Good morning everyone. Thanks for joining us for this Conference Call to present Veolia's H1 Results. I am accompanied by Emmanuelle Menning, our CFO. We will start on slide four. 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 stronghold and booster activities, an 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 units 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 the active portfolio transformation designed to enhance value creation and boost growth. We will have rotated more than EUR 8 billion of assets in four 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, when I expect to grow current net income by at least 8%, including and not excluding Clean Earth. Our GreenUp trajectory is of course fully confirmed.
Now let's look at our H1 results. I am on slide five. Revenue reached EUR 22.193 billion, up 1.5% at constant scope and forex, 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. A very good performance given the complex macro and geopolitical environments, this is of course in the absence of any contribution of SUEZ synergy we enjoyed previously. Noteworthy is our EBITDA margin expansion of another 70 basis points, reaching now 16%, which is an increase of 120 basis points in two 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 this capital expenditure and working capital 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 three at year-end. These results give us strong confidence for the full year 2026 and even raise our guidance. On slide six, 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 desalination 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 at fixed price instead of imports, and help secure supply chains thanks to the circular economy. The disruption we've experienced recently with the threat of our moves is another testimony of the strategic importance of our services for our customers. Last but not least, our solutions protect health when we depollute and decontaminate, as when we treat PFAS, for instance. We have built with Veolia a unique environmental security powerhouse addressing critical needs for our clients.
In terms of business model, and I'm now on slide seven, 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, environmental services leader operating in 44 countries across five 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 solutions combining wastewater and energy services, and combining the strength of our infrastructure like strongholds together with our agile boosters. Slide eight 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 desalination 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 contract. Of course, we rapidly passed through this surcharge to our private clients. We are also, as you know, automatically protected by indexation formulas in our municipal contract 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, recent heat wave 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 nine, and we 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 time of uncertainty, our stronghold are a solid foundations for our group performance. 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 no 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 contract, and we registered new commercial successes. For instance, in Cúcuta 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 heat wave in June.
This is illustrated by our very innovative solution deployed in Saclay, where nature is helping cooling down data centers, flats, and universities for minimal energy consumption. Now to our booster activities. This is Water Technology, 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. We expect a recovery from H2, thanks to the action plan we've put in place, including pricing initiative, 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 micro-e.
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 five new treatment plants under construction or ramping up across the globe in hazardous waste, which is an additional 486,000 tons 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 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 industry, this is data centers and chips manufacturing. They are in high demand to secure steady water supply for cooling system, ultrapure water. 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 in resource consumption. 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 industry from EUR 150 million in 2019 to EUR 560 million in 2025, 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 new contract wins in data centers and micro-e, such as our recent contract with AWS in Mississippi, the one we just announced today in Ohio, and the more than EUR 200 million ultrapure contract or large micro 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. These 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. I'm now on slide 12.
I would like to highlight the continuous 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 internationalization. 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 Technology segment was temporarily penalized by the crisis in Middle East, as I explained earlier, but continued to deliver a remarkable EBITDA growth. In Europe, we grew by a solid 2.6%, as 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 plan 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. We've started already with 23% of our gain last year sourced from AI and digital, and we are deploying more widely solutions such as Talk to My Plant, enhancing maintenance manager in our waste or water plants. Regarding synergies and integration processes, we've been successfully executing the SUEZ acquisition, which bodes quite well for the upcoming integration of Clean Earth. I'm now on slide 14.
Veolia continues its transformation as set in GreenUp toward more international and more technology-driven activities are boosters. These two shows margin improvement and value creation and enhance 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 four 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 are now closed. EUR 1.5 billion invested in Water Tech. We have already extracted nearly half of the planned EUR 90 million synergy. This is EUR 40 million, including EUR 20 million in H1. 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 non-strategic asset divestitures by mid 2028, and I'm fully confident in this process, which is accelerating now.
We have process already ready for more than EUR 2 billion disposal. I expect around EUR 500 million of signed divestitures in 2026. A few words on the landmark acquisition of Clean Earth in the U.S. This is slide 15. Not only are we doubling our size in the growing U.S. hazardous market, reaching the number two position with more than $2 billion of revenues, but we are also building a national platform to offer full range of Veolia services throughout the U.S. Integration started at full speed. I am very confident in our capacity to deliver the $120 million cost synergies by year four, let alone the growth enhancement I expect from this acquisition. The acquisition is dilutive in year one, as you would expect, but we will offset it, as you will see in a minute with our enhanced guidance.
