It has been several years since the financial markets began to value leading companies in the water sector. And it’s not finished. The proof with a giant in the sector, Veolia; a French SME specializing in fluids, Thermador, and a key technology provider, Xylem.
Veolia represents a fairly consensual investment choice when it comes to selecting companies linked to environmental transition. The group operates in fact in waste treatment (37% of its income), energy management (21%) and water (42%), three themes at the heart of the concerns of the time. Since the hasty takeover of part of the assets of its great rival, Suez, Veolia has strengthened its sectoral and geographical hold. The French footprint remains strong (23% of revenues), but internationalization has increased with a presence in the rest of Europe (40%) and other regions of the world (37%), in particular the States -United.
Predictable and lucrative activities
With regard more specifically to water management, Veolia can boast of being number 1 worldwide with revenue of 18.2 billion euros in 2022. Most of this revenue comes from operation of collective drinking water supply and waste water treatment works. Activities that have in common to be predictable and, it must be emphasized, lucrative. The contracts, signed for a long period, generally benefit from price indexation clauses and are not very sensitive to economic cycles, since these are basic services to the population. Unsurprisingly, it is also the group’s most profitable business. The division’s additional revenue is provided by contracts signed in the industrial water cycle and by technologies related to control, monitoring, filtration, depollution and reuse.
Financially, the group has carried out a major restructuring over the last decade, during which it has improved most of its profitability ratios. And for good reason. The acquisition of Suez not only enabled it to partly eliminate a historical competitor. It also led to the famous synergies that each buyer seeks to develop. Based on current prices, betting on Veolia is therefore a reasonable bet.
© / Alexandra Compain-Tissier – B. GUAY/AFP
Change of dimension with an average quality company, Thermador. The company from Isère distributes equipment intended for fluid circuits in buildings and industry, as well as pumps and compressor tools. It is therefore widely exposed to all the problems of improving the efficiency of fluids, including, of course, water. It is a very well managed company, which communicates very transparently with its shareholders and has had a remarkable stock market performance for years. In summary, a high quality ETI.
Let’s end this selection with Xylem, a supplier of equipment for the transport, treatment and analysis of water. This US company, which has just taken over its rival Evoque, is unequaled in North America for wastewater treatment plant equipment, water treatment and control. It is also in competition in this segment with Veolia’s Technologies division, mentioned above. Xylem is increasing its international presence as well as the environmental and technological dimensions of its offer. A quality player already generously valued, but promising in the long term.
An article from the special issue of L’Express “Investing in the ecological transition: 20 values to follow”, published on July 6