Veolia Environnement SA

PAR:VIE

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, welcome to the First Quarter of 2020 Results Conference Call of Veolia. I now hand over to Antoine Frérot, CEO; Claude Laruelle, CFO; and Estelle Brachlianoff, COO. Gentlemen, the floor is yours.

[Antoine Frérot, Chairman & CEO]

Thank you. Good morning, ladies and gentlemen. And thank you for attending this conference call on Veolia Q1 2020 results. I am this morning with Estelle Brachlianoff, our COO; and with Claude Laruelle, our CFO. I will first, with Estelle, present the key highlights of our activity in Q1 and explain our action plan to face the COVID crisis. Claude will then give you details on Q1 performance and results. And finally, we will take your questions. So I begin, and I am on Slide 5 of the slide show. We've had a very good start of the year, with January and February showing continued, solid growth, in line with previous years. The COVID crisis has, of course, strongly impacted the month of March. Overall, the impact of COVID on our Q1 activity results has been moderate. Revenue is down 0.5% on a like-for-like basis. The COVID impact is estimated at around minus EUR 200 million, and without COVID, the revenue would have increased by 2.3%. The impact of COVID on EBITDA is estimated at minus EUR 80 million in Q1. EBITDA is down 2.9% on a like-for-like basis, and without COVID, it would have grown by 4.8%. This EBITDA effect impacts current EBIT, which is down 13% compared to Q1 2019. Without COVID, current EBIT would have progressed by 4.7%. Cash is, of course, very closely and strictly managed. Net financial debt stood at EUR 11.5 billion at the end of March, down EUR 400 million versus last year. The group's liquidity position is very strong, totaling EUR 9.6 billion, of which EUR 5.4 billion of cash and EUR 4.2 billion of undrawn credit lines. And I am now on Slide 6. Veolia is obviously fully mobilized to face the COVID crisis. Until mid-April, we had 2 operational priorities. First priority was to provide all our essential services, municipal water, municipal waste collection and treatment and district heating, with backup teams in case of contamination and also to ensure our other activities for which all our facilities have remained open, though activity has slowed. Second priority was to ensure maximal protection for our employees in terms of health, first, but also on the economic front in order to maintain their [indiscernible] during the crisis. Since mid-April, we have added 2 new priorities. The first one is to be able to welcome back all our employees at their place of work as of the first half of May with reinforced sanitary safety and without fear of contamination. Our objective there is for our employees to feel safer at their place of work than anywhere else. Finally, the last and fourth operational priority, and I'm now on Slide 7, is to restore as quickly as possible a normal activity rate for those sector which have been reduced or stopped, construction, maintenance and industrial services. Asia is now recovering vigorously. And in Europe, industrial sites are reopening, and construction works have resumed. Moreover, our commercial activity has remained vigorous, like, for instance, in Korea or with the deployment of a new offer of disinfection of our office buildings and industrial sites already commercialized with success. To date, the 3 first priority targets have already been met, and the fourth one is progressing, currently happening. Meanwhile, and I am now on Slide 8, we have been managing cash very closely. I've already mentioned the very strong cash position, a liquid position of the group. CapEx on the existing perimeter has been reduced, but gross CapEx and M&A end up fueling our future growth, are maintained. I have also already mentioned the moderate impact of COVID on our Q1 results. This impact will be stronger in April where the situation was comparable to the last 2 weeks of March, but it will improve as of May. In order to face this impact, we immediately took strong mitigation and adaptation measures. They include, in 2020, exceptional cost cutting of EUR 200 million, which comes in addition to the EUR 250 million cost-cutting objective for the year; as well as of EUR 500 million of reduction in mainly maintenance and contractual CapEx. These actions, on which Estelle will provide the details, are going to bear fruit from Q2 and until the end of the year. Estelle, the floor is yours.

[Estelle K. Brachlianoff, Chief Operating Officer]

