Veolia Environnement SA

PAR:VIE

Q1-2025 Earnings Call

[Operator]

Good morning, ladies and gentlemen, and welcome to the Veolia First Quarter 2025 Key Figures Conference Call with Estelle Brachlianoff, CEO; and Emmanuelle Menning, CFO. [Operator Instructions] This call is being recorded on May 7, 2025.

I would now like to turn the conference call over to Ms. Estelle Brachlianoff. Please go ahead.

[Estelle Brachlianoff, executive]

Thank you, and good morning, everyone. Thanks for joining this conference call to present Veolia's Q1 key figures, and I'm accompanied by Emmanuelle Menning, our CFO.

First and foremost, our Q1 2025 results are very strong, and I'm on Slide 4. And this is in spite of a rather challenging environment. They are perfectly in line with our objective and enable us to start 2025 with great confidence and fully confirm our guidance for the year. This result illustrates once again the strength of Veolia's winning formula, resilience and growth. As you know, the Veolia value creation model is a combination of 3 levers: growth, performance and efficiency and capital allocation. In 2024, which was the first year of our GreenUp plan, we were already very active in terms of capital allocation with EUR 1 million divestiture of noncore assets and EUR 0.6 billion reinvested, leading to a balance sheet headroom.

In Q1 2025, we decided to accelerate value creation using part of this headroom with the acquisition of a 30% minority stake of CDPQ in our Water Technology business, thus achieving full ownership. This strategic move is fully aligned with GreenUp's strategic program and priorities. Water Tech, as you know, being identified as a growth booster and priority for investments as well as North America. We will be able. To deliver EUR 90 million of additional synergies and unlock full potential for innovation and development. This buyout comes at a reasonable price with a 2025 EV EBITDA multiple of 11x post synergies. This investment is a strategic and very international activity, allows us to secure future earnings growth.

I'm now on Slide 5. Our Q1 key figures are once again very solid. Sales reached EUR 11.5 billion, up 3.9%, excluding energy price, which are essentially pass-through for us, as you know. EBITDA increased by a substantial 5.5% on a like-for-like basis to EUR 1.695 billion, fully in line with our 5% to 6% guidance and show a margin improvement of 60 basis points. Current EBIT was up plus 8.4% to EUR 915 million, demonstrating good operating leverage. Net financial debt is well under control and even down year-on-year to EUR 18.8 billion. And our leverage ratio is also down from 2.88x last year to 2.75x this year at the end of the quarter, perfectly in line with our target of the leverage ratio below 3x at year-end. Our resilient and growth business model as well as our solid Q1 performance enable us to fully confirm our guidance despite macro uncertainties.

I'm now on Slide 6. Ultimately, Veolia stock is really a combination of resilience and growth as demonstrated in the last few years. We managed to increase our results quarter after quarter despite volatile energy price, difficult macro in Europe, political and geopolitical uncertainty, higher inflation and interest rates. This is thanks to our winning formula based on 4 key features: enhanced growth first, in particular with our growth booster. Second, a worldwide footprint with France only 20% of the group and 38% outside Europe. Third, a continued value creation with EPS and ROCE, of course, growing very fast. And ROCE has been hit 8.8% post tax at the end of '24, which is 320 basis points above our weighted average cost of capital. Finally, Veolia as a world leader in environmental services is a unique combination of businesses, wastewater and energy.

On Slide 7, we remind you of the unique characteristics of Veolia's business model. We have no direct exposure to tariff or very minimal. Since our activities are multi-local, we do not import or export any goods or only insignificant amounts. We are protected against inflation with 70% indexed, solid pricing power for the remaining 30%, as we've shown over the last 3 years. Our activities are very largely not dependent on GDP. This is clearly the case of our municipal activities, but also partially with the commercial and industrial activities, which are very spread over different type of customers from pharma to hospitals, microelectronic to retail and all that on all continents. In terms of our municipal client base, we enjoy long-term contract with 11-year average still remaining and more than 90% renewal rate.

You can see on this slide, our largest contract expiry schedule. Altogether, we estimate that only about 15% of our revenue is exposed to macro, mostly in C&I waste. Last but not least, our resilience lies also in our proven agility and capacity to boost efficiency and cost cutting when needed. Of course, I will add to that list that we benefit from a diversified geographic footprint on all continents. In terms of political exposure, our contracts are always local contracts. We are never dependent on subsidies or national or federal contracts. Finally, our strength is reinforced by our ability to combine our different businesses, for instance, Waste and Energy or Water and Energy, which makes us quite unique to our customers.

I'm now on Slide 8. As you know, our value creation lies in 3 pillars: top line growth, performance and capital allocation, and I'm going to go through them one by one to illustrate Q1 results. Starting with growth on Slide 8. We registered very solid revenue growth of our stronghold. This is plus 3.9% in energy price, fueled by our 3 activities. Starting with water operations, revenue increased by plus 3.3%. We continue to benefit from good indexation and have achieved successful tariff negotiation in Spain as well as rate cases approval in our U.S. regulated operations. We also enjoyed good commercial momentum in Europe. Solid waste revenue grew by plus 3% despite sluggish macro. This is thanks to good pricing, a high renewal rate above 90% as well as very successful offers.

In particular, we signed in Q1 a new high-tech material recovery facility in Canberra, Australia, totaling AUD 850 million over 20 years. District Heating and Cooling Networks revenue increased by plus 4.9%, excluding energy price. This is faster than last year, thanks in particular to a favorable weather impact as well as contract extensions. We continue to invest to decarbonize our assets with double-digit IRR and expect to open a new cogeneration facility in Poznan by year-end, replacing the coal-fired facility.

On Slide 9, let's have a quick look at each of the boosters performance in Q1 2025. Water Technologies revenue was stable in Q1. This stability is temporary. It is due to a very high comparison basis in Q1 2024 and to the timing of contract deliveries. In the last few weeks, we signed key contracts in Water Tech, which will fuel revenue growth in the coming quarters. Starting with a significant contract we've won to provide the technology to supply ultrapure water in the semiconductor industry in the Midwest in the U.S., followed by 16 years of operation for a total backlog of $550 million, all that using our patented ZeeWeed technology.

We were awarded as well a new contract to provide technology to help the San Francisco wastewater treatment plant to produce biogas and reinject it into the gas grid, thanks to our MemGas technology, again, patented. In both cases, we are in the priority offers as showcased in our deep dive on this activity last October. I'm very pleased as well to see our technologies remove sulfur from offshore oil and gas, that is FPSO, which was again super successful with $170 million additional orders in Q1, notably in Brazil and the Emirates. Hazardous Waste revenue increased by 5.6%.

