Suez Environnement (SEV.FR) Wednesday lowered its full-year guidance as the economic downturn continued to weigh on the French company's waste business, but it reported a smaller-than-expected 12.8% decline in first-half net profit.

The Paris-based water and waste utility, the world's second-largest by revenue after cross-town rival Veolia Environnement (VE), said it is now targeting "overall stability" for 2009 revenue and earnings before interest, taxes, depreciation and amortization at constant exchange rates.

The company had previously targeted slight growth in revenue and Ebitda for the year.

In the economic downturn, lower volumes of waste to process and lower prices for recycled materials have weighed heavily on the waste business.

Suez Environnement said in its earnings statement that the economic situation continues to prove challenging, but Chief Executive Jean-Louis Chaussade expressed optimism that the company will do better in the second half of the year.

The company's operational performance is improving and, "we anticipate that this trend will continue with a second half of 2009 better than the first," he told reporters on a conference call.

Net profit for the first six months of the year fell to EUR175 million from EUR201 million in the same period a year earlier, Suez Environnement said.

That exceeds an average expectation of EUR146 million, according to a Dow Jones Newswires survey of six analysts' forecasts.

Revenue fell 2.6% to EUR5.87 billion, from EUR6.03 billion in the first half of 2008.

Ebitda fell 5.5% to EUR951 million from EUR1.01 billion in the year-earlier period, but topped analysts' average estimate from the poll of EUR926 million.

Suez Environnement shares have shed nearly 30% of their value since making their debut over a year ago, as global financial and economic woes have weighed heavily on the performance of its waste business. They closed Tuesday in Paris 0.9% higher at EUR13.04 each.

Veolia reported first-half earnings on Aug. 6 that also illustrated the downturn's effect on the waste business. But while Veolia's earnings missed analysts' expectations, the company stuck to its full-year objectives.

Company Web site: http://www.suez-environnement.com

-By Adam Mitchell, Dow Jones Newswires, +33 1 40171756; adam.mitchell@dowjones.com