Thank you, Antoine. Antoine has just highlighted the impact of the sanitary crisis and even more so the associated lockdown measures on our activity in Q1, which is EUR 192 million sales or about 3% and minus EUR 90 million in EBITDA. These figures, however, are very different from one business segment to another and from one geography to another. By business segments first. We see the essential services we are providing to municipalities as well as our services to hospitals or pharmaceutical customers have been very little impacted. We have even benefited in some cases from additional work orders or increased volumes. On the one hand -- on the other hand, sorry, construction as well as on-site services for car manufacturers has been almost completely halted upon our client requests. In between, we are satisfied by the relatively good resilience of the hazardous waste activities, thanks in particular to a well-balanced client mix. What we call C&I, so which is the commercial and industrial waste collection, has been more impacted with volume halved during the lockdown periods. By geography now. In Asia, we have hit a low point in February, and we've since observed a gradual recovery in China. In Europe, as Antoine highlighted, most countries have been locked down since mid-March with the lowest point of activity probably reached around mid-April. In Latin America or in Africa and the Middle East, the epidemic peak has not been reached yet, and we are closely monitoring invoicing and cash collection there. I'm now on Slide 10. And to say that, of course, the situation is evolving quite fast, and with Antoine and Claude, we are monitoring weekly activity levels by geography, which is what you see on that slide with a few examples. So typically, on the left-hand side, you have the construction activities in France with SADE and VWT, which have been practically stopped until mid-April but which seems then are progressively recovering. So you can see that on the graph. Our hazardous waste facilities in China, which have reached the lowest point at 75% capacity utilization in February, are recovering rapidly with 92% as we speak. Regarding our hazardous waste facilities in Europe, we've hit a lowest point in week 16 and are seeing some progressive increase since then with, in particular, the reopening of civic amenity sites. In the U.S., our hazardous waste plants have been utilized at full capacity during the whole months of March and April. Altogether regarding hazardous waste activities, we still enjoyed a 6% growth in revenue over the first quarter in this activity, which is quite good. Now I'm on Slide 11 with our mitigation measures and our Recover and Adapt Plan. So to start with our initial 2020 target of EUR 250 million. Very happy to see that with EUR 64 million of savings achieved in Q1, we are perfectly in line with these initial targets. And we haven't waited for the end of the crisis to launch a new ambitious plan, the Recover and Adapt Plan, which includes EUR 200 million of additional cost savings in 2020 as well as EUR 500 million of CapEx reduction. All our BUs and all our geographies are mobilized to contribute to this exceptional cost-cutting plan, which is addressing almost all our cost lines. Just to give you a few examples. We are, of course, reducing all our G&A expenses. Travels, external expenses are cut sharply and all recruitment frozen. We are renegotiating contracts with our suppliers to reduce lease costs, for instance, during the crisis period. We are reducing subcontracting, developing internalization to promote internal employment. We are as well adjusting repair and maintenance planning to postpone the works, which are not necessary when some assets have been unused for weeks. And of course, we are using the various government scheme of furloughing, but we have also been cutting temporary labor very sharply.Just a specific mention on our digital road map, which I'm very happy to see it has allowed us to put in place those initiatives quite swiftly as the tools and the teams were ready. I can say that some digital projects have even been accelerated. I'm on Slide 12 now. Regarding our 2020 CapEx reduction plan, which is minus 20% on the initial budget, the rule is very clear. Priority is given to growth projects, which will fuel profitable growth in the future and starting now. And conversely, we will significantly reduce CapEx from existing assets. Besides those cost-saving measures, I must say our relationship with our clients as well as our very specific and powerful client mix has been key during the crisis and will continue to be so thereafter. Our large portfolio of municipal clients but also the pharmaceutical clients, the food and bev or the hospital ones we've got, all those relationship has been reinforced by the crisis. Not only have we been able to answer their normal, I would say, their contractual needs, but also face their exceptional demands. We have, for instance, launched a very large-scale offer of disinfection for public buildings or industrial facilities in half a dozen countries. We've registered an increasing demand for our medical waste treatment services as well as for indoor air quality services. And finally, we've been reflecting on our processes in order to keep up with some good ways of working we have implemented in the last few weeks. When we are out of the crisis, we want to remain even more agile, leaner and digital than we were before. In summary, we will continue to seize all opportunities to continue to reduce our cost base and enrich our offer.

[Antoine Frérot, Chairman & CEO]

Thank you, Estelle. To conclude these highlights. It is certainly too early to accurately assess all the consequences of the COVID crisis for our 2020 results. That is why we have suspended our initial guidance. Strong mitigation and adaptation measures have been put in place. We will cut 2020 CapEx by EUR 500 million, and we have added EUR 200 million of cost-cutting to our annual objective. But I am convinced that our strategic program, IMPACT 2023, presented at the end of February, remains completely relevant. Of course, its implementation is delayed and its planning will be adapted. The strong financial, commercial and technological capabilities of Veolia will allow space to pursue our ongoing and very promising development projects and to seize the best opportunities that will arise when the crisis ends. Our mission to become the benchmark company for ecological transformation remains unchanged. I now hand over to Claude Laruelle, who will give you more details on Q1 results. Claude, the floor is yours.

