French utilities group Suez Environnement reported a 5.0-percent rise in underlying profit for the first nine months of the year on Thursday, but international sales fell on completion of a huge desalination project in Australia.

The group said that the waste management business in Europe rallied in the third quarter, and that its overall activity had "steadily improved" since the beginning of the year.

Shares in the company gained by 3.24 percent to 13.05 euros in initial trading, beating the wider French market which was up 0.32 percent.

Chief executive Jean-Louis Chaussade commented: "Although the economic environment is still tough, the third quarter appears to show some signs of an improvement in Europe, and the group is ready to continue its expansion."

The group, a world leader in the treatment of water and in waste management, said that earnings before interest, tax depreciation and amortisation (Ebitda) had risen by 5.0 percent in the nine months to 1.86 billion euros ($2.56 billion).

But sales fell back by 2.7 percent to 10.8 billion euros.

However, the company stood by its targets for the year.

At brokers Aurel BGC, analyst Fabien Laurenceau commented that the Ebitda results were better than had been expected but that the sales figures were not so good.

The latest results showed an Ebitda result in the third quarter of 640 million euros from sales of 3.64 billion euros, about in line with average estimates by analysts polled by Bloomberg news service.

The gross operating margin for the nine months rose to 17.2 percent from 15.9 percent at the same time last year.

Suez Environnement said that changes in exchange rates had had a negative effect on sales amounting to 154 million euros or 1.4 percent of the nine-month total.

Sales by the waste management division in Europe fell by 3.8 percent over the nine months to 4.87 billion euros, but had rallied by 0.3 percent in the third quarter, on a 12-month basis.

Water treatment activities in Europe grew by 1.6 percent to 3.26 billion euros.

This was pulled by a 5.3-percent increase by Spanish business Agbar. However, the original business of the group in France, Lyonnaise des Eaux, reported a fall of 0.2 percent in sales.

International activities fell by 5.2 percent, but this reflected the completion of a desalination plant in Melbourne, Australia.

The company said that in the fourth quarter, it would recover a provision of 58 million euros following settlement of disputes relating to this project.

Finance director Jean-Marc Boursier said during a telephone press conference that the markets in France, Britain where the government is pushing hard to develop incineration of waste, and in Scandinavia were showing signs of improvement.

Boursier said it was too soon to give an outlook for 2014.

A recovery of the economy in Europe would be important for the group which generates 36.2 percent of its sales in France and 34.4 percent elsewhere in Europe.

At the end of September, the share of non-European sales was 29.4 percent.

The main competitor, French group Veolia, is to publish its latest results on November 7.

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SUEZ ENVIRONNEMENT

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