We are very satisfied with continued strong growth in Europe, up 5.1% despite the industrial macro, which is a good demonstration of our relative immunity to macro, as I explained earlier. We've delivered continued solid growth in the U.S., up plus 8.5% with planned shutdowns early in the year and started new operation in Saudi in the Jubail complex. In Bioenergy, Flexibility, Energy Efficiency, revenue was up plus 16.7%, excluding energy price and including our new targeted acquisition, fully in line with our GreenUp plan priorities, in particular, flexibility asset in Hungary. Organic growth was still plus 6.1%, which is very good.

Let's now deep dive on Slide 10 in our second lever of value creation, which is performance and efficiency. And this slide shows our first quarter performance in terms of both. On the left-hand side, you have efficiency, where we achieved EUR 91 million in gains, in line with our annual target of EUR 350 million. Efficiency gains at Veolia are not discretionary, the cost-cutting programs, of which you could question the continuity. They are composed of a very operational and diversified series of initiatives in our thousands of plants from process optimization, energy efficiency to upselling our digital gains. Digital is a prime example to show how we constantly look for new efficiency levers. Digital gains already represent 15% of our operational efficiency, but we are now moving quickly to Gen AI.

And the new partnership with Mistral AI, worldwide first is a good illustration of this. In terms of cost synergies derived from the Suez merger, we've achieved EUR 25 million in Q1 for a cumulative total of EUR 460 million since day 1, in line with our objective of EUR 530 million by year-end, which, as you know, we raised last February. The third pillar, and I'm on Slide 11, is capital allocation. And this morning, we announced the acquisition of CDPQ's 30% stake in WTS for EUR 1.5 billion, translating into an EBITDA multiple of 11x post synergies. This acquisition is fully aligned with the GreenUp strategic plan and with Water Tech as a priority booster. It is indeed a very logical step, which will unlock more value for our shareholders by enabling full integration and enhancing operational performance.

We will be able to extract additional run rate cost synergies of EUR 90 million by 2027, but there is more to it. After merging WTS and VVT, we will, in fact, maximize the operational control of the asset, unlock its full potential for development and innovation, fully control cash flow and capital allocation to pursue our growth trajectory in Water Tech. This strategic move should, therefore, enhance the value of our Water Tech activities. We fully maintain our balance sheet headroom and our leverage will remain below 3x at year-end, allowing the group to retain strategic flexibility. Finally, this operation will be accretive to our current EPS from 2026 and enhance our ROCE.

On Slide 12, you see the simplification of the group structure after the merger of VVT and WTS. The removal of minority interest will enhance our control of our Water Tech operations in terms of synergies, but also cash flow and tax optimization. We will be the sole decision-maker, especially as far as strategic decisions such as capital allocation are concerned. This full integration will enable us to enhance operational performance and to unlock full potential for development and innovation.

Slide 13. The transaction is very straightforward. We signed an agreement with CDPQ yesterday to buy out the 30% stake in WTS for $1.75 billion or a cash out secured at EUR 1.5 billion, representing an EBITDA multiple of 11x, including additional synergies of EUR 90 million. A few words on those synergies. They all relate to operating costs impacting EBITDA and are derived from a simplified corporate structure with our Water Tech activities, leading us, for instance, to remove SG&A costs as we do not need to maintain a double government structure as today, both at WTS and VVT level. That being said, there are additional financial benefits to take into account that has the potential for tax optimization as well as dividend leakage and cash optimization.

What matters here is the very low level of execution risk to deliver this additional operational synergies in light of our deep and intimate knowledge of the asset as well as our strong track record in extracting synergies as highlighted by the Suez merger. Overall, the transaction will be accretive from 2026 and contribute to group ROCE increase. We will finance this acquisition through our available net cash position at group level. For CDPQ, the divestment after 8 years is part of the normal investment process. For us, it is the opportunity to invest in the merging of our 2 Water Tech subsidiaries, thus unlocking significant value. We expect to close the deal by the end of June.

On Slide 14, you will see this acquisition will further strengthen the group position in Water Technologies activities, which is one of our 3 strategic boosters as well as enhance our position in North America, which represents half of WTS business today. You remember from our deep dive last October that the combined VVT and VWTS as a fully merged and integrated entity is the world leader in water technologies with combined revenues of EUR 5 billion in '24 and a global footprint. 40% in the U.S., 13% in Asia Pacific, 13% in Africa and Middle East and 8% in Latin America. We serve over 8,000 clients in 44 countries. We hold more than 4,000 patents and have 11 dedicated research centers. We are now the only player present on all along the value chain in the complementary 4 business lines, which are projects, technologies and products, services, and chemicals, allowing us to select the correct go-to-market package depending on country or client type.

On top of that, as part of Veolia, our Water Technologies segment benefits from combination opportunities with our other businesses and segments as demonstrated in our PFAS unique offer, for instance. We have set ambitious growth targets for 2027, which, of course, are further enhanced by the acquisition of CDPQ minority stakes, all this for this activity. We aim to grow our Water Tech operation by 6% to 10% per year between '23 and '27 on average and increase our EBITDA even further. Including the additional synergies I've described, the EBITDA CAGR for the period will be now above 10% per year with ROCE increasing gradually.

Slide 16 summarizes our 3 levers of value creation, namely growth, performance and capital allocation, which is the backbone of our GreenUp plan. Our very solid Q1 results, the strategic acquisition of CDPQ's minority stake in WTS, combined with our unique positioning, a combination of resilient and growth, enables me to fully confirm our strategic plan GreenUp and associated objective. They include current net income of growth of 10% per year on average over the period, with dividend growing in line with EPS and ROCE above 9% in 2027. As you remember from our yearly presentation a few weeks ago, we decided to launch a share buyback plan from '25 to '27, size to neutralize the impact of the employee shareholding program so that going forward, current EPS will grow in line with current net income growth. In a nutshell, Veolia is all about both resilience and growth.

I now hand over to Emmanuelle, who will detail our Q1 figures.

[Emmanuelle Menning, executive]

Thank you, Estelle, and good morning, everyone. The results for the first quarter are solid and allow us to be very confident for the rest of the year. We have demonstrated for many quarters now that even in a complex economic environment, Veolia is able to deliver growing results. With EUR 11.5 billion in revenue, we experienced a good solid growth of 3.9%, excluding energy prices. Taking into account the impact of lower energy prices, revenue was up 1.5%, which is quite ahead of Q1 2024. Thanks to the operating leverage and the good delivery of efficiencies synergy, we enjoyed a solid organic EBITDA growth of 5.5% at EUR 1.695 billion and a current EBIT growth of 8.4% at EUR 950 million.