[Claude Laruelle, Chief Financial Officer]

Thank you, Antoine, and good morning, ladies and gentlemen. I'm on Page 15, where you have the main figures for Q1. As Antoine told you, the revenue was resilient, minus 0.5% at constant scope and ForEx, with a moderate effect from COVID, minus 2.8%, that occurred mostly during the second part of March in Europe. The underlying growth without COVID is plus 2.3%. EBITDA was more impacted, minus 2.9% at constant scope and ForEx, with COVID impact for more than 7%. The underlying growth is 4.8% without COVID impact. EBIT was down further, minus 13.3% at constant scope and ForEx, due to the EBITDA decrease, less provision reversal and a lower contribution from our Chinese JVs, as we will see later in the presentation. Without the COVID effect, underlying EBIT growth was 4.7%. Our free cash flow was very close to the 2019 in Q1 at minus EUR 595 million with the usual impact of the working capital in the first quarter of the year and a good management of our CapEx, leading to a net debt of EUR 11.5 billion. On Slide 16, we have split the first quarter into 2 phases. The 2 months of January and February showing a good trend in all our segments, as Antoine said, plus 1.2% with a good start in France, with a good start in water and waste; plus 3.1% in the rest of Europe despite a mild weather in Central Europe. The minus 1.2% for the Rest of the World includes the district heating disposal in the U.S. Excluding that effect, the segment was growing at plus 5.7% in the first 2 months of the year and plus 4.9% in our Global Businesses with all activities performing well. You can see the COVID effect in March, as it has been described by Estelle. A significant decrease in France, minus 11.1%, due to our waste activities and the impact on commercial and industrial waste. The water volumes remain solid. And in Global Businesses, minus 18.3% due to the very strong impact on the construction activities in France and the on-site services. For example, the PSA Group decided to completely shut down its operation in Europe, leading to a significant impact for our industrial service activities. The Rest of Europe is less impacted, thanks to the resilience of Central Europe, where our activities are mostly municipal and also the lockdown in the U.K. that came later in the month. For the Rest of the World, U.S. and LatAm activities are almost not impacted as the lockdown came later as well at the end of March. Asia is still growing with plus 2.2% in March despite the COVID. This is due to the strong [indiscernible] growth in that region. Let's move to Slide 18, where you can see the usual revenue bridge. ForEx had a very little impact in Q1, and the scope effect is mostly due to the district heating disposal in the U.S. The minus EUR 192 million COVID effect is mostly coming from Europe. As we said, Europe lockdown had a significant impact in March. Asia impact is much more limited in terms of revenue. But as I said, growth is slower as the COVID is delaying our ability to grow in that region. You can note the good start to the year with the strong commercial effect, EUR 120 million, and the price increase of EUR 80 million coming from the decision we have taken to continue to increase our waste prices and the positive impact of the price indexation in French water, plus 1.5%. Moving to Slide 19. You have the translation of the revenue impact into EBITDA with a very small ForEx impact, again, scope coming mostly from the district heating disposal in the U.S. and COVID effect, minus EUR 80 million coming mostly from Europe. There were much less impact in Asia from COVID, and Japan had a good Q1, thanks to good municipal water activity. The mild weather in Central Europe led to a minus EUR 9 million effect in Q1. And the magnitude of the cost-cutting continues to be strong with EUR 64 million in Q1, in line with our EUR 250 million target for the year. As Estelle said, we continue to implement our cost-cutting plan despite the crisis and the lockdown. This figure doesn't include the additional EUR 200 million plan that Estelle mentioned earlier. Moving to Slide 20. The waste activity grew in Q1 by 1.6% at constant ForEx, thanks first to the pricing policy that we have implemented, leading to a significant 2.4% price increase in Q1, especially in the C&I collection and in hazardous waste treatment. In the very specific context of Q1, the waste volumes are resisting quite well at minus 1.8%, keeping in mind that in the meantime, 30% of the economy was shut down since mid-March in Europe, where we have most of our waste volumes. We have estimated the COVID impact at minus 3.5%, which is close to the GDP drop in Europe for that period. Incineration continues to run well in France and in the U.K., whilst in France, sorting was reduced. We had our lowest point in France in early April, and we are seeing a pickup on volumes at the end of April. U.K. had a good Q1 with more volume due to the tax on foreign waste imposed in the Netherlands and the late implementation of the lockdown. U.S., very small impact on volume from the COVID in March, it will come in Q2. Same for Pacific. For hazardous waste in Europe, we experienced a low point the first half of April and some improvements since then. On Slide 21, you have more details about the EUR 64 million cost-cutting achieved in Q1. Again, this number does not include any of the EUR 200 million plan we mentioned earlier. As you can see, despite the COVID, we continued to implement our savings plan. As I said, we are rolling out our standards of digitalization processes across our operations. That explain why the operational savings are representing 55% of the total savings for the quarter, in line with what we did last year. I'm now on Slide 22. The COVID effect on EBITDA, minus EUR 80 million, is translated into current EBIT where the drop is slightly higher, EUR 87 million, compared to last year. This is due to the negative impact of the COVID on the Chinese water concessions volume for EUR 7 million, leading to EUR 392 million of current EBIT for Q1. If you exclude the COVID effect, current EBIT is up 4.7% at constant scope and ForEx. On Slide 23, the COVID impact of EUR 87 million at current EBIT level translates into EUR 63 million at the current net income level after taxes and minorities. On top of that number, in Q1, we have less capital gains this year as last year, we had the Foshan disposal in China with a capital gain of EUR 18 million. Due mainly to those 2 effects, current net income is down by EUR 88 million compared to last year at EUR 121 million. If you exclude the capital gains, the difference is reduced to minus EUR 72 million with current net income at EUR 117 million this year. And if you exclude the COVID effect, current net income is up 3.9% at constant scope and ForEx. Moving to Slide 24. We have solid financials at the end of March 2020, thanks to a good management of our CapEx with a 10% reduction in Q1. We have maintained a good level of discretionary CapEx at EUR 68 million, of which 50% in Asia to prepare the group for the postcrisis recovery. As Antoine told you, we will continue to invest on discretionary CapEx and reduce as much as possible maintenance and contractual CapEx. The net free cash flow at minus EUR 595 million is in line with Q1 2019, thanks to a good management of our working capital, which is comparable to Q1 2019. This leads to a net debt of EUR 11.5 billion at the end of the quarter, lower than Q1 2019, thanks to the divestiture of TNAI in the U.S., partly offset by new M&A projects. On Page 25, you can see the different items of the net financial debt variation, including the net financial investment, new acquisition closed in Q1 for EUR 287 million. The largest portion of it is the Alcoa acquisition, a very large hazardous waste site in the U.S. that we presented on February 28 with a very large landfill and 2 incineration units. Moving to Page 26. As our activity is quite predictable, we used to manage the cash on a weekly basis with a detailed review with our treasury department. Since the beginning of the crisis, we have put in place a very close monitoring of our cash position at group level on a daily basis. This is helped by the cash management improvement plan that we put in place 2 years ago to better manage our cash position, the receivables and the cash forecast in all geographies. At the start of the crisis, we also focus the attention of our BU CFOs on cash management at their level but also on back-office management, invoicing and collection. Invoicing is a key function that is running well, thanks to the digitalization effort that we have implemented everywhere in the group, as Estelle mentioned. As you can see on the slide, Veolia has a very strong cash position and a robust balance sheet. And we were entering into the crisis with a leverage of 2.66 at the end of 2019. This allows Veolia to be in a very robust cash position to face the crisis. On the cash side, we have in hand EUR 4.5 billion of cash at the end of March. And we have reinforced this position with a recent issue of a EUR 700 million midterm note on April 7. On top of it, we have EUR 4.2 billion of undrawn confirmed credit lines and no significant bond repayment before November 2020. Finally, our BBB rating has been confirmed by S&P in April. On Slide 27. As a reminder, we have put the bond repayment schedule by quarter from 2020 to 2023. We have already refinanced Q4 2020 with the 2 midterm notes issued in January and April for EUR 1.2 billion. So 2021 and 2022 refinancing are not a problem. On Slide 28. As Antoine said earlier, the 2020 guidance is suspended, and we are taking strong adaptation measures to face the crisis with the new Adapt and Recover Plan with EUR 500 million of CapEx reduction and EUR 200 million of additional cost cutting. Thank you very much.

