Summary of Veolia Environnement Conference Call Company and Industry - **Company**: Veolia Environnement (OTCPK: VEOE.F) - **Industry**: Hazardous waste management and environmental services Key Points and Arguments Acquisition of Clean Earth - Veolia announced the acquisition of Clean Earth, a significant player in the U.S. hazardous waste sector, which will double Veolia's U.S. hazardous waste operations, positioning it as the number two in the U.S. market with projected revenues of $2 billion from hazardous waste activities [1][3][7] - The acquisition is expected to enhance Veolia's global hazardous waste revenue to approximately $6 billion [3][9] - The deal is fully cash financed, with an expected leverage ratio of around three times in 2026 and below three times in 2027 [2][18] Financial Aspects - The acquisition was secured at a multiple below 10x 2026 EV/EBITDA, with anticipated synergies of $120 million from operational efficiencies [2][18] - The integration is projected to be accretive to net income by the second year post-acquisition [2][18] - Clean Earth has shown organic annual revenue growth of nearly 7% and an EBITDA margin improvement to 17% [7][9] Strategic Importance - The acquisition aligns with Veolia's Green Up strategy, focusing on high-growth areas and enhancing its portfolio transformation towards dynamic markets [3][20] - Clean Earth provides a comprehensive network of 46 transfer stations and 90 treatment facilities across the U.S., significantly expanding Veolia's operational capabilities [6][9] - The acquisition is expected to create a nationwide complementary network, enhancing service offerings and operational efficiencies [9][23] Market Demand and Growth Potential - The U.S. hazardous waste market is experiencing sustained demand due to regulatory pressures and the need for advanced waste treatment solutions, particularly in sectors like healthcare, pharmaceuticals, and semiconductors [4][11] - Veolia anticipates mid to high single-digit revenue growth in hazardous waste, supported by megatrends such as reshoring and environmental compliance [10][28] Asset Rotation and Divestment Plans - Veolia plans to execute at least EUR 2 billion in asset disposals within two years, focusing on mature activities to streamline its portfolio [2][20] - Since the launch of the Green Up strategy, Veolia has already completed EUR 4 billion in asset rotations, with a target of EUR 8.5 billion by 2030 [20][21] Integration and Synergies - The integration of Clean Earth is expected to unlock significant operational synergies, particularly in waste disposal and transportation optimization [13][18] - The anticipated synergies are based on a detailed analysis of operational efficiencies and logistics improvements [14][82] Long-term Outlook - The combination of Veolia and Clean Earth is projected to enhance the EBITDA growth profile of the hazardous waste business to above 10% per year [10][18] - The acquisition is seen as a transformative step in Veolia's growth trajectory, reinforcing its position as a leader in the hazardous waste market [23][67] Other Important Content - The call emphasized the importance of sustainability and environmental responsibility in the hazardous waste sector, highlighting the need for modern, high-capacity solutions to meet regulatory demands [11][16] - The integration process is expected to foster a unified culture focused on excellence and long-term value creation for stakeholders [16][19]

Acquisition Highlights - Veolia is acquiring Clean Earth for an Enterprise Value of $3.0 billion (approximately €2.6 billion), which is 9.8x EBITDA 2026e post run-rate synergies[3] - The acquisition is expected to generate $120 million (approximately €105 million) in run-rate cost synergies by Year 4[3] - The transaction is expected to be EPS accretive from Year 2[3] - Veolia will fund the cash transaction through existing financial resources and debt, alongside accelerated portfolio rotation with over €2 billion disposals of mature assets[3] Strategic Impact - The acquisition doubles Veolia's size in the US Hazardous Waste sector, making it the 2 player in the US[3, 5] - Clean Earth has a network of 82 specialized sites and 700 permits across all US states[5, 9] - Clean Earth's 2022-2024 Revenue CAGR was +6.8%[9] - Veolia's US revenue will reach approximately $6.3 billion, representing 12% of Veolia Group[21] Financial Performance - Clean Earth's 2024A Revenues were $1.03 billion with $200 million EBITDA[9] - Clean Earth's FCF/EBITDA conversion is over 60%[9] - Veolia anticipates €5.2 billion (approximately $6 billion) in Revenue and €0.9 billion in EBITDA from Hazardous Waste in 2025E[16] - Veolia expects EBITDA Growth of >+10% CAGR from GreenUp 24-27[16]

Financial Data and Key Metrics Changes - Revenues totaled $548 million, down approximately 4% on an organic basis after adjusting for FX translation and business divestitures [20] - Adjusted EBITDA was $67 million, with year-over-year comparisons affected by negative FX and divestiture impacts of $7 million [21] - Adjusted diluted loss per share was $0.18, excluding the impact of special items [21] Business Line Data and Key Metrics Changes - Harsco Environmental segment revenues totaled $243 million, with adjusted EBITDA of $39 million, impacted by lower volumes due to site exits and closures [23] - Clean Earth achieved revenues of $235 million and adjusted EBITDA of $38 million, with EBITDA increasing by 12% supported by revenue growth of 4% [25] - Rail revenues totaled $70 million, with an adjusted EBITDA loss of $2 million, in line with expectations [26] Market Data and Key Metrics Changes - Steel production at customer locations declined less than 1% compared to the prior year, with production weakest in Asia, the Middle East, and Latin America [23] - The U.S. dollar strength has negatively impacted Harsco Environmental's revenues and EBITDA by approximately $100 million and $25 million over the past three years [13] - Recent dollar weakness is seen as a potential tailwind for Harsco Environmental, which generates roughly 80% of its revenues outside the U.S. [13] Company Strategy and Development Direction - The company is focused on expanding service capabilities and business growth, particularly in Clean Earth, which is expected to outpace other segments [10][11] - Harsco Environmental is managing through a difficult period in the global steel industry, with expectations for stable performance on a like-for-like basis [17] - The company anticipates earnings growth and completion of ETO contracts in Rail, aiming for annual free cash flow of $150 million in the future [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledges significant macroeconomic uncertainty due to ongoing global trade issues but does not expect a material direct impact from tariffs [9][19] - The outlook for Clean Earth's earnings, margins, and free cash flow is positive, tracking ahead of financial targets established previously [11] - Management expects a stronger second half for Harsco Environmental, driven by new site ramp-ups and operational improvements [58] Other Important Information - Cash flow was ahead of expectations, supporting full-year cash flow guidance of $30 million to $50 million [7] - The company completed the rebuild of the Rail leadership team with new appointments [8] Q&A Session Summary Question: Thoughts on steel production and the economy going forward - Management expects a little bit of volume growth for Harsco Environmental, with efficiency and cost reduction programs mitigating impacts from site shutdowns [35] Question: Clean Earth's performance and volume assumptions - Management sees volume as a larger contributor to earnings growth this year, with no signs of economic slowdown yet [38][40] Question: Status of Rail ETO contract renegotiation - The amendment recognizes cost inflation and includes a new delivery schedule, reducing future penalty risks [46] Question: Sustainability of Clean Earth margin expansion - Management expects margins in Clean Earth to exceed previously projected levels, with ongoing efficiency initiatives contributing to margin growth [48][49] Question: Pressure in the steel industry and underlying market changes - Management notes that excess capacity in the steel industry remains a factor, but there are encouraging signs in the EU that may improve customer profitability [55]