Net financial debt reached EUR 18.9 billion, down compared to last year and lower than expected. As a result, our leverage ratio was 2.75x below last year and well below our guidance of under 3x. Our balance sheet is accordingly very strong, which gives us a lot of flexibility in terms of capital allocation and allows us to easily maintain a leverage below 3x after the financing of the acquisition of CDPQ minority interest in WTS. You can also see on the slide the detailed ForEx impacts, which were positive in Q1. I also remind you that we operate in local currency, meaning that our exposure is linked only to translation and not to transaction impacts. As you saw in previous year, the ForEx impact at EBITDA level was very much offset down the line, meaning at current net income.

Moving to Slide 19. You can see the revenue evolution by geographical segments. I will start with Water Technologies. Revenues were stable in Q1 due to high comparison basis and the timing of project delivery. Q1 2024 was particularly high as we recorded revenue from the delivery of big projects at the WTS, for instance, projects for semiconductor industry in Texas, at Samsung in Austin as well as identified one-off linked to end of contracts. We are very confident for the rest of the year, and you saw this morning our very strong commercial momentum with the signing of new contracts to produce ultra-pure water for a large semiconductor client in the U.S. and to treat water in the energy sector to supply injection water treatment solution for offshore production units in Brazil. In the rest of the world, revenue was up 5%, with all regions performing very well.

North America continued to enjoy solid hazardous waste performance and good water activity. Hazardous Waste revenue was up 8.5% in Q1. Asia had a solid growth of 4.1%, thanks to some recovery in Mainland China. Latin America grew double digit, thanks to good waste volumes and pricing. Rest of Europe revenue was up 5.5%, excluding energy prices. In Central Europe, the impact of lower energy prices in district heating activity was much lower than last year, minus EUR 249 million compared to minus EUR 628 million in Q1 2024. Electricity prices are down 9.4% on average, but heat prices are now almost stable. In Northern Europe, we registered again solid performance in the U.K. and Belgium in both Energy and Waste activities. In Southern Europe, the quarter was excellent and revenue was up double digit. Finally, France and Hazardous Waste Europe was flat in Q1 with lower solid waste volumes and indexation, offset by a very strong hazardous waste activity.

Now let's take a look at our performance by businesses. I will start with Water. Water revenue was up 2.4%, fueled by the strong water operation, up 3.3%, while Water Technology was temporarily stable due to the timing of project delivery and high comparison basis, as mentioned earlier. Water operations benefit from good indexation with continued price increases in Spain, Central Europe and in the regulated U.S. and Chilean water operation, while indexation was back to 0 in France due to lower electricity prices. Volume were on a very good trend: France, plus 0.5%; Spain, plus 1.2% with the end of good situation in Andalusia and Catalonia; and Central and Eastern Europe increases its volume by plus 3%.

Moving to Waste. Activities grew by 3.7%, a solid pace, although lower than last year due as expected to lower indexation. Volumes were resilient, up on average by 1.2% like last year. Commodity impacts were nonsignificant and comparable year-on-year with lower electricity prices in Q1, partially offset by increased recycled material prices. The strong Solid Waste revenue was up 3%, driven by tariff increases in all geographies. Regarding volumes and commercial development, Europe was mixed with good volume in Germany, resilient in the U.K., slightly down in France, while volume were strong in the rest of the world. The Booster Hazardous Waste had a very strong quarter in almost all geographies. In Europe, plus 5.1% as well as in the U.S., revenue were up 8.5%, thanks to favorable mix effect and good commercial momentum.

Finally, moving on to Energy. I am on Slide 22. Excluding the energy price impact, growth was faster than last year, up 5.3%, thanks to good volumes helped by a colder winter. Heat prices were on average almost stable compared to last year and electricity prices lower as expected. Strong activity in Energy Efficiency, up 6.1% on a like-for-like basis with strong sales momentum in Spain, Belgium and in the Middle East. As I have just explained, Energy revenue is sensitive to energy prices, which were down as expected again in Q1, but to a much lesser extent than last year.

To illustrate the solid performance of the third quarter, we will go on Slide 23. It shows our revenue bridge and explain our organic growth of plus 3.9%, excluding energy prices, which is stronger at EBITDA level, thanks to our operating leverage. ForEx impact was positive, plus EUR 42 million, mainly due to the appreciation of the U.S. Polish British currencies. Scope was negative by minus EUR 271 million, mainly due to the impact of last year disposals. We expect scope impact to turn positive in the second part of the year.

The impact of energy and recyclate prices were much lower than last year as expected, minus 2.2% compared to minus 5.8% in Q1 2024 and include the impact of lower energy prices, slightly mitigated by the positive effect of recyclate prices. The weather effect amounted to plus EUR 110 million due to a harsher winter at the beginning of the year in Europe. Commerce and Volumes contribution was comparable to last year, plus 1.3%, driven by sales momentum and resilient volumes. And finally, price effects were, as expected, lower in [ 2024 ] than in 2024 due to lower inflation and continued to 1.5% to top line growth.

On Page 24, you have the usual EBITDA bridge detailing our organic growth of 5.5%, in line with the annual guidance between 5% and 6%. Essentially, EBITDA benefited from 3 sources: organic revenue growth of plus 3.9%, operational efficiency, and sales synergies. The ForEx impact amounts to EUR 11 million. Scope was minus EUR 30 million. Weather was favorable by plus EUR 16 million due to a colder winter in the first quarter 2025. Commerce/Volume/Work effect was favorable at plus EUR 22 million, plus 1.4%, in line with revenue impact. Efficiency gain of EUR 91 million generates plus 2.3% in additional EBITDA hence a very good retention rate of 42%.

Synergies amount to EUR 25 million, especially thanks to optimization in purchasing and in the water technology activities, leading to a cumulative amount of EUR 460 million, perfectly in line with our objective of EUR 530 million by the end of 2025. Going down to current EBIT. This slide illustrates perfectly the operational leverage of our business model. Current EBIT grew by 8.4% in Q1 to EUR 915 million at a higher pace than EBITDA. Renewal expense of EUR 74 million were comparable to 2024. Amortization and OFA were slightly lower than last year due to perimeter and slightly up at constant and ForEx. We had slightly lower industrial capital gains, provisions and others. JVs were stable. Net financial debt reached EUR 18.9 billion at the end of March, lower than expected and down EUR 142 million compared to last year, thanks to strong free cash flow generation and dynamic asset arbitrage launched last year to quickly secure room of maneuver to achieve GreenUp's ambitions.

