, which gives us confidence not only for this year's performance, but for very long. Veolia provides ecological security, supplies essential services and therefore, contributes to resource sovereignty. Our proprietary solutions and technologies help secure access to water supply, which is as critical as oil, if not more, as we see now very strikingly in the Middle East with desalinization plants being targeted or even with data center permits being rejected in arid locations. Our solutions also give access to an untapped reservoir of local [ energy ] LNG at fixed price instead of imports and help secure supply chains, thanks to the circular economy. The disruption we've experienced recently with the set of our moves is another testimony of the strategic importance of our services for our customers. Last but not least, our solution protects health when we depollute and decontaminate as when we treat PFAS, for instance. We have built with Veolia a unique [ unvented ] security powerhouse, addressing critical needs for our clients. In terms of business model, and I'm now on Slide 7, Veolia offers a unique combination of resilience and growth. I must say this has been tested and demonstrated quite a lot in recent years with results growing quarter after quarter when simultaneously, we faced inflations, trade wars, economical downturns and more recently, the war in Iran. In parallel, we enjoy our international presence and environmental services leader operating in 44 countries across 5 continents, which gives us firepower to lead in technology and innovation, thanks to our 14 R&D centers and over 5,000 patents. This enables us to offer unique integrated solution combining wastewater and energy services and combining the strength of our infrastructure like strongholds together with our agile boosters. Slide 8 illustrates in H1 how strong our model is with strong results delivered despite external headwinds after the strike in Iran and a confirmation, therefore, of our positioning. The crisis in the Middle East led to delayed projects such as new desalinization plants or oil and gas effluent treatment. Paradoxically, on the other hand, the war has reinforced the importance and critical nature of those same projects, and I would expect anything but an enhanced pipeline eventually. As a direct consequence of the war, we incurred higher fuel and chemical costs in our contracts. Of course, we rapidly pass through this surcharge to our private clients. We are also, as you know, automatically protected by our indexation formulas in our municipal contracts with some lag effect and therefore, temporary margin squeeze. In order to compensate, we have ensured a strong pace and even a stronger pace of efficiency program delivery and put in place specific action plans. Altogether, given the volatile and complex context, I'm very pleased about our 5% EBITDA and above 9% net income growth in H1 and even our ability to improve our full year guidance. With regards to long-term group's perspective, the Middle East conflict, recently heatwaves in Europe and droughts have highlighted water security was absolutely key and technology secure this precious. Looking now at our performance by business line. We see resilient growth and solid EBITDA progression across all our activities. I'm on Slide 9, and I will start with our stronghold activities. This is Municipal Water, Solid Waste and District Heating. They generated EUR 15.992 billion in revenue, up 2%, with an EBITDA up 4.7%. In terms of uncertainty, our stronghold are solid foundations for our group performance. And Municipal Water was a real driver in H1 with revenue up 4.1% and EBITDA up 7.7%. Not only have we benefited from a very good volume momentum in all our geographies, but also from a renewed commercial dynamism. When droughts hit, cities face water restriction or industries realize the cost of having the water just for a few days or even when data center face being turned down their permit application, it is time to call Veolia for a solution. In H1, we enjoyed in France close to 100% renewal rate of contracts, and we registered new commercial successes, for instance, in Cucuta in Colombia with a EUR 2 billion backlog over 20 years. This is a very significant contract. I would like to stress also that we are growing our district cooling offer in France with more than 100 sites identified covering 3 million inhabitants, an offer which has gained traction since the heatwave in June. This is illustrated by our very innovative solution deployment in Saclay where nature is helping cooling down data centers, flats and universities for minimal energy consumption. Now to our booster activities. So this is Water Technologies, Hazardous Waste and Bioenergy. They generated EUR 6.201 billion in revenue, up 4.1%, including tuck-ins and excluding projects, with a very solid growth of EBITDA up 6.2%. Regarding Water Technology, revenue was slightly down due to project delays in the Middle East crisis, which is temporary, as I just explained. And we expect a recovery from H2, thanks to the action plan we've put in place, including pricing initiatives, commercial actions, for instance. Moreover, we see renewed demand and a healthy pipeline. The month of June was very promising in terms of bookings, notably with large microelectronics clients totaling EUR 343 million of orders in MicroE, and we will continue our strong EBITDA growth and margin expansion. Hazardous Waste enjoys solid growth after a first quarter penalized by weather events, as you remember. In the U.S., we succeeded in closing Clean Earth early June, and I'm very satisfied with the ramp-up of the integration and teams. The month of June was excellent and very promising regarding the rest of the year. You remember, we built in parallel our future growth for years to come with 5 new treatment plants under construction or ramping up across the globe in Hazardous Waste, which is an additional 486,000 tonnes of capacity eventually. I'm pleased they are progressing well with the commissioning in the U.K. in January and the beginning of the commissioning of the high temperature incinerator in January and June and a ramp-up, which is starting, therefore. On Slide 11, I'm very happy about the progression of our innovative offers, which are on trajectory of reaching each EUR 1 billion turnover by 2030. With regards to AI industries, this is data centers and chips manufacturing, they are in high demand to secure steady water supply for cooling system, ultra-pure water, and they use large amount of high-quality solvents and acids. Data centers are starting to see resistance from local communities to be granted permits, given the intensity and resource consumption. And our data center Resource 360 new offer helps secure local acceptance and license to operate with recycled water technologies and heat recovery, for instance. As explained in our April event in London, we already grew very