[Antoine Frérot, Chairman & CEO]

Thank you, Claude, and the floor is yours, ladies gentlemen, for the questions.

[Operator]

[Operator Instructions] We have the first question from James Brand from Deutsche Bank.

[James Brand, Research Analyst]

I have 3 questions. I have 3 questions. So the first is on the cost cutting. So you highlighted the additional EUR 200 million of cost cutting. I just wanted to confirm what's included in that, because it seems a little bit of a mix of temporary things and potentially more sustainable areas of cost cutting. But I just want to confirm, does that include all of the COVID response, that includes the kind of temporary redundancy plans and the savings from kind of lower fuel costs or less kind of visits from kind of trucks? Or just in terms of scope, what's included in that? And then secondly, on cost cutting, how easy are you finding it to cut costs? Because we have Suez report results last week, and they were saying they were actually finding it a lot easier to variabilize costs and that turned to kind of fixed -- the costs in April, fixed in the past, have become variable and that they've actually done a bit better in terms of cost cutting. The second question, you mentioned the EUR 500 million of CapEx reductions. I was just wondering whether that impacted on any of your revenues under your contracts because some of your contracts, obviously, they have CapEx kickers, and you get -- your revenue's rise reflects CapEx. So just wondering how much of that CapEx was just taking slices out of maintenance CapEx or delaying projects. How much of it was actually going to be feeding through into revenues? And then thirdly, in terms of the EUR 80 million quantification in terms of the impact in Q1. Suez at their results were saying we should view the Q1 impact from COVID as being approximately equivalent to 2 weeks of full lockdown. And therefore, we should be timing it by 2 or a little bit more than 2 in terms of thinking of the April impact. I'm not sure if the same way of thinking is appropriate for you, but maybe you could just put the EUR 80 million in perspective in terms of how we should think about the impact going forward.