As a result, our leverage ratio was 2.75x below last year and well below our guidance of under 3x. Our balance sheet is, therefore, very strong. Both rating agencies confirmed strong investment-grade rating after full year results. It enabled us to finance the acquisition of CDPQ minority interest in WTS with our available cash position while maintaining a leverage below 3x afterwards. As a conclusion, we are very confident for the rest of the year, which is based on solid foundation. We fully confirm our ambitious guidance for 2025, including WTS acquisition, continued solid growth of revenue, excluding energy prices, for EBITDA organic growth between plus 5% and 6%, more than EUR 350 million of efficiency gains, more than EUR 530 million of cumulated synergy at the end of 2024, current net income up 9% at constant ForEx, leverage ratio below 3x. And as usual, our dividend will grow in line with our current EPS.

Thank you for your attention.

[Estelle Brachlianoff, executive]

Thank you, Emmanuelle, and we are now ready to take your questions.

[Operator]

[Operator Instructions] Your first question is from Alex Roncier from Bank of America.

[Alexandre Roncier, analyst]

I've got 3, please. I mean the first one is on the 30% acquisition from CDPQ. I'm just wondering if you could give us some background and color on why CDPQ was actually willing to sell their 30% stake. I remember in the past, and that's been something that is discussed heavily with investors over the years, it seems like the structure was a bit at a standstill with perhaps CDPQ expecting a buyout or even a listing of the Water Tech division overall. So any color on the process there would be super interesting.

And then a second one still on M&A. I think if I'm not mistaken, you still have EUR 1 billion net of M&A left in your GreenUp plan, which I suppose you will still use depending on opportunities and be relatively flexible on that. But any area you would focus on specifically? And I'm saying that because I feel like the energy booster is actually the one performing the best at the moment. You already addressed Water Tech with CDPQ. So would that make sense to actually increase exposure there, especially given your ambition to become #1 across your different segment by 2030 in your different energy verticals? And I'm wondering that as well if you are already or expecting to see actually growing under -- sorry, growing order on flexibility and some of the local and backup generation you mentioned you had for hospital and critical infrastructure in the wake of the recent blackout in Spain.

And lastly, just one on numbers. I'm mindful the guidance is at current ForEx and that ForEx actually had a positive impact in Q1. But you also have in your guidance an absolute EBITDA guidance for 2027 of EUR 8 billion and more, which arguably would include ForEx. So given the recent moving in currency and Veolia predominantly being euro-denominated, any color you would give us on FX impact expected for the rest of the year at current rate? And if any impact, would that mean you need to restate at some point the EUR 8 billion absolute EBITDA guidance for 2027?

[Estelle Brachlianoff, executive]

So 3 questions. I will take the first 2 and then Emmanuelle will be answering the third one. I cannot answer on why CDPQ has sold now as opposed to other option. It's after 8 years of them having all this participation. So it looks like a normal cycle to them. That's what they've said very officially. I can tell you why it's the right moment for Veolia that I can comment upon. Right moment because we've like very said clearly for a while now that Water Technologies was super important for us and an area where we wanted to invest and reinforce our presence. You may remember the deep dive in the Water Tech business where we invited a few people in Hungary last October. That's one of the key boosters in our GreenUp strategic plan.

So it's very strategically aligned with what we've prepared the ground for. And I must add that in terms of timing the euro versus dollar makes it so that the acquisition not only is good in terms of multiple, 11x now compared to the American peers, for instance, is a very reasonable price, plus the dollar's relative weakness is good in terms of us paying in euros, as you know. So very -- the right time for Veolia altogether, very strategic move for us, and I cannot answer on behalf of CDPQ. In terms of M&A, you're exactly right. We still have room for maneuver for additional M&As going forward to complete the GreenUp strategic plan, as Emmanuelle highlighted. It didn't came by chance. As you know, we've anticipated and the agile last year by selling nonstrategic assets. And I always said that we had 3 pillars of value creation, top line growth performance and balance sheet. We've anticipated last year.

We've been agile, which gives us room for maneuver, not only to do the CDPQ acquisition today or CDPQ stake, sorry, into WTS, plus potential other opportunities. So any areas, yes, and we've been very clear in our GreenUp strategy. So it boasts all the 3 boosters. So Water Tech has the Swiss and Bioenergy flexibility as well as outside Europe. So I may emphasis again on the fact that this acquisition today not only enhances value in the Water Tech, but as well outside Europe, in particular in the U.S., but elsewhere as well. So I think it's an important one. So everything which creates value and is with one of the 3 boosters will be a good candidate for potential M&A. So it has to be both strategic and creating value. Are we done with the Water Tech? Not necessarily. We may have tuck-in ideas going forward.

Again, if they create value and are very complementary in our portfolio of technologies, why not? Hazardous Waste could be good candidates as well. As you know, we are a leader as well in this industry, create value, and we are very happy with this business. As well as, again, bioenergy and flexibility. Commenting on the blackout in Spain, you're right. It makes to the forefront and the headlines of the newspaper, the importance of flexibility as a market, which I understand is quite a technical one, so not necessarily understood by the general public. Of course, it is by you. And we are already a big player in Europe, in France, in Northern Europe, in Italy, in Eastern Europe as well. Not yet specifically on this specific area in Spain, but we have quite a good series of activities in energy in Spain. So why not developing the flexibility in addition? That's something, as you can imagine, we have a look at.

In terms of the ForEx I will say, I won't comment on anticipation because 2 months ago, there was a consensus on EUR 1 equals $1 very soon. Now it's very different. So it's moving very fast. So I won't comment on the anticipation of -- at the end of the year, the anticipation at the end of '27, it's even more risky. I will confirm the 2027 guidance. And with regard to '25, Emmanuelle?

[Emmanuelle Menning, executive]

Yes, bonjour Alexandre. So as mentioned earlier, you know that Veolia has absolutely zero transaction exposure. When we operate in a country, we -- all the costs and the revenue are in the same currency, so that we have only translation exposure. Three elements mainly, which are important to have in mind. So the first element on top of local currency, so no transaction impact is that our guidance at EBITDA level is at constant scope and ForEx. And finally, as you saw in the former year, the FX impact at EBITDA level was very much offset down the line to current net income. At the end of Q1, you have noticed the impact. It was positive plus EUR 42 million at revenue level and plus EUR 11 million at EBITDA level.

It's true that when you use the exchange rate of the last closing, so March 31, we expect it would give an EBITDA impact, which is really slightly negative. So as mentioned by Estelle, ForEx, it's difficult to forecast. When you look at the EBITDA 2027, the EUR 8 million, we fully confirm them. It includes organic growth, efficiencies and M&A and the purchase of CDPQ minority interest in WTS will contribute around EUR 90 million in synergy.

[Estelle Brachlianoff, executive]

In addition to what you said, everything you said kind of partially vanishes anywhere at the net result level. So I think it's an important additional point.