The deal will be accretive as early as year two. 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 targets 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 GreenUp plan trajectory. Emmanuelle, the floor is yours to elaborate on H1 results.
Thank you, Estelle. Good morning, everyone. In the current environment, our results are continuously progressing thanks to solid operational execution and the unique combination of growth and resilience. I will start with revenue, which amounted EUR 22.2 billion, up 1.5%, excluding energy prices. Organic growth of EBITDA was 5%, in line with guidance. It is a remarkable performance as we no longer benefit from synergies, given the temporary negative impact of energy prices in H1. Our EBITDA margin continued to increase by 70 basis points 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 income jumped by 10.4% at constant forex, 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. 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 dollars 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 America, APAC, and ME.
As Estelle mentioned earlier, growth outside Europe was excellent, at + 3.9% and even + 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. had grew by 3.9% and 11%, including tuck-ins, in spite of adverse weather conditions, which impact hazardous waste volumes. Clean Earth contributed one month, perfectly in line with expectation, and integration has started promptly after closing on June 1st. LATAM was up by 10%, benefiting from strong commercial momentum, good waste activity, as well as water tariff increases. Africa, 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 attentism linked to the Middle East crisis. Market in the U.S. was mixed, with strong Bases and Acids, AI, and mercury 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 initiative, volumes rebounds, and commercial action. Above all, Water Tech continued to deliver a solid EBITDA growth of + 6.7%, fueled by our business refocusing efficiencies and synergies. Europe grew by 2.6%, fueled by favorable weather in district heating and strong water activity. Finally, France and other Europe were resilient as always, in spite of adverse weather conditions. Water volumes were very good thanks to Veolia's solution to face heat waves. 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 treasury 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. Waste activity are overall stable, despite unhelpful macro and is very comparable to previous quarters. Excluding external factors, weather, recycled and electricity prices, waste revenue was up 0.9% at constant scope and forex. What is remarkable is that we continue to improve our profitability. EBITDA grew by 5.5% and EBITDA margin increased by 100 basis points 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 recycled prices.
We start to invoice fuel surcharge to our clients after the diesel cost increase. We expect to fully recover the cost overrun by year-end or early next year for municipal contracts. Other scopes grew by 2.1%, +6.2%, including take-ins. Growth remains strong in the U.S. with solid price increases and good commercial momentum in Q2. Moving on to energy on slide 22. Energy performance was quite strong, with revenue up by 2.7%. District heating and cooling network revenue progressed by 1.9%, excluding energy prices, with a very good heating season in Central and Eastern Europe. We register less flexibility services marginally benefit from the heat wave in Q2, boosting our electricity sites. Energy prices were down year-on-year, but as you know, it is regulated and our margin are protected.
Excluding the energy price impact, growth was quite good, +2.7%, with a strong activity in the booster energy up 4.7%. The revenue bridge on slide 23 explain the driver of our resilient growth in H1 2026. Price impact reversed in Q2, as I just indicated. Scope was positive by EUR +189 million, including as waste take-ins and one month of consolidation of Clean Earth. The impact of energy prices was as expected, more than divided by two, and recycled prices were slightly negative due to mostly paper. The water effect amounted EUR +84 million. The contribution of commercial volume and pricing was +1.2%. Let's focus on the EBITDA bridge, which illustrates our strong operational performance. Forex translation impact become positive in Q2, EUR +4 million and EUR -29 million for H1, representing less than 1% of EBITDA. It's not significant at net income level.
Scope effects 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 in Q after the crisis in the Middle East, which we progressively pass through to our clients. Weather effect continue 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 break down into EUR 130 million from net efficiency gain, which is a very good record pension rate thanks to action plan implemented across Europe. Fuel surcharge invoicing, EUR +20 million from Water Technology synergies. The volume and commerce contribution was much more robust than in Q1 at EUR 52 million.
This bring 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 illustrate 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 faster pace than EBITDA. Let's highlight amortization and [inaudible] 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 cost 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 on June 25, several take-ins, and lastly, the closing of Clean Earth.
This was due to the combination of a well-controlled cost of debt at EUR -371 million and lower other financial charges, coming notably from foreign exchange results. In H2, though, I remind you that we'll bear six 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 non-current item. Given our strong H1 performance, the very promising first month of Clean Earth, we are slightly improving our objective, which now include Clean Earth consolidation.