[Antoine Frérot, Chairman & CEO]

Thank you, Mr. Brand. Estelle will answer the 2 first questions and Claude the third one. So Estelle?

[Estelle K. Brachlianoff, Chief Operating Officer]

Just regarding your first question. In terms of the cost cutting, to start with, I guess we've highlighted the ratio of the first quarter, which is basically when we lose EUR 100 million in revenue, we lose something like EUR 40 million of EBITDA. I think it's a starting point. So all the cost-cutting measures are going beyond that and are in addition to this. So in other words, this cost-cutting is everything we do extra on top of the variable costs. So it doesn't include, for instance, the fact that we're consuming, say, less fuel during the lockdown or less reactive. Of course, that's already in our 1 equals 0.4, if you want, in the results. So that's everything on top. So everything which needs a specific -- a further specific -- a specific plan, so be it recurring or be it exceptional for this year. What will be exceptional? For instance, banning of travels or banning of seminars or overtreatment, it's going to be for the entire year. Is it going to go for the next 5 years? Probably not. So I wouldn't consider that recurring. That's exceptional. But that's a specific matter. On the other hand, we will have stuff which we'll deliver this year and which may be recurring. If I'm giving you an example, we are, as we speak, rebooting all our waste collection with less tactility and using digital. It may be that in the end, we are left with a more effective fleet management even post the crisis, and that could be a recurring saving. So it's in addition, basically, of all the variable costs which we've seen in the first few weeks of the crisis. Regarding your CapEx question, I guess...

[Antoine Frérot, Chairman & CEO]

The total in March.

[Estelle K. Brachlianoff, Chief Operating Officer]

The total in March, sorry. The total in March is we haven't included anything yet in the first quarter. So it's starting from April onwards. So no extra cost-cutting measures are included in the current results. Of course, the EUR 64 million, which was the initial savings planned, are already in the results, as Claude has highlighted. In terms of the CapEx versus revenue, no, we don't see any direct impact between the fact that we cut CapEx and the revenue. Basically, we are maintaining all the CapEx which are sustaining growth in the future. It's a good project we believe in, too, and they are as good as they were 2 months ago. So we are building new plants. For instance, we are still building the new capacities of hazardous waste treatment in China, and we haven't stalled those at all. So basically, like, I wouldn't see any impact from the fact that we are cutting CapEx in the revenue line.

[Claude Laruelle, Chief Financial Officer]

In terms of April impact, James, to answer your question, what we see in April, we see, as I said, a little bit more impact from the geographies, the way 3 of geographies entering into the lockdown and, on the other hand, in Europe, the start of recovery at the end of April. So the order of magnitude of the impact in April for the COVID is roughly twice the effect in Q1.

[Antoine Frérot, Chairman & CEO]

March.

[Claude Laruelle, Chief Financial Officer]

In March. Yes, in March.

[Operator]

Next question comes from Olivier Van Doosselaere from Exane.

[Olivier Pascal Michel Van Doosselaere, Analyst of Utilities]

I have 4 quick questions, if I may. One is on waste pricing. We've seen that waste pricing has been very resilient in the first quarter. I wonder to what extent lower volumes might actually drive any request from clients to renegotiate that or if you could give us a feel maybe on when the next renegotiations will be coming. And effectively, how sustainable you believe those waste pricing trends are going to be through this crisis?Secondly, on working capital. So you're flagging that you're keeping a close eye on the evolution of working capital. I wonder if, in April, if you've seen any signs of working capital slipping anywhere and if that has been material to some degree. Also, if you see any government legislation enabling different types of consumers to actually delay the payment of their bills, whether you see that as actually having any impact on your cash collection. And then the cost of debt, I think it was slightly up year-on-year. I wonder what you expect going forward from here. You said that you've already refinanced the Q4 debt. So is there a negative impact to the cost of carry? And would you expect a year-on-year decrease in cost of debt in the coming months? And then a final question is on the -- on scope effect. So your strategy plan had both a disposal lag, I think there was still EUR 2 billion left, and then an M&A lag. You flagged that the timing has been -- is being revised, so I guess delayed on that. But to -- what's your feel in terms of current market conditions on transactions? And when would you expect the markets might be normalized again on those type of considerations?