[Operator]

Your next question is from Arthur Sitbon from Morgan Stanley.

[Arthur Sitbon, analyst]

One follow-up question on the acquisition so far in the GreenUp plan. I think to be precise, your initial acquisition budget was between EUR 2 billion and EUR 4 billion between 2024 and 2027. I was just wondering how much you've done -- you've conducted so far, including WTS. I think I get not too far from the EUR 2 billion, so the low end of that EUR 2 billion to EUR 4 billion range. I was wondering if your intention is to stop here. You seem to be running a bit ahead of track here. And so at the end of the day, what I'm wondering is, do you need to go further? Do you need to do more acquisitions to reach the 10% CAGR net income guidance by 2027? Or could you potentially stop here and just rely on what you have today to get there? That's the first question.

The second question is because I think, obviously, there has been some uncertainty on the macro environment. And you seem to say that you've been very resilient so far. So I was wondering as well in the second quarter of the year since especially the announcements on import tariffs early April, what have you noticed in how the business is performing? And specifically, I think, in industrial water and in waste activities?

[Estelle Brachlianoff, executive]

So I will start with the global vision of GreenUp going forward, and Emmanuelle will comment a bit further on the figures and then on the macro as well. So Globally, today, we've announced a major step in the GreenUp plan with the acquisition of a 30% stake of CDPQ in the Water Tech business. Do we need to do further acquisition? No, we don't. Do we have opportunities? Yes, we have. So -- and do we have room for maneuver? Yes, we have for an extra EUR 1 billion, as we said. So it's a little bit more the way I would think about it. Do I intend to stop there?

And to say, yes, that's it. GreenUp is delivered. No. I'm very happy that the acquisition we announced this morning secures some value creation for GreenUp going forward. In that way, you're right. It secures the trajectory. But we have plenty of opportunities to create value, and we have the room for maneuver, as we explained, to do that. So maybe on the figures, so the EUR 2 billion I was mentioning was net of the disposal, right? So Emmanuelle, if you could go a little bit through those figures.

[Emmanuelle Menning, executive]

Yes, with pleasure. Bonjour, Arthur. So when we design the GreenUp plan and the GreenUp strategy, as mentioned before, to achieve the EUR 8 billion target in 2027, we have some M&A. The M&A, what we have communicated so far was EUR 2 billion M&A net. So it's acquisition minus disposal. We have been very agile after the launch of GreenUp, achieving already EUR 1 billion disposal. And you have seen with the EUR 1.5 billion acquisition of WTS plus what we have already bought, we are currently around EUR 2 billion, so EUR 2 billion minus EUR 1 billion. We still have EUR 1 billion room of maneuver or target for GreenUp in M&A. With the acquisition of WTS, it was clearly expected. It was part of GreenUp. I think in terms of timing, it's ideal, and it helps us to simplify the group structure and unlock additional value.

[Estelle Brachlianoff, executive]

In terms of the macro, Emmanuelle will comment on how April looks like. And basically, no change in the trend as we've seen in Q1. Tariff, we have a very minimal, if not exposure to tariff as we are very local in terms of contract, as we said. And we are a service company. So both makes us very, very, I guess, resilient in this uncertain tariff times, which I'm very happy, as you can imagine. And in terms of macro, altogether, I wanted to comment a little bit further on what I said in the call, which is we are very largely immune to macro. We estimate it to 85%. And this is not by miracle. Half of our business is municipal, which is, of course, macro immune. But even on the other half, we have around 20% altogether, which is more like retail and hospitals. So it's not municipal as such, but it still is very resilient.

And for the 30%, which is real industry, if you want, we are super diversified in terms of industries and super diversified in terms of geographies. It helps us to say, okay, we have a lot of presence in the pharma and microelectronics, which, as you can imagine, is not in the same mood usually as you would say, in other type of more like a traditional industries. So that makes us quite confident as well as our ability to react that we've demonstrated in the past and our track record. I just wanted to mention 2 figures we've highlighted, but to emphasis again on them. Hazardous Waste, as you know, is a 100% industrial customer base.

In the first quarter, we've had a plus 5.1% revenue in Hazardous Waste in Europe and plus 8.5% in the U.S.A. I won't go into circles to say there was not a GDP growth in Europe of 5.1% and in the U.S., about 8.5%. So it's a very big proof of the disconnect largely of macro versus Veolia's performance. But how do you see April and the spring, Emmanuelle?

[Emmanuelle Menning, executive]

Thank you, Estelle. So regarding this question on macro and how April is continuing. First element is that we don't see major change compared to the figure that you are seeing for the end of April. The main changes that we are seeing it's in Water Technology, where we are starting to see the rebound, and you may have seen our press release this morning with commercial game. The second main element where we see a change or continued trend, it's regarding the recyclate prices, which were again up in April, EUR 20 in [indiscernible], for instance. For the rest of the business, it is continuing. So what we see, it's -- in hazardous waste, continue to be strong, especially in the U.S., but also no change in volume regarding Europe, where you have seen we were able to have an increase of, for instance, in France, plus 12%.

Volumes in U.K. and Australia remaining very resilient. Volumes in Germany are strong. And we were also happy to see a good performance in Asia, especially in China, plus 4% with good volume in hazardous waste. So no main change continuing on trend. And maybe one line sentence on macro on top of everything that Estelle has mentioned regarding our characteristic defining our defensiveness, one element which is interesting, it may be in the bridge where you see that in terms of commercial volumes, we are fully in line with what -- where we were at the end of Q1 2024, so around 1.3%, 1.5%.

[Operator]

Your next question is from Ajay Patel from Goldman Sachs.

[Ajay Patel, analyst]

I just really wanted to keep the picture really simple. In the sense that you have a long-term guidance for '27, 10% growth in net income, which in broad terms is broadly just over EUR 600 million in net income growth from 2023. I wanted to understand this acquisition this morning, with the synergies included, how many millions of net income are you looking to add as a result of it? And then just to understand what the picture for you in the current market environment, that guidance of 10% net income growth was based on constant FX. Could you help us just understand at the net income level, what is the headwind that FX presents? Now I know you have plenty of levers to offset, and this is a very resilient business. But just to understand that potential add in terms of the acquisition with the synergies included and the potential sort of headwind that the FX presents.

[Estelle Brachlianoff, executive]

So I will start by the first part of your question and hand over to Emmanuelle for the second part. In terms of the 2027 guidance, you're right, we guided around 10% average over the period of net income growth. And this included some potential acquisition, including the EUR 2 billion net of disposal of acquisition we've highlighted in a question we had earlier on. So it included already some acquisition. We used part of this acquisition room of maneuver if you want today. So I can confirm the 2027 guidance. There is no further enhancements to it, but it's more a way to secure this guidance, if you want. Hence, securing the growth of our net result and performance over the next few years is what helps the acquisition of the 30% CDPQ that we have highlighted this morning. In terms of 2025, as we said, we confirm our guidance of '25, including the acquisition of today, despite the ForEx as it is today. That's the global picture. In more detail about the net results and ForEx, Emmanuelle.