Moving to net income group share, I'm on slide 27. Non-current charges increased by EUR -50 million due to higher integration costs associated with the Water Tech merger and Clean Earth integration. Non-current impairment, PPA, other charges include the specific Clean Earth acquisition cost. Net income group share reached EUR 682 million, up 3.8%. Now, free cash flow generation, which is key, and net financial debt. I'm on slide 28. I'm 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 EUR -2.9 billion, including Enviropacific and Clean Earth.
In term of our net debt, 76.6, our net debt liquidity is very solid. Our balance sheets, 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 three times. As usual, our dividend will grow in line with our current EPS. As you see, we are very confident for 2026. We deliver a strong H1, resilient growth, and robust underlying EBITDA progression well in line with our net guidance. In addition, I'm also very confident in the delivery of our EUR 2 billion disposal plan by mid 2028.
All processes are ready, launch, and we are expecting around EUR 500 million signed by the end of 2026. 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.
Thank you, Emmanuelle. Now we are ready to take your questions.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star followed by the number two. One moment please for your first question. Your first question comes from the line of Arthur Sitbon with Morgan Stanley. Please go ahead.
Hello. Thank you very much for taking my questions. The first one is on the change in guidance. 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%-6% range, from what we can observe in H1. I was wondering, what is driving that higher conviction, that stronger conviction on net income for the year? Given it's not organic EBITDA, I assume, is it perimeter maybe with disposals coming more in 2027 than in 2026? Is it FX? Is it something below the EBITDA line? A bit of color on that would be helpful.
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 net income as well as energy prices. I would be quite curious to have a bit of an update on that. Thank you very much.
Thanks for your question. We'll 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 Clean Earth. Given the fact that Clean Earth was dilutive, say around 1%, this is what we're talking about in terms of net result improvement of our guidance. What gives us confidence to do it? One is, the first half was very good result with 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. It's not the question of disposal, which were later rather than earlier. We are really exactly on our trajectory that we had anticipated with regards to disposal. forex, again, it's the same.
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. It's more the small flow which makes big rivers rather than a big one thing, which explain why we are raising our guidance in net results. 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 the delay in recouping the margin, in terms of our indexation formulas, which will be in H2.
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. 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 effects of forex, all that, Emmanuelle, do you want to elaborate or-
Yes, with pleasure.
maybe given guidance as well?
Yeah. Good morning, Arthur. Thank you for your question. As you have seen, we are very happy with the performance of the bottom line and of the margin. Net income jumped by 10.4%, which is more than largely in line with our annual guidance. The move that we have done on the guidance, it is linked to the bottom line of our P&L. With stable financial charges, which is excellent when considering the higher average net debt linked to our M&A operation, and also thanks to the stable and modest tax rate of 25.8%. As you have said, it is 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 is linked to the evolution of dollars and the appreciation of some foreign currencies.
When we have guide beginning of the year, we have communicated around a forex impact which was estimated at EUR 100 million. We cannot have a perfect estimation of forex, but our estimation today, it is EUR -50 million compared to the EUR -100 million that we have communicated. If we are using the forex rate of the 21st of July, it give us the forex impact, which is between EUR -50 million and zero. That our best estimate today is EUR -50 million.
Altogether, it is improving. I just wanted to add to what Emmanuelle said about forex, a few things which we know, but you know, but I am just repeating them. Which is, forex for us is only a translation, not transaction, so it has no impact on our margin rate, as we have demonstrated again, last year, the year before, and this year. This is nothing to do with our margin rate. 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. It is kind of four-fifths of it vanishes when it comes to net result. I am just doing the link with the previous question you asked. On energy, maybe Emmanuelle.
Yes, on energy cost. On energy cost, you have seen that in the bridge, the impact on EBITDA was EUR -60 million. A bit less than 50 of it was linked to the evolution of our edge electricity prices, the rest was linked, of what has been mentioned in the call by Estelle and myself, is the increase of fuel prices within 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 where you don't have indexation formula. For the 70% of the rest, part of it had been passed. You know that we have a bit of timeline, which can go to 6 to 12 months, meaning that we'll fully have passed it in H2 or beginning of Q1 next year.
Thank you very much.
The next question comes from the line of Ajay Patel with Goldman Sachs. Please go ahead.
Good morning, and thank you for the presentation. Look, I think I want to just revisit the earnings again. In the first half, you achieved 10% growth. 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 nine? Why not 10? I'm just making sure that I'm not missing something for H2 when it comes to the modeling. 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, therefore we should be thinking about that as a run rate going forward? Then on the asset rotation, we talk about the EUR 8 billion of asset rotation in the last four years. Is that more reflective of the run rate we should be thinking going forward, that this isn't 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 strategy? Thank you.