[Antoine Frérot, Chairman & CEO]

Thank you, Olivier. Estelle will take the first question and Claude the other.

[Estelle K. Brachlianoff, Chief Operating Officer]

With regard your first question on the waste price, if I understand well, what I can say is, until now, we are going -- we are seeing still quite a lot of price increase in waste pretty much everywhere, be it in hazardous waste or in dry waste. We've enjoyed a few price increases, which I have in mind. I won't mention the name of the customers, but they are a large one in March. So we are going on with this strategy of increasing the price as much as we can. We haven't seen yet customer asking for price reduction. Probably, we will at one point. Precisely when, I'm anticipating that from the smaller SME customer, which will be probably in difficulties come this summer. And we are preparing all the arguments against those price decrease, of course, which includes the fact that the COVID, I would say, new norm, but the way we will work with social distancing and wearing masks and everything has a tendency to increase naturally the cost base. So I guess we have arguments against those price decrease, and our intention is to stay as we are exactly.

[Claude Laruelle, Chief Financial Officer]

Okay. In terms of working capital, to answer your question, Olivier, in April, we have not seen any material change in terms of working capital. So as I said, the collection system is -- the invoicing system is working well, the collection system as well. We had some fear about the back offices of our clients, but they are working well as well. So we have no material impact on the working capital as we speak. And as we monitor the cash every day, we really have a very strong focus on it. In terms of the cost of net debt, we have issued a new midterm note early this year with a little bit with -- at 1.25% interest rate. We will have a slight negative impact of the cost of carry. And also that we have to refinance 2021 January bond, which is coming at maturity in January. So we will stay on the safe side. So we will take the best opportunity in terms of window for the midterm note issuance. So it may have a slight negative impact on the cost of carry but nothing major compared to the cost of net debt for the group. And in terms of strategic plan, the disposal, of course, are delayed because M&A today is delayed. But there is absolutely no reason not to continue to do the asset rotation that we have planned in the strategic plan. As Antoine said, the strategy remains valid. So we will continue to work on the disposal that we have planned in the strategic plan. But of course, it's delayed, so we will have very little impact this year for disposal.

[Operator]

Next question comes from Vincent Ayral from JPMorgan.

[Vincent Jean Michel Ayral, Analyst]

I will try to get to 2 questions here. So the first one is basically the crisis. Is it presenting any opportunities in M&A? Obviously, small players are clearly more fragile regarding working capital, cash issues. Are you seeing actually opportunities appearing on the radar on this side of things? I understand you may not act in the coming couple of months, but this is something interesting regarding your asset rotation. So that's question number one. And question number two is the 2023 guidance. So you say that basically remains relevant, obviously some delay in implementation. But the question there is how should we look at it? So 2023 guidance, let's say, EUR 1 billion net income, that was one of the targets, a bit of delay. Maybe we can remove 50 to 100 max. But on the other hand, there could be some opportunities on M&A, so that could be some offset. So getting a bit of a sense on the different levers and how we should look at that going forward.

[Antoine Frérot, Chairman & CEO]

Thank you, Mr. Ayral. About the first question, it could be the case that the crisis will bring some opportunity for small M&A. Why not? Or for medium size. It is too early to see that clearly, and we will wait for some weeks or months to see if there is some special opportunities. But for sure, we will have the financial position to seize them if they appear. About the second question, as I already tell you that the strategic program, IMPACT 2023, remains relevant. I also said that, of course, its implementation will be delayed, and its planning will be adapted. We don't know this delay today because it will depend on the crisis duration, of course. So it is too early to answer your question we will see which, the evolution of the crisis and the duration of it.

[Operator]

Next question comes from Emmanuel Turpin from Societe Generale.

[Emmanuel Philippe Turpin, Equity Analyst]

Yes. A few of my questions have been answered. I will carry through on COVID. You alluded to an interesting concept, which is a concept of waves of impact on your different geographies. I guess wave 1, Asia; wave 2, probably Europe; and you were mentioning wave 3 starting to impact more recently. Trying to get down to the concept of peak impact from the crisis. And if we focus on EBITDA or EBIT, what would you say was your peak impact? I don't know, the peak week, for instance, in your wave 2 geographies, Europe, that could help us anticipate the impact on the wave 3 countries? I guess it's another way to look at your answer to the questions about what we could expect in April, knowing that April may not be the peak everywhere. The second question on COVID is relating to cost cutting. I expect that the shape of the new cost-cutting benefit over the year, so the timing effect of this benefit, will not match the negative impact of the COVID, right? And I was wondering if you could help us maybe anticipate how this EUR 200 million will spread over the remaining 3 quarters, as you explained that there was no impact on Q1. Next question is about waste-to-energy plants. I believe that the volumes incinerated was up in Q1. Can you confirm that you've managed to keep your incinerators saturated on that, indeed, for incineration as for the rest of your treatment, there has been no drop in gate fees?And lastly, you mentioned growth CapEx down a little bit in Q1. At the same time, you mentioned that you had not canceled any growth CapEx projects. And if you project for the rest of the year, so you are not looking at really dropping your growth CapEx, and while we may expect a bit of delays in some projects because of construction constraints, is it right to assume that this should not have any material impact on your, I would say, growth plans or contribution -- revenue and EBITDA contribution from growth CapEx for maybe 2021, excluding potential acquisitions, of course?