quickly in those AI industries from EUR 150 million in 2019 to EUR 560 million in 2025, and we're now targeting approximately EUR 1 billion by 2030. In H1, we secured multiple commercial successes by leveraging our new offering and technological capabilities, resulting in new contract wins in data centers and MicroE, such as our recent contract with AWS in Mississippi, the one we just announced today in Ohio; and the more than $200 million ultrapure contract for large MicroE with U.S. key players in the water tech. Regarding PFAS and new pollutants, we have also an ambition of EUR 1 billion revenue target by 2030, and we are already very successful. Our recent acquisition of Clean Earth will enhance our U.S. capabilities with a presence in 50 states, so will the acquisition of the soil remediation specialist in Australia with duplication possible. This innovation-driven growth are testimony of the group's transformation towards more value-added offer and services. Our international footprint has largely contributed to our good results in H1, and I'm now on Slide 12. I would like to highlight the continued standout performance in our regions outside of Europe, which grew by a strong 7.1% at constant ForEx with a noticeable acceleration in Q2. Outside Europe, our growth is much faster than the group's average and a testimony to our asset portfolio internalization. All geographies outside Europe showed commercial traction, notably Australia, Asia rebounding and a sustainable growth very strong in Latin America. That was accompanied by significant EBITDA progression as well. In the U.S., we closed Clean Earth earlier than expected, and I will come back to it. The Water Technologies segment was temporarily penalized by the crisis in the Middle East, as I explained earlier, but continued to deliver a remarkable EBITDA growth. In Europe, we grew by a solid 2.6%, whilst France and Hazardous Europe has shown resilience. I would like now to spend a few minutes on efficiency, Slide 13, because at Veolia, it is a backbone of our value-creation process, as our track record shows and again, in H1 with EUR 195 million. Our recurring efficiency plans are enabling us to enhance year after year the profitability of our operations with commercial efficiency, smart pricing, upselling, cost optimization and synergies. AI and digital gains will even support our efficiency in the years to come, and we started already with 23% of our gain last year from AI and digital, and we are deploying more widely solutions such as [indiscernible], enhancing maintenance manager in our waste or water plants. Regarding synergies and integration processes, we've been successful executing the Suez acquisition, which bodes quite well for the upcoming progression of [ clean water ]. I'm now on Slide 14. Veolia continues its transformation and set -- sorry, in GreenUp towards more international and more technology-driven activities as boosters. These two fuels margin improvement and value creation and hence the group's growth profile. We are very active in strategic portfolio management with EUR 8.5 billion of assets, which will have rotated over 4 years, which is massive. You remember that 2025 was a pivotal year as we successfully achieved the Suez integration, but we've also crystallized strategic move with two major acquisitions signed or closed, EUR 1.5 billion invested in Water Tech. We have already extracted nearly half of the planned EUR 90 million synergies, this is EUR 40 million, including EUR 20 million in H1; and of course, EUR 2.5 billion with the acquisition of Clean Earth in the U.S. closed early June. Lastly, we announced EUR 2 billion of nonstrategic asset divestitures by mid-'28, and I'm fully confident in this process, which is accelerating now. We have processed already ready for more than EUR 2 billion disposal, and I expect around EUR 500 million of signed divestitures in '26. A few words on the Lombard acquisition of Clean Earth in the U.S. This is Slide 15. Not only are we doubling our size and growing U.S. hazardous waste market, reaching the #2 position with more than $2 billion of revenues, but we are also building a national platform to offer a full range of Veolia's services throughout the U.S. Integration started at full speed. I'm very confident in our capacity to deliver the $120 million cost synergies by year 4, let alone the growth enhancement I expect from this acquisition. The acquisition is dilutive in year 1, as you would expect, but we will offset it, as you will see in a minute with our enhanced guidance. And the deal will be accretive as early as year 2. Now Veolia generates more than $6 billion of revenue in the U.S. that is the second country of the group. Finally, I would like to say a few words about our guidance on Slide 16. Veolia, as you know, is not used to increasing its target year, but I will do it this time. We now target a current net income growth of at least 8%, even including Clean Earth and not excluding Clean Earth. This shows our confidence regarding this acquisition as well as in our capacity to continue to deliver growing results in spite of a volatile macro and geopolitical context. I, of course, confirm as well our brilliant plan trajectory. Emmanuelle, the floor is yours to elaborate on H1 results.
Emmanuelle Menning: Thank you, Estelle, and good morning, everyone. In the current environment, our results are continuously progressing, thanks to solid operational execution and a unique combination of growth and resilience. I will start with revenue, which amounted to EUR 22.2 billion, up 1.5%, excluding energy prices. Organic growth of EBITDA was 5%, in line with annual guidance. It's a remarkable performance as we no longer benefit from synergies and given the temporary negative impact of energy prices in H1. And our EBITDA margin continued to increase by 70 bps to 16%. We continue to enjoy a strong operating leverage, leading to 6.4% progression of current EBIT with a good quality of earnings. Current net income jumped by 10.4% at constant rates, largely in line with our annual guidance, thanks to stable financial charges, which is excellent when considering the higher average net debt linked to our M&A operation and thanks to a stable and modest tax rate of 25.8%. Net free cash flow grew slightly by EUR 163 million, thanks to tight CapEx control. As expected, net debt landed at EUR 24.5 billion, including the closing of Clean Earth acquisition and the seasonality of working capital. Worth noting, ForEx impact reversed in Q2 and became positive, thanks to stronger dollar in Q2 and the appreciation of Central European currencies. Moving to Slide 19, you can see the revenue and EBITDA evolution by geography. Starting with Americas, APAC and EMEA. As Estelle mentioned earlier, growth outside Europe was excellent at plus 3.9% and even plus 7.1% at constant ForEx, with an acceleration in Q2 at 4.6% and even 9.1% at constant ForEx. Above