Thanks for your question. Do you want to take the first one, Emmanuelle?
Yes.
Why are we so modestly increasing our guidance by only roughly by 1%, Emmanuelle, on net results?
Yeah. Good question. Hi, Ajay. Just for you to have in mind that when we have defined our guidance of 8%, 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 six months of financing on Clean Earth that we were not having in H1. Now it has been slightly adjusted as we have one month of financing, which is June, and we'll have six months of financing. That's the explanation. Meaning that when we forecast our guidance, it was strong H1, close to 10%, and lower H2 between 7% and 8%.
In terms of your second question of can we 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 Ukraine 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. 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 increase. 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.
If we can do more, we will always be in this type of mindset as well. That's what I can tell you. 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 won't discourage you to think that.
Given again that we've enhanced 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. In a way, that's a strategic asset rotation. Strategic and 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. That's why we are continuing with tuck-ins. Typically, like we demonstrated in the first half, 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 rules of either non-strategic or mature of not in the top three, and we're constantly reviewing the portfolio to see if we can be better. That's why I've mentioned in my introduction speech that we had already launched processes for more than the EUR 2 billion of asset divestitures just to have a room for maneuver and to be able to go from plan A to plan B in case. I guess, 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 token, we will go on looking for them, and if we have a divestiture, which would make sense and value creation, we will as well.
Okay. Thank you very much.
Your next question comes from the line of Peter Crampton with Barclays. Please go ahead.
Good morning, Peter Crampton here from Barclays. We are obviously got this big heat wave going on right now in Europe. 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 it is obviously a really bad heat wave. Should we worry about risks as well, or what are your thoughts on this? Thank you.
You are right. In Europe, but I must say it is not only in Europe, although it is particularly striking in Europe this summer. We have heat waves, droughts. I read an article yesterday saying that three quarter of the U.K. was in drought situation and in some drought situation now, which is probably less expected than Spain, which we have talked about for quite a few years now, which is as well in this.
Altogether, I do not want to let you feel that I am a bit cynical, but all that is pretty good for Veolia eventually. Why is that so? Because it supports the need for our services. 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 projects or desalination unit at times for AI to detect leakage and all that.
We have incoming call following heatwaves or for even district cooling, which we've developed in Saclay, for instance. Altogether, mid-long-term is a positive and a support to our services, which are critical needs. Even in a way, in the Middle East, with the critical nature of desalination units. In terms of the immediate situation, as in 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. That's the first bit.
In terms of the large fires which you have in France and in Spain, to a lesser extent, the heat waves, it has a modest negative impact, although on the short-term economy, because everything is closed at times and you have tourism going down so on so forth. I guess the waste activities or we even have motorways which are closed where your trucks cannot just get into our plant, stuff like that. I guess on the waste side, you have a modestly negative. On the water, it's largely positive. Just to give you a global picture.
In terms of energy, as in heating and cooling, short-term, we don't have that many networks, 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 environmentally speaking. I hope that answers your question.
That was very clear. Thank you.
Your next question comes from the line of Bartlomiej Kubicki with Bernstein. Please go ahead.
Morning. Thank you very much for presentation and taking my questions. 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 two related questions. First of all, what will be the impact of the PPA on the reported net income? What will be the recognition of PPA on an annual basis? Also, how much the reported net income growth will lack the recurring net income growth giving, I assume, in 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.
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. 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 and your businesses. Thank you very much.
The PPA and everything. Obviously, we haven't done the full exercise of PPA. We just have the case of Clean Earth for what, a month or something. We are really just starting. But maybe you will be 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 has decreased. In other words, the difference has decreased. I guess the restructuring costs are more on the management side. If you exclude, of course, the cost of synergies, which is in a different category, in my opinion, than the restructuring cost as such. I guess the restructuring in a classical sense is really on the reduction side.
You have the cost of synergies, which is a benefit or almost an investment that you take the benefit from the synergies eventually. On that one, maybe Emmanuelle?
Yes, with pleasure. First question on PPA. Have you seen Batrec? Good morning. 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 test 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 non-current, 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 50 million. As you know, it will be non-current. As you know, dividend is based on current net result. 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 amount of restructuring cost was the same than the amount of synergies that we were going to deliver. The amount that had been communicated on restructuring costs for Clean Earth, it was below the $120 million of synergy that we are targeting. It was around EUR 90 million. Although I would tend to call it cost of synergies rather than restructuring, which for me is something different. Cost of synergies.