[Antoine Frérot, Chairman & CEO]

Thank you, Emmanuel. We will keep the last question for Claude, but Estelle will answer the first ones.

[Estelle K. Brachlianoff, Chief Operating Officer]

Yes. Regarding the -- when is the peak reached. So I guess as far as we can tell, I would start my sentence with that because we all are in a uncertain world, certainly. In Asia or actually in China, we've seen the peak in activity level in February, the peak down, I mean, or the trough in February. And it's coming back up at that point. So the worst moment, lowest point was February, certainly. In terms of France and actually Europe outside the U.K., which is delayed by, I guess, 1 or 2 weeks, [indiscernible], so France was more week 15, which is the beginning of April. As you can see in the graph I've put on Slide 10, you can see the lowest point being on week 15, so beginning of April. In terms of the Rest of the World, the peak hasn't been reached yet. So I think for the U.S., it's probably going to be somewhere in May. And Latin America and Africa and Middle East, I don't know. It's probably May, June, which is the common assumption. But like -- we'll see where it goes. In terms of your second question regarding the timing of the savings extra, the EUR 200 million extra in our Recover and Adapt Plan, I guess you can consider it's going to be spread throughout the rest of the year. Some of those savings are, I would say, instant but starting now, and some others are asking a bit more effort to start to bear fruit. So I guess it's from now till the end of the year is the best assumption I can give. So yes, it's not the same -- the saving timing won't be probably the same as the timing of the impact we will have from COVID. It's the entire year we should have a look at.

[Antoine Frérot, Chairman & CEO]

But we can say that probably the biggest part would be the end of the year, H2.

[Estelle K. Brachlianoff, Chief Operating Officer]

At the end of the year, yes. So in terms of the incineration plants in the various countries where we have some, I can confirm that they all are full as we speak, and we've managed to derive the tonnage, which were going either to third parties' plants or geographies or to landfill within our incineration plants. So yes, they are full, both in France and the U.K., which are the 2 main geographies where we have them.

[Claude Laruelle, Chief Financial Officer]

And Emmanuel, to answer your question on growth CapEx, as we said, we want to concentrate the CapEx on discretionary growth CapEx. And I will give you an example. And it's to fuel the recovery after the crisis, and I will give you an example in China. We told you that we had some problems with construction in China with some -- we stopped some construction of hazardous waste plants in China. Now we have restarted those plants, and we are accelerating the schedule in order to catch up with initial schedule in terms of new plants in that country. So for us, it's clearly priority #1 in order to be at full speed in terms of growth CapEx for 2021.

[Operator]

Next Question comes from Philippe Ourpatian from ODDO BHF.

[Philippe Ourpatian, Analyst]

Yes. I have 3 questions. One is concerning the minus EUR 80 million. Could we just exclude -- looking at the time frame, which is completely different between the geographies, could you just exclude the Chinese or Asian impact, as you mentioned, that Feb was the weakest point in this area? Just to have a good idea of what could be for Europe and at some point from the rest of the world this monthly impact. First question. The second question is concerning the reduction on maintenance CapEx. Does that mean that some of the works, maintenance works you have to do are going to be delayed on 2021, and this means that you have -- we will have to, in fact, correct the amount of investment we were forecasting for 2021 by increasing it from the portion of the maintenance not done in 2020 but realized the year after? That's the second question. And then the third one is concerning the EUR 200 million of cost cutting. Are we discussing about the net impact? There is some, let's say, cost of implementation. Or are you able to keep all of this amount in your own accounts?

[Antoine Frérot, Chairman & CEO]

Claude for the first question, Estelle for the third one, I will take the second one.

[Claude Laruelle, Chief Financial Officer]

Okay. So in terms of the split of the EUR 80 million, to answer your question, Philippe, is on Page 19, where you have Asia -- in Asia, you have 2 effects. You have the EBITDA effect and the EBIT on the JV. The EBITDA effect is minus EUR 7 million just for Asia. And the impact for Europe, mostly Europe, is EUR 73 million, on Page 19.