all, EBITDA jumped by nearly 9% outside Europe. Most regions registered mid-single-digit growth. Let's mention some of them. The U.S.A. grew by 3.9% and 11%, including tuck-ins in spite of adverse weather conditions, which impacted Hazardous Waste volumes. Clean Earth contributed 1 month perfectly in line with expectation and integration has started promptly after closing on June 1. LatAm was up by 10%, benefiting from strong commercial momentum, good waste activity as well as water tariff increases. Africa and Middle East revenue increased by 1%, with limited decrease of Middle East revenue in a complex geopolitical context. Water Technology was a bit disappointing in H1 with revenue up 0.6%, excluding projects. Projects were impacted by several bookings and milestone delay due to the global [absenteeism] linked to the Middle East crisis. Market in the U.S. was mixed with strong [indiscernible], AI and [indiscernible], offset by lower petrochemical and oil and gas clients. We expect recovery in H2, thanks to the action plan we have put in place, including pricing initiatives, volumes rebound and commercial actions. Above all, Water Tech continued to deliver a solid EBITDA growth of plus 6.7%, fueled by our business refocusing efficiencies and synergies. Europe grew by 2.6%, fueled by favorable weather in urban heating and strong water activity. Finally, France and Hazardous Waste Europe were resilient as always in spite of adverse weather conditions. Water volumes were very good, thanks to Veolia's solution to face heatwaves. Now let's take a look at our performance by businesses. I start with Water, which you remember represents around 40% of our revenues. H1 Water performance was outstanding. Revenue was up by 1.6%, thanks to an excellent performance of Municipal Water. EBITDA increased by 7%, and we reached a record EBITDA margin of 19.8%. Water operation grew by a remarkable 4.1%. We benefit from a good volume momentum in all geographies, but also from strong commercial dynamism combined with positive indexation in Europe and in the U.S., except in France due to lower electricity prices. And it's fueled by excellent volumes in France, in Spain, in Central Europe and in the U.S. This confirms the strong momentum. As the water stress expands, we expect a good year on that front, and we are very pleased with the new contract in Colombia. As I just explained, Water Technology continued to be impacted by lower project bookings, but we expect a rebound in H2. Moving to Waste, representing 35% of our revenues with activity are overall stable despite unhelpful macro and is very comparable to previous quarters. Excluding external factors, weather, recyclate and electricity prices, waste revenue was up 0.9% at constant scope and ForEx. And what is remarkable is that we continue to improve our profitability. EBITDA grew by 5.5% and EBITDA margin increased by 100 bps, close to 14%. Dealing with Solid Waste, revenue was flat as in previous quarters with solid growth in the U.K., Australia and LatAm, offset by slower Germany and France impacted by lower electricity and recyclate prices. We start to invoice fuel surcharge to our clients after the diesel cost increase, and we expect to fully recover the cost of [rent] by year-end or early next year for municipal contracts. Hazardous Waste grew by 2.1%, plus 6.2%, including tuck-ins. Growth remains strong in the U.S. with solid price increases and good commercial momentum in Q2. Finally, moving on to Energy. I'm on Slide 22. Energy performance was quite strong with revenue up by 2.7%. District heating and cooling electric revenue progressed by 1.9%, excluding energy prices, with a very good heating season in Central and Eastern Europe. We registered less flexibility services, marginally benefit from the heatwave in Q2, boosting our electricity sales. Energy prices were down year-on-year, but as you know, it is regulated and our margins are protected. Excluding the energy price impact, growth was quite good, plus 2.7% with a strong activity in the Booster energy, up 4.7%. The revenue bridge on Slide 23 explains the driver of our resilient growth in H1 2026. Price impact reversed, as I just indicated. Scope was positive by plus EUR 189 million, including as [waste] and 1 month of consolidation of Clean Earth. The impact of energy prices was as expected, more than divided by 2, and recyclate prices were slightly negative due to mostly paper. The weather effect amounted plus EUR 84 million. The contribution of commerce volume and pricing was plus 1.2%. Let's focus on the EBITDA bridge, which illustrates our strong operational performance. ForEx translation impact become positive in Q2, plus EUR 4 million and minus EUR 29 million for H1, representing less than 1% of EBITDA, and it's not significant at net income level. Scope effect show good revenue to EBITDA conversion and will fuel future EBITDA growth. Energy and recycled material prices had an impact of EUR 60 million with a more significant impact in Q2 than in Q1 due to higher diesel costs incurred after the crisis in the Middle East, which we progressively pass through to our clients. Weather effect continued positively. The most impressive component is our growth and performance contribution of 6%. It's higher than last year in spite of no more Suez synergies and even higher than in Q1. This breaks down into EUR 113 million from net efficiency gain, which is a very good record retention rate, thanks to action plan implemented across Europe, fuel surcharge invoicing, plus EUR 20 million from wood technology synergies. The volume and commerce contribution was much more robust than in Q1 at EUR 52 million. This brings us to an EBITDA of EUR 3.55 billion. Let's now analyze our performance below EBITDA on Slide 25. Going down to current EBIT, H1 performance illustrates again perfectly the operational leverage of our business model, 1.5% revenue growth, 5% EBITDA growth and 6.4% EBIT increase. Current EBIT grew at a faster pace than EBITDA. Let's highlight amortization and [indiscernible] were slightly up at constant scope and ForEx. Industrial capital gain provision and other were lower than last year, showing a continued strong quality of results. I am very pleased with our financing costs and other financial charges, which are stable year-on-year in spite of a higher average net debt of EUR 2.8 billion due to the financing of M&A., 30% minority interest in Water Technology in June '25, several tuck-ins and lastly, the closing of Clean Earth. This was due to the combination of a well-controlled cost of debt at minus EUR 371 million and lower other financial charges coming notably from foreign exchange results. In H2, though, I remind you that we will be 6 months of cost of the debt raised to acquire Clean Earth so that I will continue to expect for the full year 2026, a cost of debt at around EUR 800 million, while other financial charges should remain below EUR 300 million. Tax