[Emmanuelle Menning, executive]

Yes, with pleasure. So regarding your question, Ajay, the transaction that we are launching and on which we have communicated this morning is accretive. It will be accretive for our ROCE. It will be accretive also from 2026. When you look at net results, it takes into account the synergies, cost synergies that we will be able to deliver in an asset from which we have deep and intimate knowledge. So a very low level of -- very low level of risk of execution, and you know our track record in terms of synergy delivery. It will take also into account tax optimization, no dividend leakage as well as the cost of financing.

Meaning that it will be accretive for 2026 accordingly to the synergy ramp-up. When you look at the ForEx impact at net result level, as you have seen in 2023 and in 2024, it is offset -- ForEx is offset at the level of net result. So we will have the positive effect contribution of the CDPQ transaction, and we expect a neutral effect of ForEx. So altogether, the 10% net income growth on average over the [ years ] is with or without good or bad ForEx in a way. That's irrespective of it. I think that's an important point for today.

[Operator]

Your next question is from Zach Ho from Jefferies.

[Yi Shu Ho, analyst]

This is Zach from Jefferies here. Just 2 quick follow-ups from me. Firstly, regarding kind of your credit metric headroom of 3x. I'm just wondering, is there a minimum level that you're looking to maintain relative to your 3x target? Doing some quick math on the additional CDPQ acquisition, I think you get to quite close to the 3x target by June 2025 when you finish executing on the transaction. I'm wondering if this would be a concern at all from a credit or cash flow point of view over the next few quarters? Or is this not something that you are or like think that this would be a concern at all?

And then the second question would be just a more general one on top line growth. Based on your responses, I think, on the previous questions, it kind of sounds like your message is that most of Veolia is -- or most of Veolia, meaning that the existing business and future kind of booster and stronghold growth is mostly macro immune. My question is on the booster top line level at least, how much of it is contracted or highly visible? And how much of it depends on certain factors like waiting on further demand to come through in places like the U.S., et cetera? Yes, any color on the above would be very helpful.

[Estelle Brachlianoff, executive]

Okay. So on the -- the line is a little bit blurred. So I hope we will answer precisely to your question because it was a little bit difficult to understand. But leverage on the first one, Emmanuelle?

[Emmanuelle Menning, executive]

Yes. So regarding the leverage, we fully confirm our leverage ratio, so below 3x for the end of the year, including the acquisition of CDPQ minority interest. As you know, we had a very strong and we have a very strong balance sheet after the disposal of last year and including our strong free cash flow generation. So our expectation and what we fully confirm for the end of the year, it's strong cash generation. We will have the free cash flow -- strong free cash flow generation, and we fully confirm the leverage ratio below 3x after the acquisition.

[Estelle Brachlianoff, executive]

Fully investment grade. We don't need to have extra bonds or whatever financing. So that's what gives us a lot of comfort, as you can imagine, from this call this morning. I just -- so I will take your second part of your question. So we estimate altogether that on the business of Veolia, and you're right, there is no major difference between the booster and the stronghold activities. Altogether, we estimate we are around 85% macro immune. So the 15% remaining will be a little bit of the C&I waste -- dry waste business, typically, which can have a little bit more an effect on the volumes of economy going up or down. And I'm asked a lot, how is that so? As we try to explain, this is what I call our winning formula, which is to be on all continents. We don't depend on the economy of one country or another.

We are very spread over. We are very spread over various type of industries as well from pharma to hospital through to more traditional industries, plus we are very active. And again, we've proven that with a very good track record over the last few quarters where the macro was not great in Europe typically, and we still have grown our revenue and not only our bottom line, but our top line as well quite consistently. The number I mentioned on the Haz in Europe at plus 5% and in the U.S. at plus 8.5%, where revenue, which is always growing faster, as you know. So you're right. We have a very good winning formula of resilience and growth, which makes us quite uniquely placed in today's world of uncertainty.

That's why when we confirm not only our guidance for '25, but even for '27, it's a secured guidance, thanks to the acquisition we said, thanks to our foundation, thanks to the strategic choices we make of around 10% growth of net results, whatever the ForEx, inflation, the macro, the tariff and everything we've just discussed. I think it's a good, again, strong foundational like secured growth of the results. Just wanted to take an example about the U.S.A. I'm asked a lot about the U.S.A., as you can imagine, over the last few months. We still have a big ambition in the U.S.A. As we said, tariff is not a question for us. We have very local contracts. And why is that? So what supports Veolia's growth, if I take a little bit of step backwards.

What supports Veolia growth is demands of the population. We're talking here about removing pollutants in drinking water, what the water tech business as well as the health business helps. We're talking here about supporting industries, which are strategic, microelectronic or data center to do actually have a license to operate because without water, you just don't have a microelectronic or chips manufacturing plant. You just don't have it. It's a licensed store base. It's not a nice to have.

So pollution or just a license to operate, this is what drives the growth in the U.S. And a good example was the PFAS. We've grown from 0 to EUR 205 million top line, again, in the PFAS removal. And I was asked a lot, okay, what about the new administration in the U.S. Is it changing your ambition? The answer is no. And it was demonstrated last week with the new EPA manager, Mr. Zeldin, confirmed that his intention was not to go slower, but actually to go quicker in the PFAS removal. So I think all that is proof by example of what we said about macro.

[Operator]

Your next question is from Olly Jeffery from Deutsche Bank.

[Olly Jeffery, analyst]

Two questions, please, on the WTS minorities acquisition. The first is, can you please confirm, I think it would help clarify for everyone to think about in terms of accretion and the PE paid here. When you look at your accounts, the minorities for the WTS Global business was EUR 19 million in 2024. What was it -- were the minorities just the WTS part of the business you bought, so we can have a sense of what the net -- or the net income looks like. That would be very helpful.

And the second question I have is just on the synergy guide you've given. I presume historically, when you come to guiding the synergies that you would see that as being a fairly conservative estimate. And there's potential headroom to that figure depending on how things go, just given how you guided synergies before in the past. Is that reasonable to consume that, that's a relatively conservative guide on the synergy front?

[Estelle Brachlianoff, executive]

So I will take the second question, leave Emmanuelle for the first one. But the global picture on the first one is it's accretive at net income and ROCE level. That's the short version. But of course, Emmanuelle will elaborate a little bit with -- in 2027, it creates value, isn't it?

