Water

This business line is focused on the entire water cycle. We support the supply of clean drinking water by water planning, hydraulic modeling, treatability studies, regulatory compliance analysis and treatment system design. For wastewater, we advise on collection, advanced treatment technologies, reuse, bio-solids and odor control, and we deliver design and engineering services. In addition, we provide management and consulting services to operators to maximize performance of systems. We also advise on water management, for rivers, coastal zones, urban and rural water, and on issues related to climate change. In 2011, this represented 16% of revenues (2010: 19%).

Present position and updated strategy

Top 10 global water consultant

The international water market is driven by long-term trends, including the increasing scarcity of clean, potable water, and the effects of climate change through sea level rise and changing precipitation patterns. Since the merger with US-based Malcolm Pirnie in 2009, we are a top 10 global water consultant and one of only a few companies covering the full water cycle. This, together with our international network of strong local positions, excellent client relationships and long term experience in this market, gives us a strong competitive edge.

SWOT analysis

Ambition and targets 2011 – 2013

Our ambition is to build a leading position in the global water market based on our longstanding experience and integrated approach to the water cycle in current core markets and selected new geographies. Our organic growth target is 5 – 7% per year with margins of 10 – 11%.

Water strategy 2011 – 2013

To achieve our ambitions we plan to:

• Expand water treatment in the United States. The US market is an important part of our water business. We aim to expand our activities in a number of large cities and regions, where there is a strong need to upgrade existing facilities.
• Leverage our Dutch water management capabilities.Our work in New Orleans has shown how successful this can be. Focus is on coastal regions and rivers in the United States, Europe and Brazil.
• Expand into selected new regions. We are using Malcolm Pirnie’s experience and reputation to expand internationally. Our initial focus is on Brazil, Chile and the Middle East. We also see opportunities in drinking water treatment in the Netherlands and Belgium. In addition, we will examine strategic options in the Asian market.

Developments in 2011

Margin improved despite organic decline of activities

The main reason for the organic decline of revenues is the weak municipal market in the United States. Although investments in water projects are mostly covered by payments for the usage of water, pressure on municipal budgets has led to delays of necessary investments. In addition, the nearing completion of the large New Orleans project, ongoing since 2007, also contributed to declining revenues, even stronger at gross revenue level, due to the large amounts of subcontracting involved in this project. In Europe, revenues were also impacted by public austerity measures, but to a lesser extent. In the second half of the year, Dutch activities picked up somewhat, while in Brazil, work on some major projects generated growth. Excluding reorganization and integration costs of €3.0 million (2010: €1.7 million), margins improved to 9.4%, a major achievement in view of declining revenues and price pressure. In the Netherlands and Brazil, margins recovered compared to 2010 when project losses had a negative impact. Margins also improved in the United States, which was achieved through the integration of Malcolm Pirnie and by the timely adjusting of capacity.

New Orleans raises profile in water management market

On 1 June 2011, the Greater New Orleans Hurricane and Storm Damage Risk Reduction System achieved the agreed level of protection. Work continued to finish subprojects and make all the waterways around New Orleans navigable again. ARCADIS played a major role in assisting the US Army Corps of Engineers on this project and as such our profile in the US water management market raised considerably. As a result we got involved in projects near San Francisco and in the Mississippi delta. New natural disasters such as the Mississippi floods and the threat to New York from hurricane Irene reignited discussions on safety provided by existing flood protection systems. This offers opportunities to support threatened communities with water management advice.

Water supply key issue to communities

Changing precipitation patterns and longer periods of drought are causing communities to work on securing their long term water supply needs. An example is Henrico County, Virginia, where we supported the development of the innovative Cobbs Creek Reservoir project to alleviate potential drinking water shortages to 2055. We were involved in all phases of this $280 million investment project, from site selection and obtaining permits, to design, engineering and construction support of the facilities.

Increasing opportunities in emerging markets

In the Middle East, demand for water services is high. In Oman, this led to two projects for the Public Authority for Electricity and Water. The first contract is aimed at supporting Veolia Water in managing the water sector by designing and implementing technologies, procedures and asset management systems. Under the second contract, we provide consultancy and management services for a new network to bring clean water directly to the taps of hundreds of thousands of residents. In Chile, we are working with mining companies to develop solutions using sea water for flotation processes, negating the use of sweet water and making mining possible in the more arid regions of Chile and Peru.

Sustainability drives demand from industrial clients

Through our environmental business, we have strong client relationships with many industrial corporations that increasingly apply sustainable business practices. While we have already consulted to many of these firms on issues like carbon footprint reduction, there is an increasing demand for improved performance in the use of water. In 2011, this led to securing large water contracts with several multinational companies.