charges were slightly higher by EUR 22 million, and our current tax rate was flat at 25.8%. Finally, current net income increased by 10.4%, well in line with our yearly guidance of at least 8%. Clean Earth PPA will be treated as a noncurrent item. Given our strong H1 performance, the very promising first month of Clean Earth, we are slightly improving our objective, which now includes Clean Earth consolidation. Moving to net income group share, I am on Slide 27. Noncurrent charges increased by minus EUR 50 million due to higher integration costs associated with the Water Tech merger and Clean Earth integration. Noncurrent impairment PPA and other charges include the specific Clean Earth acquisition costs and net income group share reached EUR 682 million, up 3.8%. Now free cash flow generation, which is key, and net financial debt, I am on Slide 28. I am satisfied with the progression of net free cash flow despite the seasonality of working cap, which reversal was close to last year and thanks to a very tight control on CapEx. Net financial debt is well under control, reaching EUR 24.5 billion. The increase of EUR 4.9 billion is due to the seasonality of working cap, the dividend payments and financial investment for minus EUR 2.9 billion, including Enviropacific and Clean Earth. In terms of our net debt, 76% fixed, our net debt liquidity is very solid. Our balance sheet, therefore, remain very strong. Both rating agencies confirm strong investment-grade rating beginning of 2026. Before we conclude, let's revisit our improved 2026 guidance. Continued solid organic revenue growth, excluding energy prices, EBITDA organic growth between 5% and 6%, current net income of minimum 8% at constant ForEx, including and not anymore excluding Clean Earth; leverage ratio equal or slightly above 3x and as usual, our dividend will grow in line with our current EPS. And as you see, we are very confident for 2026. We delivered a strong H1, resilient growth and robust underlying EBITDA progression well in line with our annual guidance. In addition, I'm also very confident in the delivery of our EUR 2 billion disposal plan by mid-'28. All processes are ready launched, and we are expecting around EUR 500 million signed by the end of '26. Last, we obviously fully confirm our GreenUp trajectory. The very good results recorded in the first half illustrate Veolia's ability to leverage its strategic positioning for ecological security. Thank you for your attention.
Estelle Brachlianoff: Thank you, Emmanuelle. And now we are ready to take your questions.
Operator: The first question comes from the line of Arthur Sitbon with Morgan Stanley.
Arthur Sitbon: The first one is on the change in guidance. So you -- obviously, given you changed the guidance, you seem more comfortable with the prospects on the outlook for net income for 2026. On the other hand, the organic EBITDA growth at the moment is more towards the bottom end of your 5% to 6% range from what we can observe in H1. So I was wondering what is driving that higher conviction, that stronger conviction on net income for the year? Is it -- given it's not organic EBITDA, I assume, is it perimeter maybe with disposals coming more in '27 than in 2026? Is it FX? Is it something below the EBITDA line? A bit of color on that would be would be helpful. And the second question I would have is, quite often, you give a bit of color on what's your view on the full-year impact of FX on your EBITDA and net income as well as energy prices. I would be quite curious to have a bit of an update on that.
Estelle Brachlianoff: Thanks for your question. I will start and probably Emmanuelle will complement. Starting with your guidance, you're right. I'm very happy that we've raised our guidance for net result. Just in a nutshell, the 8% before Clean Earth, which is now 8% after Cleaners, given the fact that Clean Earth was dilutive, say, around 1%, this is what we're talking about in terms of net result in range of our guidance. What gives us confidence to do it? So one is the first half was very [Audio Gap] result, the 10.4%. I'm very happy about it. Two, I'm confident about the H2 in terms of operational performance as well as everything which is below the EBITDA. Is it anything specific? No. So it's not a question of disposal, which were later rather than earlier. We had not -- we are really exactly on our trajectory that we had anticipated with regards to disposal. ForEx, again, it's the same. So it's really a series of small things, if I may, which makes us being very happy about our performance in net results. Well controlled in terms of cost of debt, as Emmanuelle said, very nice control of our tax ratio, as Emmanuelle said, a series of smaller stuff. So it's more the small flows, which makes big drivers rather than a big one thing, which explains why we are raising our guidance in net result. I must add that when you say EBITDA is on the bottom end of our guidance, yes, but you have to have in mind that I'm very happy about this performance because this is despite the temporary squeeze in our margin, which I've explained with a delay in recouping the margin in terms of our indexation formulas, which will be in H2. So to be able to deliver 5% despite that is a very good performance, and this is thanks to our efficiency plan, which we've enhanced in particular. So I'm very confident altogether about H2, which is the global tone that I wanted to highlight, I would say, in addition to just the figures. In terms of the full year effect of ForEx, all that, Emmanuelle, do you want to elaborate or -- yes, maybe on the guidance as well.
Emmanuelle Menning: Yes. Arthur, thank you for your question. So as you have seen, we have -- we are very happy with the performance of the bottom line and of the margin. Core net income jumped by 10.4%, which is more than largely in line with our annual guidance. And the move that we have done on the guidance, it's linked to the bottom line of our P&L with stable financial charges, which is excellent when considering the high average net debt linked to our M&A operation and also thanks to the stable and modest tax rate of 25.8%. So as you have said, it's a stronger conviction of the profitability that we are going to deliver. Regarding your question on ForEx, you have noted that ForEx impact reversed in Q2 and became positive. So it's linked to the evolution of dollars and the appreciation of Central European currencies. When we have guide beginning of the year, we have communicated around a ForEx impact, which is estimated at EUR 100 million. So we cannot have a perfect estimation of ForEx. But our estimation today, it's minus EUR 50 million compared to the minus EUR 100 million that we have communicated. And if we are using the ForEx rate of the 21st of July, it gives us a ForEx impact, which is between minus EUR 50 million and zero. So our best estimate today is minus EUR 50 million. So altogether, it's improving.