Of course, it's more integration cost than restructuring, in a way. Integration cost, you're right.
For the two other questions.
For the disposal, I'm very happy that we are really exactly well on track to deliver our EUR 2 billion by mid-2028 with EUR 500 million signed this year. I won't give you the full detail of it. Of course, in terms of scope, there will be a bit of negative of EBITDA and revenue and so on so forth. The thing you can retain from that is, of course, what we invest has a higher margin than what we divest. 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 ETS?
Nothing to add on that one. Fully align with you.
In terms of ETS and CO2. A few things. First things first, this is only a 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. In a way, it's a cost which local authorities will bear, and therefore, potentially the taxpayers' money rather than the company's P&L. Second, the date of application is 2034, again, potentially assuming it will be voted and blah, blah, which gives a little bit of time for customer to react, between 2031 and 2034. The biggest bet I have is probably 2034.
The third thing is that it will leave time for local authorities to try and see what they can do to avoid hitting their own budget. One counter 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 energy from waste which is connected to a district heating, basically you avoid the ETS. 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. Last but not least, health authorities are not concerned, which is normal in my opinion, given the fact that they're protecting health and it's a very different story. That was a confirmation.
Thank you very much.
Your next question comes from the line, Philippe Ourpatian with Oddo BHF. Please go ahead.
Yes. Good morning, Philippe Ourpatian speaking. I have three questions. The first one is, when we are looking at the volumes of Water in France, we are +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 at the fact that July was worse in terms of heatwave for the French volume and more extended for the European volume because Spain is currently suffering from heatwave. That's the first question. The second one is, I have just seen that there is a declining maintenance CapEx. My question 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, a deviation in terms of diary or, I would say, planning of outages.
I would say planned outages of your units. That's the second question. The last one is, the retention rate you show, in terms of efficiencies, 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. Many thanks.
Thank you. You're very well. All our figures, I can see. In terms of Water France. 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 a weather prediction. What I can tell you is, you're right. The volumes of Water France in June, it was less the case in April, but it was okay in May and very good in June. 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 Water France, and they will go the reverse next year.
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, the indexation formula is positive and should be positive going forward, 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. We should have a good water summer altogether in Europe. Can I give a specific figure? No, I cannot. We have no idea what the weather's going to be like in a few weeks' time, but I expect it to be really good.
In terms of the maintenance CapEx, the global figures for us is 50/50 maintenance CapEx or growth CapEx. You're right, the maintenance CapEx was well under control in the first half of the year. This is in part when I say we're piloting the group and the war in Iran started, we said, "Okay, we have to react quickly." Part of it was fuel surcharge, part of it was enhancing efficiency plans, like I explained, part of it was to say, "You know what? Let's try to generate the most cash possible in the first half of the year and put maintenance CapEx under control." Do you want to give a bit of color on that one, Emmanuelle?
Yes. On that one, Philippe, you're absolutely right. 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, 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. Maintenance CapEx for us, it's key. We don't want to have, as we say, plants in paper. That's not the target. We'll continue to have a balance around 50% to 50%. Which is important has been mentioned by Estelle, is 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.
I think that what we have delivered in H1 with the progression of free cash flow is the proof of that.
Retention rates.
On the retention rate, we were very satisfied with the 56% retention rate we have delivered. You're right, it's above our average rate that we have usually, which is between 30% and 50%. It's linked to the additional action plan which has been launched. It's control of costs, it's additional efficiency, it's reduction of travel, it's renegotiation of fuel prices. You have a huge amount of measure behind that. Of course, also the contribution of ER, which was very good last year. You remember it was 22% of our efficiency that we have delivered, and it will continue to contribute in 2026.
The 30%-50% range is still the good proxy for us on the midterm. Of course, each time we have a specific hit like the war in Iran, we are trying to be on the upper range of this with the type of enhanced efficiency plan we deliver.
Many thanks.
Piloting is, I guess, the key word in everything we've just said with Emmanuelle.
All right. Thank you. Your next question comes from the line of Juan Rodriguez with Kepler. Please go ahead.
Hi. Good morning. Thank you for taking our questions. 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 or more than 100 basis points improvement on margins that you had on the water and waste segments. As you signal that you still have the negative indexation effect on margins. 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? 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 on margins? Thank you.
