Vivendi Environnement announces solid results in a difficult environment

March 4, 2003
The Supervisory Board met on March 3, 2003, to examine Vivendi Environnement's financial statements for 2002.

PARIS, March 4, 2003 -- The Supervisory Board met on March 3, 2003, to examine Vivendi Environnement's financial statements for 2002.

Vivendi Environnement posted another year of steady business growth despite a particularly difficult international environment. Revenue from core businesses amounted to (EUR)28,073 million, up 5.9%, or an increase of 7.2% at constant exchange rates.

Two-thirds of the negative impact of exchange rates of (EUR)350 million was due to the decline of the dollar. Internal growth from core businesses rose 5%. Due to the disposals completed over the course of the year, revenue from non-core businesses amounted to (EUR)2,006 million, compared with (EUR)2,614 million at December 31, 2001.

Total consolidated revenue for Vivendi Environnement increased 3.3% to (EUR)30,079 million versus (EUR)29,127 million in 2001.

Vivendi Environnement also won new contracts for municipal and industrial outsourcing services, including several that combined the services of two or more divisions. This commercial performance confirms the success of the company's strategy and the growth potential of its markets.

The new municipal outsourcing contracts underline the company's ability to capitalize on the international positions gained over recent years by all divisions: Water (Pudong, Indianapolis, Atlanta), Waste (Camden, Singapore), Energy Services (Poznan), and Transportation (Boston).

In line with the commitments made, net debt was reduced from (EUR)14.3 billion at December 31, 2001, to less than (EUR)13.1 billion at December 31, 2002, as a result of:

* Continued steady growth in cash flow from operations (+13%) to (EUR)2.8 billion; after maintenance capital expenditures (stable at (EUR)1.3 billion), cash flow available before growth investments rose 36% to (EUR)1.5 billion;

* The implementation of a program of non-core business disposals amounting to more than (EUR)1.7 billion, which is in excess of the announced target;

* The (EUR)1.5 billion capital increase completed last August.

The reduction in debt was achieved while simultaneously carrying out a significant program of growth investments of (EUR)2.4 billion compared with (EUR)2.7 billion in 2001.

EBITDA (3) for the company reached (EUR)3,887 million. EBITDA from core businesses posted satisfactory growth of 7.1% to (EUR)3,727 million, up 8.0% at constant exchange rates. This increase, which reflects the positive growth trend of new contracts, led to a 0.2% improvement in the EBITDA margin.

EBIT from the core businesses rose 1.9% in 2002 to (EUR)1,847 million from (EUR)1,813 million last year, increasing 3.2% at constant exchange rates. The contribution from non-core businesses was down due to the disposals made during the year. Total EBIT therefore amounted to (EUR)1,971 million versus (EUR)2,013 million in 2001.

All of the divisions contributed to the growth in EBIT from core businesses. EBIT from Water rose 2.9% to (EUR)900 million (up 4.2% at constant exchange rates for core businesses).

The good level of business activity in France, the gradually increasing impact of outsourcing contracts won outside of France, and the confirmed turnaround of Vivendi Water Systems offset the slowdown in the industrial equipment market in the United States and higher insurance costs. EBIT from Waste was (EUR)385 million (+5% excluding Latin America and at constant exchange rates), benefiting from the initial measures taken to improve profitability.

In Energy Services, the 10.7% increase (9% at constant exchange rates) was attributable primarily to the integration of Italian company SIRAM and developments in Northern and Central Europe. EBIT from Transportation increased 3.1% (2.9% at constant exchange rates), with new contracts signed in Europe and the United States more than offsetting the cancellation of the South Central contract in the United Kingdom. EBIT from FCC rose 9.1% (9.4% at constant exchange rates), due principally to its service businesses.

Vivendi Environnement's net financial expense improved nearly 19%, moving from (EUR)798 million in 2001 to (EUR)648 million in 2002, reflecting reductions in both net debt and the cost of financing. The average interest rate was 4.25% in 2002 versus 4.85% in 2001.

Non-recurring items amount to -(EUR)90 million, including restructuring costs of (EUR)57 million and (EUR)47 million in provisions and write-downs taken in the first half of the year relating to the company's businesses in Latin America, partially offset by the net capital gains as a result of disposals.

After taking into account the non-recurring items, Vivendi Environnement's consolidated net income amounted to (EUR)339 million in 2002 compared with a net loss of (EUR)2,251 million last year.

Excluding non-recurring items, consolidated net income was (EUR)429 million in 2002 compared with (EUR)420 million in 2001(4). Taking into account the average number of shares outstanding in 2002, recurring net income per share amounted to (EUR)1.16, compared with (EUR)1.21 in 2001.

The payment of a dividend of (EUR)0.55 per share will be proposed at the Shareholders Meeting on April 30, 2003.

Within the context of a difficult business climate, Vivendi Environnement demonstrated its ability to sustain growth and strengthen its market postions. The company will continue its growth strategy in 2003 in line with the priorities defined during previous years: focus on its four, well-matched divisions (Water, Waste, Energy services and Transportation), selective geographical expansion, and growth provided by customers in the municipal, industrial manufacturing and service sectors.

The maturation of major contracts recently won and the continued enrichment of the services offered to its customers will contribute to improving the company's return on capital employed. Growth in cash flow from operations, the continued selectivity of investments and active asset management should enable the company to further improve its financial situation.

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