Estelle Brachlianoff: I just wanted to add to what Emmanuelle said about ForEx, a few things which we know, but you know, but I'm just repeating them, which is ForEx for us is only translation, not transaction. So it has no impact on our margin rate, as we've demonstrated again last year, the year before and this year. This is nothing to do with our margin rate. And you remember that the impact being EUR 100 million at the top of our P&L ends up being basically EUR 20 million at the net result. So it's a kind of [ 4/5 of it Spanish ] is when it comes to net result. I'm just doing the link with the previous question you asked. On energy, maybe Emmanuelle?
Emmanuelle Menning: Yes, on energy cost. So on energy costs, you have seen that in the bridge, the impact of -- on EBITDA was minus EUR 60 million. A bit less than EUR 50 million of it was linked to the evolution of our hedged electricity prices and the rest was linked of what has been mentioned in the call by Estelle and myself is the increase of fuel prices with in Q2, a slight squeeze that we have as we have been able to fully pass our energy cost increase in the 30% of our contract with which where you don't have indexation formula. And for the 70% of the rest, part of it has been passed. But you know that we have a bit of time lag, which can go to 6 to 12 months, meaning that we'll fully have passed it in H2 or beginning of Q1 next year.
Operator: And the next question comes from the line of Ajay Patel with Goldman Sachs.
Ajay Patel: Look, I think I want to just revisit the earnings again. So in the first half, you achieved 10% growth. And I'm thinking about the second half, I'm thinking, is that implying a deceleration of earnings growth in the second half? Or is there any sort of timing effects between the halves that we need to take into account? It feels to me the 8% seems modest in the sense that implying by the strong H1 results, why not 9%, not 10%, given this? I'm just making sure that I'm not missing something for H2 when it comes to the modeling. And then secondly, on cost cutting, you've been achieving a run rate of around EUR 400 million for the last couple of years now. Should we now be beginning to dream bigger on the cost-cutting side and therefore, we should be thinking about that as a more of a run rate going forward? And then on the asset rotation, we talked about the EUR 8 billion of asset rotation in the last 4 years. Is that more reflective of the run rate we should be thinking going forward that this is a sort of step journey that reverses, that this is now more of a picture of the level of asset rotation that we should be thinking about in the Veolia's strategy?
Estelle Brachlianoff: Thanks for your question. Do you want to take the first one, Emmanuelle? Why are we increasing our guidance by only roughly by 1%, Emmanuelle, on net results?
Emmanuelle Menning: Yes. Good question. Just for you to have in mind that when we have defined our guidance of 8%, so at least 8% in terms of net result growth, we knew that we were going to have a stronger H1 than H2 because in H2, you will have 6 months of financing on Clean Earth that we were not having in H1. So now it has been slightly adjusted as we have 1 month of financing, which is June, and we'll have 6 months of financing. That's the explanation. So meaning that when we did -- when we forecast our guidance, it was strong H1, close to 10% and lower H2 between 7% and 8%.
Estelle Brachlianoff: So in terms of your second question of can you dream big in terms of efficiency? The way I see it is a run rate of EUR 350 million per year is already very, very good. What happens is when the war in Iran started in -- when was it, March, something like that, if I remember well, we've enhanced a few specific local efficiency plan. We've enhanced the one in the Middle East, we've enhanced the one in Germany. We've enhanced the one in France, I mean enhanced we've stayed at a very, very high level like last year. And we've enhanced the one in the U.S. and specifically in SG&A. So the way to think about it is our ability to react fast and quick and therefore, to deliver, again, a 5% EBITDA growth despite the squeeze in margin, which would have been the case if we had not done anything, if you want, given the fuel cost inflation. Am I targeting always higher? Yes, I am, as you can imagine, when you run a company. You always ask everybody to do their best. And if we can do more, we will always be in this type of mindset as well. That's what I can tell you. And I guess it would be a good guess to expect that this year, given the first half we've done, we will probably be higher than our annual target. That would be, I guess, a good guess. I wouldn't discourage you to think that, given again that we've announced a few specific action plans. In terms of asset rotation, that's a good question. Are we going to stop here? The answer is no. But we want to target as well. So in a way, that's a strategic asset rotation. Strategic, I mean we are very clear about what we want to buy and what's potential like divestitures as well. On the plus side, this is not buying for the sake of it. This is really outside European priority and in our boosters. And that's exactly what we've done with 90% of our investment in exactly those. That enhances our growth profile and margin rate as well. And that's why we are continuing with tuck-ins typically, like we demonstrated in the first half, and I expect to go on with a classical rhythm of tuck-ins because it enhances, again, the value added of the group. In terms of divestitures, we have our goals of either nonstrategic or mature of -- not in the top 3. And we are constantly reviewing the portfolio to see if we can be better. That's why I've mentioned in my introduction speech that we had like already launched processes for more than the EUR 2 billion of asset divestitures just to have room for maneuver and to be able to go from Plan A to Plan B in case. So I guess, like don't expect that we will suddenly once all that is over, just to stop and keep the portfolio exactly as is. If we have good opportunities of talking, we will go on looking for them. And if we have a divestiture which would make sense on value creation, we will as well.
Operator: And your next question comes from the line of Peter Crampton with Barclays.
Peter Crampton: Peter Crampton here from Barclays. We've obviously got this big heatwave going on right now in kind of Europe. And I was wondering how we should think about the related kind of impact for Veolia. In the past, you kind of sold more drinking water volumes, but there's obviously a really bad heatwave. Should we worry about risks as well? Or what are your thoughts on this?