[Antoine Frérot, Chairman & CEO]

About the second question, Philippe, the crisis is, for us, a good occasion to explain our clients that a good maintenance CapEx is not a fixed amount but by geography. So we will take the occasion of this crisis, not to replace or to put the delayed maintenance CapEx next year. We will definitively tell them, explaining to our clients that we have now the possibility to get the same objective with a bit less money. You know that in some cases, for our clients, the clients thought that what was important for maintenance CapEx was the amounts in euro. We have a good occasion there to explain to them that we know also to be more efficient to do this maintenance CapEx. So we do not put them next year.

[Estelle K. Brachlianoff, Chief Operating Officer]

And regarding your third question, I don't see a large cost-cutting implementation at all. I would see them as very limited, the reason -- the main reason being that we don't have any layoff plans within this efficiency plan, these new cost savings. So I would say very limited. So it's pure savings. Part of it -- the recurring part of it probably exceptional for 2020 and no kickbacks in 2021. So that's the idea. I mean it's real savings that we'll do for this year.

[Operator]

Our next question comes from Olivier Van Doosselaere.

[Olivier Pascal Michel Van Doosselaere, Analyst of Utilities]

Yes. Sorry, I had just one quick add-on question. I think that the tax rate is, in Q1, I think, above 27%, was probably a bit higher than what we have used to receive that guidance for full year. I wonder if you could give us an indication on how that can land for the full year, please, and maybe for the years to come, if something might have momentarily changed versus, I think, the previous guidance, which was more around 25%, I believe.

[Claude Laruelle, Chief Financial Officer]

So yes, in terms of tax rate, the tax rate has increased a little bit due to less results and less efficiency of tax because we have -- we are a little bit impacted by the -- at the results level. What you see in Q1 is roughly what we expect for the full year, something between -- we don't have, of course, exact number, but something in between 27%, 28% would be a correct assumption.

[Operator]

Next question comes from Fraser McLaren from Bank of America.

[Fraser Andrew McLaren, Director]

I just have 2 follow-up questions, please, on what you have mentioned on costs. First of all, just to check that what you're seeing for the April impact on EBITDA includes the first impact from the new cost savings. And then secondly, you mentioned no implementation costs for these incremental savings. But just wondering if you can confirm if that number is net of any extra costs that you face in the new world after COVID. For example, you mentioned in waste that there would be additional costs. I mean would you expect the price increases that you're seeking to be offset by these new costs and therefore end up with higher margins overall?

[Antoine Frérot, Chairman & CEO]

Okay. For the first question, you understood certainly that the new cost cutting -- extra cost-cutting program has been created end of March. So the first results are small in April, and it will increase week after week, month after month, and we will certainly have the biggest part at the end of the year. So in April, it is rather short in terms of cutting. But obviously, the -- it will grow, obviously. About the second question?

[Estelle K. Brachlianoff, Chief Operating Officer]

The second question, I guess we don't know yet what's going to be the extra costs of operating with COVID. I guess everybody is discovering what I call the new norm. So we'll have, for instance, the cost of masks and PPEs, which is relatively modest. So we're talking millions, not dozens of millions. But we're still to assess the impact of the, I guess, social distancing and yield, which we don't know yet what it's going to look like. So I guess it will be difficult to give me a figure as we speak today.

[Operator]

We have no more questions at the moment. [Operator Instructions] The next question comes -- sorry. Yes. Last one comes from Mitchell Verity from HSBC.

[Verity Mitchell, Analyst]

It's Verity Mitchell here. Just a question about -- finally about paper prices, which we see going up. Would you say that was a temporary trend because of constraints in the market? Or do you see it as something more positive and permanent?

[Antoine Frérot, Chairman & CEO]

Excuse me, madam, we don't hear very well. Could you come closer to your microphone?

[Verity Mitchell, Analyst]

It's a question about paper prices, which we see are stronger recently. Do you think that's a temporary issue? Or do you think that's a more permanent trend?

[Estelle K. Brachlianoff, Chief Operating Officer]

I guess I'm happy that -- to highlight that the paper prices bounced back up by EUR 40 a tonne, roughly, in the last 1 month, the main rationale behind that being that since a lot of plants or recycling centers have been closed in Europe, there is a lack of resource. And the paper mills are, therefore, very keen on and actually have to buy this resource. So the prices are going up. So is it going to stay forever? I don't know. But I guess I'm very happy to see that paper mills have come to the conclusion that actually, our activities are very much needed. And the close -- the short supply chain, the local supply chain of turning waste into resource, it's part of the solution as well in a more, I would say, local world.

[Antoine Frérot, Chairman & CEO]

Thank you, Estelle. Thank you a lot, ladies and gentlemen, for your attendance, and I wish you a good day. Goodbye.

[Operator]

Ladies and gentlemen, this concludes the conference call. Thank you all for your participation, you may now disconnect.