[Emmanuelle Menning, executive]

Yes. So Olly, absolutely right. So with this transaction, what we fully confirm, it's accretive. It will be accretive starting 2026 because due to the timing of the operation, of course, you will have and the ramp-up of synergy this year, we expect around EUR 15 million synergies. Then next year, around EUR 35 million and then EUR 39 million. So with this ramp-up that this year, it will be very slightly dilutive, but the amount is not significant, and we fully confirm the increase of our net income around 9%. Starting in 2026 and in '27 and onward, it will be positive at EPS level and at ROCE level, taking into account several elements, of course, the cost synergies, but also the tax optimization, the removal of minority interest having positive impact on all our financial indicators.

So -- and I just would like to add that we've had a question earlier on, on the guidance 2027. We commented and confirmed that secured 10% CAGR on net result. We also said that we will be above 9% ROCE by 2027 or in 2027. Just want to confirm that again that we haven't highlighted yet. In terms of the synergies, I was smiling on the conservativeness of the synergies. It's the best estimate we have today. What I can say is, we have an intimate knowledge of the target. Therefore, it's a very detailed plan. I wouldn't qualify it as conservative. I would qualify it as more or less secured. It's our best estimate today, but I don't see a risk of execution on achieving this target as we've demonstrated as well in the delivering of the said synergy.

[Olly Jeffery, analyst]

And then just as a follow-up, could I take the EUR 19 million in the accounts of the minorities for WTS as being representative for the business you bought or not because that's the global figure and is not representative.

[Emmanuelle Menning, executive]

I guess the EUR 19 million figure is not -- I mean, the net result today of our WTS activity is not optimized. That's what I've tried to say in our -- in the call. Like above, if you want, or in addition to the EUR 90 million synergies, which are more EBITDA, we have a lot of work on tax optimization in addition, for instance, and all the rest of it, which makes us so that like there will be value creation as well from EBITDA in addition to net results, if I'm trying to be clear on that one. Hope I'm clear.

[Olly Jeffery, analyst]

Okay. Yes, that makes more sense. You got more benefit coming through below the line.

[Emmanuelle Menning, executive]

Yes, exactly. In addition to the EUR 90 million. I mean just to make sure everybody understands, we had to run 2 different separate structures in parallel. Of course, we were coordinating a lot of things. But in terms of cash flow, in terms of tax, of course, in terms of the business we run, we had still to run 2 separate structures. So as you can imagine, in addition to costs that we can take away, there is a lot of optimization, which we will stop now.

[Operator]

Your next question is from Philippe Ourpatian from ODDO BHF.

[Philippe Ourpatian, analyst]

I have some additional questions concerning CDPQ, as you can imagine. The first one is just to well understand the figure you have given in terms of sequential contribution. Could you just elaborate about the nature of this operational synergy impacting the EBITDA? That's the first question. Because as you say, you were running 2 companies, but the one you have had 70%, you were also well knowing, are the synergy coming from the merger of the 2 entities? Or there is some -- at the EBITDA level first, some additional things to do you couldn't do before because of the structure of WTS? That's the first question.

The second one is concerning tax because we are discussing about tax optimization. You have had previously some tax carryforward in the U.S. If I'm not wrong, those ones were terminating somewhere in '25. Are you going to optimize the remaining you have had for '25 because of this deal, means you will be able to more optimize something starting '25? Or are you also benefiting from some additional delays due to this deal? And is there any remaining tax carryforward beyond '25 on the U.S. perimeter because I do suppose that it's mainly the U.S. one and not impacting the French one.

The third question is concerning U.S. business globally, but mainly, I would say, the Water Tech U.S. global business. The Trump administration has made a quite significant turnaround concerning oil and gas. He is mainly pushing this activity and renewable is suffering as everyone noticed. Are you starting to see some positive impact from this reversal of going more to oil in terms of industrial water business and Water Tech, for example, for your mobile treatment units, which are based on refineries and so on?

And the last one is concerning China. You mentioned in the press release a rebound of China. But just to be clear, are we discussing a rebound in terms of profitability, which is linked to, I would say, the efficiency plan you started -- implemented some years ago in order to optimize the return? Or are you also feeling some macro trend, positive reversal, which are on top of your efficiencies, I would say, are fueling your growth because between end of Q4 and Q5 '25, we have a quite strong, I would say, turnaround of the China's activity you mentioned.

[Estelle Brachlianoff, executive]

Okay. So in terms of the tax, Emmanuelle?

[Emmanuelle Menning, executive]

Yes. Bonjour, Philippe, so you're absolutely right. The acquisition of the 30%, it's not only a strategic move, which is fully in line with GreenUp and fully consistent because it's a great asset, and we will be able to generate synergies after a fantastic track record with the merger with Suez and in an environment where we have deep and intimate knowledge, securing the execution. But on top of that, we'll have, as I mentioned, also tax optimization potential. You're absolutely right.

We have -- it will be mainly in France as we will be able to put in the tax group, so to have a tax integration of the European entities. You know that in France, we have a tax loss carryforward, which are above EUR 150 million available forever. In the U.S., we have more than EUR 300 million tax loss carryforward available, but only until the end of 2026. So the impact on that one will be more limited.

[Estelle Brachlianoff, executive]

On the U.S. business, we have half of the Water Tech business, which is our 40% altogether and half of the WTS, which we see in the U.S. But as you know, we have as well a very big presence in the U.S. in the hazardous waste as well as in water activities, reg and non-reg. So it's a varied set of business. What I can say is, as Emmanuelle mentioned earlier on, we've seen -- I mean, hazardous waste is the best proxy of how industry is doing in the U.S. because it's 100% industrial. And we've seen a plus 8.5% revenue growth in Q1 and a very good April. So I cannot comment specifically on oil and gas, the "drill, baby, drill" effect, if you want, versus what we see so far is more down to the pharma as well as microelectronics.

And on the Water Tech part of the business in the U.S., we've announced this morning very major contracts. And one was in the U.S. in the microelectronic business, ultrapure water and water tech. So I would say, so far, we see what drives the growth in the U.S. would be more that than the effect of oil and gas. But we have such a varied exposure to the very type of industries that it's difficult to comment for me a lot further. In terms of China, it's not only a profitability rebound, it's a revenue rebound as well. I think we have had a plus 4% in Q1. And it's really more Veolia rather than China altogether. Again, difficult for me to comment on is China's economy rebouncing or not. What we can say is the revenue has bounced back, which we are very happy about.