Estelle Brachlianoff: You're right in Europe, but I must say it's not only in Europe, although it's particularly striking in Europe this summer. We have heatwaves, droughts. I read an article yesterday saying that 3/4 of the U.K. was in drought situation, including drought situation now. which is probably less expected than Spain, which we've talked about for quite a few years now, which is as well in this. So altogether, I don't want to feel -- to let you feel that I'm a little bit cynical, but all that is pretty good for Veolia eventually. Why is that so? Because it supports the need for our services. So the immediate one is not necessarily positive, and I will elaborate on that. But the mid-, long-term one is because it supports the need for water reuse project for desalination unit at times for AI to detect leakage and all that. So we have incoming call following heat waves or for even district cooling, which we've developed in cycle, for instance. So altogether, mid-, long term is a positive and support to our services, which are critical needs and even in a way, in the Middle East with the critical nature of desalination units. In terms of the immediate situation, I think when you have a summer like that one, what do you expect? On the positive side, water volume should be on the good side, although you should remember that it was already quite good last year. So the comparison basis is relatively high. We don't have so far so much of the restriction of water distribution because the winter was relatively wet. Therefore, we have water that we can distribute. So that's the first bit. In terms of the large fires, which you have in France and in Spain, and to a lesser extent, the heatwave, it has a modest negative impact, although on the short-term economy because everything is closed at times and you have tourism like going down and so on and so forth. So I guess the west activities or we even have motorways, which are closed where your trucks cannot just get into our plants, stuff like that. So I guess on the west side, you have a modestly negative. On the water, it's largely positive, just to give you a global picture. And in terms of energy, as in heating and cooling, short term, we don't have that many networks. So we don't expect a large positive, but it's more a positive for the mid- long term, as I explained, because suddenly, people realize that it would be a good idea to have district cooling systems because it's more efficient, less costly and more virtuous [indiscernible] speaking. So I hope that answers your question.
Operator: And your next question comes from the line of Bartek Kubicki with Bernstein.
Bartlomiej Kubicki: I would like to touch base three issues, please. Firstly, again, coming back to the guidance, but I would rather prefer to look at the reported net income and 2 related questions. First of all, what will be the impact of the PPA on the reported net income? So let's say, what will be the recognition of PPA on an annual basis? And also, how much the reported net income growth will lack the recurring net income growth given, I assume also increasing restructuring costs? That would be question number one. Question number two, on the disposals, you mentioned EUR 500 million to be potentially signed by the end of the year. So the two related numbers I would like to get on this is what could be the impact on EBITDA from scope next year coming from this EUR 500 million of disposals and also whether this will be ROCE dilutive or actually accretive? And the third point, more like a discussion, EU Commission has proposed to put CO2 costs on municipal waste incineration. And we are just wondering, how it could impact your profitability in your businesses?
Estelle Brachlianoff: So the PPA and everything, so obviously, we haven't done the full exercise of PPA. We just have the keys of cleaners for what a month or something. So we are really just starting. But maybe you will able to elaborate in a minute, Emmanuelle. In terms of restructuring costs, you will notice that over the years, the difference between net result current and net result net-net has decreased -- the difference has decreased. So I guess the rest costs are more on the management side, if you exclude, of course, the cost of synergies, which is a different category, in my opinion, than the resting cost as such. So I guess the restructuring in a classical sense is really on the reduction side. And of course, you have the cost of synergies, but which is a benefit on almost an investment that you have take the benefit from the synergies eventually. But on that one, maybe Emmanuelle?
Emmanuelle Menning: Yes, with pleasure. So first question on PPA. So have you seen Bartek, we have two good news. The first one is, as you have seen, we have increased or improved our guidance, meaning that with the very strong start of the year, we are able to compensate the dilution or negative impact of roughly 1% of net result. The second good news is that we are confirming you today that the PPA will be in noncurrent, which makes sense as it's fully in line with what we did for the Suez acquisition. As mentioned by Estelle, we have 12 months to do the PPA work. The first estimation we had, it was communicated when we did the signing and closing of Clean Earth was the first estimation was around EUR 15 million. And as you know, so it will be noncurrent. And as you know, dividend is based on current net results. Regarding restructuring cost, it was also a good news that we have communicated to you during the signing and closing of Clean Earth. When we did the Suez acquisition, the number -- the amount of restructuring cost was the same than the amount of synergies that we were going to deliver. And the amount that has been communicated on restructuring costs for Clean Earth, it was below the $120 million of synergies that we are targeting. It was around $90 million. Although I would tend to call it cost of synergies rather than restructuring, which was something different -- but of course, I won't -- it's more integration cost than restructuring any...
Estelle Brachlianoff: Integration costs. You're right. And for the two other questions?
Emmanuelle Menning: Yes. So for the disposal, we are -- I'm very happy that we are really exactly well on track to deliver $2 billion by mid-2028 with $500 million signed this year. I won't give you the full detail of it. And of course, in terms of scope, there will be a bit of negative of EBITDA and revenue and so on and so forth. The thing you can retain from that is, of course, what we invest has a higher margin than what we divest. So in a way, this is enhancing margin and value creation altogether. I think that's the way to look at that one. Do you want to elaborate on that? Or should I move to [ Suez], yes?
Estelle Brachlianoff: Nothing to add on that one for you, [indiscernible].
Emmanuelle Menning: In terms of ETS and CO2, so a few things. So first things first, is your proposal so far, it hasn't been voted yet by the EU. Assuming it were to be voted tomorrow morning, which is far from being the case, given the length of everything EU-wise. First things first, this is pass-through for Veolia. So in a way, it's a cost which the local authorities will bear and therefore, potentially the taxpayers model rather than the company's P&L. Second, the date of application is 2034, again, potentially assuming it will be voted on [indiscernible] , which gives a little bit of time for our customer to react so between 2031 and 2034. So the biggest bet I have is like it will be probably [ 2034 ]. The third thing is that it will take -- it will leave time for local authorities to try and see what they can do to avoid hitting their own budget. And one -- answer to that one was in actually the project from the EU, which is to support the development of district heating scheme because if you have an engine for waste which is connected to district heating, basically, you avoid the ETS. So in a way, pass-through for Veolia, so no direct impact for us and the potential to develop our offers connected to district heating eventually. And last but not least, hazardous waste incinerators are not concerned, which is normal, in my opinion, given the fact that they're protecting health, and it's a very different story, but that was a confirmation.