I guess the EBITDA margin, 70 basis points for the first half. I think if I remember, the last two years we were at 120 basis points, we are constantly trying to grow our margin. Which doesn't mean that it will be the case naturally quarter specifically on water. It's more a mid-term trend, which is the result of two things, efficiency plan and repositioning under strategic portfolio management. That's really the two of them. Efficiency plan, of course, each time it means it enhances the margin rate. Same applies when you invest in higher margin and divest in low margin, if you want, and outside Europe versus inside Europe. That's the global picture.
You're right that in a way, I'm very confident about H2 because despite this cost squeeze we had in H1, we were able to still increase our margin by 70 basis points. 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 good improvement of margin and EBITDA. The temporary nature of it is basically linked with the war in Iran, directly with the typical 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 industries wait-and-see attitude for everything to do with their effluent treatment and things like that. That's the global picture. This is temporary.
That's why we've talked about a rebalance starting in H2 without the project and probably including the project in 2027, something like that would be my best guess. 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. Noticing that on the different segments we're offering services to with the Water Tech, as I mentioned, the oil and gas and the desal will be more-- Not the oil and gas, the refinery. The downstream bits and the chemicals will be more on the negative side. Will be the desalination on the negative, as in the growth is more like a postponed till better news from Iran. On the positive side, the micro-e is really good, and we have a good order book and a very strong pipeline.
I've mentioned in my speech as introduction that we've already been ordered EUR 343 million of orders only in micro 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 ultrapure water, just to give you an example.
Quite useful. Thank you.
Once again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Charles Swabey with HSBC. Please go ahead.
Hi. Good morning, everyone. 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 that's from the pricing or a bit of both? Thanks.
An interesting question. I guess hazardous waste Europe 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. Unless there is a big storm and two weeks of everything almost being shut down like we've had in the first half of the year, we should be back up. The EBITDA growth was very good as well. I want to notice as well. H2 should be good. We see a very good demand for high temperature incinerator in particular. 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 this type of things for a few months before the election and just after the election until the new elected members are just seated. The demand is high. We are very happy about it. What you could expect as well, you remember that we are progressively building and ramping up five new facilities across the globe, which will eventually give us almost 500,000 tons 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. We've had the first fire in Germany in June. It is there as well for the second half and for 2027 and for 2028 and onwards as well. The demand is high. I'm happy about those specific ones.
Hazardous waste in the U.S. was good. The first month of Clean Earth was good as well. 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.
Great. Thank you.
Your next question comes from the line of Olly Jeffery with Deutsche Bank. Please go ahead.
Thanks. Good morning. Two questions from me, please. The first one is, they're both kind of medium-term. 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 heading much further into the cleaner integration process, are you giving any consideration to doing an off-cycle medium-term update of full year results or should we expect the normal cadence and therefore an update coming in 2028? The second question is on corporate tax. If the high corporate tax in France is extended in the budget, should we expect what happened last year and presumably this year, It was a very actual minor effect on the bottom line, given where your interest costs are and low PBT within France. Thank you.
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, that's exactly what we're doing. We'll give you updates probably more when we'll launch the new strategic plan. In the meantime, we'll have a yearly update via our guidance. 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 2027 as well. I think you have a lot of material. As I answered to a question which was previously asked, we're not stopping here. 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, I hope lots of people will join it, either physically or online. In terms of tax, you're right, we'll probably come into an interesting budget discussion, budget as in budget for the country, not as budget for Veolia, in the autumn. 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 carry forward in France, for instance, just to give you an idea. We've been through that last year. It was marginal for us, and probably we'll go through this again this year. I'm not nervous about that.
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. Nothing to worry about. It's not the order of magnitude and the ballpark of what would matter for us. Even if the corporate tax were to stay the same, it wouldn't change much. You wanted to add something, Emmanuelle?
No. Good morning, Olly. Just to say that, for us, it is and it will be non-significant for two reasons. The first one is that, as you know, we have lost guide forward. The second element is that, as you know, in France, 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. 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're able to compensate whatever happens. For us, first, it's super small, we will be able to compensate it. Second, we have the strength of the model.
Thanks. Makes sense. Just good to get that confirmation if that were to happen.
If. It's not our politician debate.
All right. Thank you. I'm showing no further questions at this time. I would like to turn it back to Ms. Estelle Brachlianoff for closing remarks.
Thank you very much for your attending today. Very happy about the H1 results. Very confident about the second part of the year, hence enhancing the guidance. I hope you'll have a very nice summer wherever you go. See you in September for a lot of you with our various events and what we have organized. Thank you very much.
Thank you. This concludes today's conference call. Thank you all for joining. You may now disconnect.