And in terms of the synergies, sorry, there is a question earlier on, which I haven't answered yet on the synergies of the WTS acquisition, what are they composed of? You're exactly right. We already have delivered with the 2 separate structure already some efficiencies and synergies, which are including in our performance until now. The additional EUR 90 million because it's an additional will be basically twofold. A big chunk of it will be just G&A as in 2 different structures, you can just merge them. So we're talking here about real estate. We're talking here about IT. We're talking here about structure altogether because we had to have the 2 separately.

And an additional element is more like operational type of efficiencies because we can do directly a lot of things in terms of purchasing where we had to keep until now 2 different boxes, if you want, separate, and we can merge them and go and have extra efficiencies in terms of typically purchasing to give you an idea. A big chunk is more G&A type. Not the majority though, it's a little bit more than half.

[Operator]

Your next question is from Alex Roncier from Bank of America.

[Alexandre Roncier, analyst]

Just one -- actually, not one follow-up, but one extra question, if I may. Just regarding your shareholder structure, you've had obviously 2 big announcements earlier this year. And I think CriteriaCaixa has already announced that they've finalized the acquisition of their 5% stake. But I was wondering if you had any new information regarding the stake Bpi was building, which was up to 3.5% as well, which seems to be taking a little bit longer than the CriteriaCaixa buildup. Any color there would be super helpful.

[Estelle Brachlianoff, executive]

I can't remember the dates exactly, but both have already built their stake now for a few weeks. So Caixa is at 5% and Bpi is already at 3.5%, and they have been for a while. I can't remember the exact date. But they've built their stake. Yes, they have. And you're right there. I'm very happy to welcome those long-term shareholders in the group in our shareholder base, which they said very clearly support fully the value creation model, the resilient and growth we've just described and the GreenUp strategic plan. So they clearly said that the reason why they invested was exactly those 2.

[Operator]

Your next question is from Olly Jeffery from Deutsche Bank.

[Olly Jeffery, analyst]

Can I please clarify with the 11x EV post synergies '25 in that EUR 90 million...

[Estelle Brachlianoff, executive]

Sorry, it was cut. So if you could repeat because you were cut for a few seconds. Yes. So the 11x you want us to comment, but...

[Olly Jeffery, analyst]

The 11x multiple. Full EUR 90 million of synergies, this EUR 15 million, the pre-synergies EBITDA multiple being for the transaction, please?

[Estelle Brachlianoff, executive]

Emmanuelle?

[Emmanuelle Menning, executive]

Yes. So to answer your question, we'll, of course, get with you after the call to give you the full detail of the calculation. So have in mind that for the calculation, we are taking into account the EBITDA 2025 and the full year and the full effect of the EUR 90 million cost synergies for the -- and just in the calculation, you have to take into account also the debt of the entity. The full detail will be sent to you.

[Estelle Brachlianoff, executive]

And of course, this compares super favorably with the typical multiple U.S. peers, which I won't give you the full list, but you have them, they are more between 15 and 20x. So it crystallizes a lot of value for us.

[Olly Jeffery, analyst]

Just on this topic, you spoke about the EUR 90 million of cost synergies at the EBITDA level. It further benefits below EBITDA, which boost net income from bringing the minorities in. Can you put a figure on what you see that additional boost below EBITDA being from combining the minorities?

[Estelle Brachlianoff, executive]

Emmanuelle.

[Emmanuelle Menning, executive]

Yes. So to complete maybe the answer that I've given before, you're right. So we'll have additional positive impact below the EBITDA line. The main one will be tax optimization. As mentioned, on the French or the European tax integration group, we have a positive contribution of EUR 10 million. For the U.S., we will see because we have until 2026 to implement it. You will have, of course, the removal of the minority interest, which is going to be taken into account.

So it's -- with this acquisition, you have full security on the synergy delivery. You have additional benefit at net result level. You have absolutely no risk of execution regarding synergies. It is financed without any bridge loan, without any session, thanks to our strong balance sheet after the disposal that we did last year. So a fully secured operation in an environment that we know deeply and intimately.

[Operator]

Your next question is from Jenny Ping from Citi.

[Jenny Ping, analyst]

Two questions, please. Firstly, with regards to the transaction. Obviously, you paid 11x for an asset, which has been absorbed into the company where it trades at 6 to 7x EBITDA. Is there views and thoughts emerging on how Veolia could make some of this value that you have at the group more visible, i.e., maybe on the completion of the merger of the 2 Water Tech businesses spin out of minority and listing it or something of that effect to show the value of the core business that sits within Veolia. So that's the first question.

And then secondly, when we look at the EBITDA growth, the 5% to 6% in the medium term, are you able to give us a sense of what is the underlying organic growth of the business exing out all of the M&A that's coming through, but also synergies has historically been a big part of that driver. So when we look at the underlying business growth, is it fair to say it's low single digits?

[Estelle Brachlianoff, executive]

So 2 different questions. So on the first question, I would see it quite differently. I think the transaction today highlights precisely the value within the Veolia stock and the potential for growing our value further, as we explained with the various different multiples. Plus, so it enhance not only the Water Tech business value, but the value of Veolia altogether. I will highlight again the word combination. When we talk about PFAS, we're talking about Water Tech and Hazardous Waste. When you talk about the SEDIF contract, we talk about an order book in Hazardous Waste -- sorry, in Water Tech, which was helped by municipal water type of contract. So a lot of things are intertwined within Veolia. So I would argue that today's transaction highlights the value potential creation for Veolia even further that we've seen so far.

In terms of the 5% to 6%, I would suggest you refer to the bridge because we give exactly the detail quarter after quarter of exactly your question, Jenny, on what comes from the top line growth, what comes from the efficiency and synergies and what comes from M&A. So we have all the details quarter after quarter for '24, for '25 so far and so on and so forth. But altogether, if you think of value creation as in EPS value creation, you have a big chunk, which come from top line, a big chunk, which come from efficiency and synergies and a big chunk, which comes from M&A, like what we've announced this morning. So depending on the quarter, I wouldn't say it's 1/3, 1/3, 1/3 because, of course, you have different quarters. But you would think of the 3 as really 3 important levers. I wouldn't mention only one of those.

And those are the 3, which helps us to be able to confirm the 10% CAGR of net result irrespective of all the different elements of the environment, the macro, the ForEx or whatever, as we've discussed this morning in detail as well as the ROCE above 9%, which is well beyond our WACC, which at the end of '24, you remember, stood at 5.6%. So we are creating value, and we intend to go on exactly in the right direction. And of course, all that with being with a lever under 3x.

It looks like we don't have any other questions. So we'll end now. And you've understood that we are very happy not only about the quarterly results, we are very confident for the rest of the year and very happy about the value creative transaction we've announced this morning, which is very strategic and value creative. Thank you very much.

[Operator]

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.