Operator: And your next question comes from the line of Philippe Ourpatian with ODDO BHF.
Philippe Ourpatian: Philippe speaking. I have three questions. The first one is when we are looking the volumes of water in France, we were up plus 2.2, which means that it was maybe the impact or the partial impact of the heatwave, I would say, of June. What could you expect looking the fact that July was worse in terms of heatwave for the French volume and more extended for the European volume? Because Spain has also is currently suffering from heat wave. That's the first question. The second one is, I have just seen that there is a declining of maintenance CapEx. And my question is, is it structural because it's almost EUR 100 million less than the previous semester? Or it's something which is conjunctural linked to, I would say, deviation in terms of diary for, I would say, planning of outages, I would say, planned outages of your units? That's the second question. And the last one is the retention rate you show in terms of efficiency is 56%, which seems to be above what we usually recorded. Is this level sustainable or there is something which is explaining the, let's say, better performance than the usual level? That's the three questions.
Estelle Brachlianoff: Thank you very well. All our figures, I can see. So in terms of [waterfront ], so first, I have no idea what the weather is going to be like in August in September. So I'm not going to try and do weather prediction. What I can tell you is like you're right, the volumes of [waterfront ] in June. It was less the case in April, but it was okay in May and very good in June. So altogether, a good Q2. And altogether, you're right, the 2.2% was a nice one. I expect that it should be a nice summer if things go on like they are now. You remember, though, that the indexation formulas are still negative for us in [waterfront ], and they will go to reverse next year. So which means that altogether, the revenue is not only a question of volume, there is a question of volume and price and the price is on the opposite side because of the lag effect, which we've just explained. In terms of the rest of Europe, in a way, in Spain, we could expect a bit the same, but the indexation formula is positive and should be positive going forward. So we should have a good revenue growth in Spain. The rest of Europe so far is good as well in Prague and the other networks. So we should have a good water summer altogether in Europe. But like can I give a specific figure? No, I cannot. We have no idea what the weather is going to be like in a few weeks' time. But I expect it to be relatively good. In terms of the maintenance CapEx, so the global figures for us is 50-50 maintenance CapEx, gross CapEx. And you're right, the maintenance CapEx were well under control in the first half of the year. This is in part, when I say we are piloting the group and with the wiring around started, we said, okay, we have to react quickly. So part of it was fuel surcharge. Part of it was enhancing efficiency plans, like I explained, and part of it was to say, you know what, let's try to generate the more cash possible in the first half of the year and put maintenance CapEx under control. But do you want to give a little bit of color, Emmanuelle?
Emmanuelle Menning: Yes. On that one, Philippe, you're absolutely right. So very happy about the evolution of free cash flow in the first half coming from stable or almost stable working capital reversal and very strict control on CapEx. As mentioned, you know that our budget for the year is EUR 3.9 billion. We have 50%, which is maintenance, 50%, which is growth. It's very important for us as we are delivering essential services to secure the services that we are delivering. So maintenance CapEx for us is key. We don't want to have, as we say, plant in paper. That's not the target. And we continue to have a balance around 50% to 50%. The important, which is important has been mentioned by Estelle, it's the capacity of the group to pilot, to react to deliver more efficiencies when necessary, but also to have a very, very tight CapEx on our cost. And I think that what we have delivered in H1 with the progression of free cash flow is the proof of that.
Estelle Brachlianoff: And retention rate?
Emmanuelle Menning: And on the retention rate, we were very satisfied with the 56% retention rate we have delivered. You're right, it's above our average debt rate that we have usually, which is between 30% and 50%. It's linked to the additional action plan, which has been launched. So it's control of costs. It's additional efficiency, it's reduction of travel, it's renegotiation of fuel prices. So you have a huge amount of measure behind that. And of course, also the contribution of ER, which was very good last year. You remember, it was 23% of our efficiency that we have delivered, and it will continue to contribute in 2026.
Estelle Brachlianoff: So the 30% to 50% range is still a good proxy for us on the midterm. And of course, each time we have a specific hit like the [indiscernible], we're trying to be on the upper range of this with the type of enhanced efficiency plan we deliver. Piloting is, I guess, the key word in everything we've just said.
Operator: And your next question comes from the line of Juan Rodriguez with Kepler.
Juan Rodriguez: I have two on my side, if I may. The first one is on margins. I would like to better understand what were the measures applied for the almost more than 100 basis points improvement on margins that you had on the Water and Waste segments. As you signaled that you still have the negative indexation effect on margins, so what are you expecting going forward? Are these margin levels on both Waste and Water sustainable? Or actually, they're expected to improve as indexation effects kick in, in the second half? So this will be the first one. The second one is, what are your expectations in terms of Water Tech by the end of the year, both in terms of revenues and margins?
Estelle Brachlianoff: So I guess EBITDA margin, so 70 bps for the first half. I think if I remember well, in the last 2 years, we were at 120 bps. So we are constantly trying to grow our margin. So which doesn't mean that it will be the case naturally quarter specifically on quarter. It's more a midterm trend, which is the result of two things: efficiency plan and repositioning and strategic portfolio management. That's really the two of them. Efficiency plan, of course, each time it means like it enhances the margin rate. And same applies when you invest in higher margin and divest in lower margin, if you want. and outside Europe versus inside Europe. So that's the global picture. So you're right that in a way, I'm very confident about H2 because despite this price -- this cost squeeze we had in H1, we were able to still increase our margin by 70 bps. So thanks for noticing this because I think it's a very good performance. In terms of Water Tech, we're talking about here a temporary slowdown of growth. and still a very, very good improvement of margin and EBITDA. And the temporary nature of it is basically linked with the war in Iran directly with the typical like a delay in projects such as the big desalination plant, which we anticipated to sign and the signing has been delayed a bit, or all the chemical industry' wait-and-see attitude for everything to do with the effluent treatment and things like that. So that's the global picture. This is temporary. That's why we've talked about a rebound starting in H2 without the project and probably including the project in '27, something like that would be my best guess. So I expect the curve to move back up in terms of growth. Again, this is a very profitable business for us with the margin improving quite [Audio Gap] noticing that on the different segments we're offering services to with the Water Tech. As I mentioned, the oil and gas and the diesel will be more -- not the only gas, the refinery. So the downstream bit and the chemicals will be more on the negative side, so will be the desalination on the negative as in the growth is more like postponed like better news from Iran. On the positive side, the micro is really, really good, and we have a good order book and a very strong pipeline. I've mentioned in my speech as an introduction that we've already been ordered EUR 343 million of orders only in MicroE in the first half of the year in Water Tech alone. I cannot mention the name of the customer, but those are the big names that you can think of, which are very, very keen on our ultra-pure water, just to give you an example.
Operator: [Operator Instructions] Your next question comes from the line of Charles Swabey with HSBC.
Charles Swabey: Just one question from my side. On the Hazardous Waste in Europe, could you provide a bit more color on the good trends you see for the second half of the year? Is that a volume rebound you're expecting? Or is that stronger pricing or a bit of both?
Estelle Brachlianoff: Interesting question. So I guess, Hazardous Waste Europe like was, I guess, good but not great in terms of growth in the first half, but that was mainly the weather effect of the first half of the year. So unless there is a big storm and 2 weeks of everything almost being shut down like we've had in the first half of the year, we should be back up. And the EBITDA growth was very, very good as well. I want to notice as well, so basically, H2 should be good. We see a very good demand for our high temperature generator in particular. And we have had a bit of volatility in the project base of decontamination, mainly linked to the municipal election in France. You don't have any order for the type of things for a few months before the election and just after the election until the new elected members are just seated. So -- but the demand is high. We are very happy about it. What you could expect as well, so that's why I'm optimistic about Page 2 is you remember that we are progressively building and ramping up 5 new facilities across the globe, which will eventually give us almost 500,000 tonnes of new capacity, which is massive. It takes a long time to build them. And I'm very happy that we've commissioned the one in the U.K. in January. And we've had the first fire in Germany in June. So this there as well for the second half and for '27 and for '28 and onwards as well. And the demand is high. So I'm happy about those specific ones. Hazardous Waste in the U.S. was good. The first month of [ GreenUp ] was good as well. And I guess I was very happy to see a rebound in Asia. The only one where it's not that good will be the Middle East because one of the plants had to be temporarily closed. That's the nuance of very happy about the hazardous waste business and very promising H2.
Operator: And your next question comes from the line of Olly Jeffery with Deutsche Bank.
Olly Jeffery: Two questions from me, please. The first one is -- they're both kind of medium term. So the first one is you have a number of 2030 targets now from exiting coal, PFAS revenue, chips, data centers. Given that -- and also you'll be having much further into the Clean Earth integration process, are you giving any consideration to doing an off-cycle medium-term update at full year results? Or should we expect the normal cadence and therefore, an update coming in 2028? And the second question is on corporate tax. So if the corporate tax, the high corporate tax in France is extended in the budget, should we expect what we've seen what happened last year and presumably this year that you're able to it was a very actually minor effect on the bottom line, given where your interest costs are low PBT within France?
Estelle Brachlianoff: So one quarter at a time, if I may, my priority is really to deliver on GreenUp and to deliver on the objective we've set as well beyond GreenUp with the 2030, and that's exactly what we are doing. So we'll give you updates probably more like when we will launch the new strategic plan. And in the meantime, we'll have a yearly update via our guidance. But you still have a lot of dots on the curve, if I may, which we've already provided you with, as you mentioned, the 2030 one, the GreenUp objective, the synergies, which go beyond '27 as well. So I think you have a lot of material. And as I answered to a question which was previously asked, we're not stopping here. So we are constantly reviewing what we can do best. In terms of events, you've noticed maybe or you haven't on slide, whatever it is, the guidance one, that we will organize an event on innovation in Asia in the autumn, and I hope a lot of people will join it, either physically or -- in terms of tax, you're right, we'll probably come into an interesting budget discussion, budget as in budget for the country, budget for Veolia in the autumn. And like maybe there will be tax creativity again. I guess Veolia won't be directly very much concerned by it very likely, given the fact that we have a tax loss in [indiscernible] France, for instance, just to give you an idea. And we've been through that last year. It was marginal for us and probably we will go through this again this year. So I'm not nervous about that. And as you know, France is only accounting for 20% of our revenue and less than 10% of our funds employed and less than 20% of our EBIT and net result and so on and so forth. So nothing to worry about. It's not the order of magnitude and the ballpark of what would matter for us. And even if the corporate tax were to stay the same, it won't change much. So do you want to add?
Emmanuelle Menning: Just to say that for us, it's and it will be nonsignificant for two reasons. The first one is that, as you know, we have a loss guide forward. And the second element is that, as you know, in France, we are in the results of France, taking into account the cost of financing for the whole group because the cost of the management of the debt is centralized as it should be. And I think that also with the figures that we are delivering, we are showing to you that with the model of Veolia with resilience and growth, we are able to compensate whatever happens. So for us, first, it's super small. We will be able to compensate it. And second, we have the strength of the model.
Olly Jeffery: Just good to get that confirmation if that were to happen.
Operator: I'm showing no further questions at this time. I would like to turn it back to Ms. Estelle Brachlianoff for closing remarks.
Estelle Brachlianoff: Thank you very much for your attending today. We're very happy about the H1 results. very confident about the second part of the year, hence, enhancing the guidance. And I hope you have a very nice summer wherever you go and see you in September for a lot of you with our various events and one-to-one organized. Thank you very much.
Operator: Thank you. And this concludes today's conference call. Thank you all for joining. You may now disconnect.