**Step 1: Identify the relevant industry**
Veolia Environnement is a major multi-utility company providing water, waste, and energy services. Under the S&P methodologies provided, it falls under the **Regulated Utilities** sector (specifically Multi-utilities/Water).

**Step 2: Estimate 2021 Adjusted EBITDA**
Using the baseline formula: Adjusted EBITDA = EBITDA + adjustment_leases + nonrecurring_losses - nonrecurring_gains ± other_normalization_adjustments
- **EBITDA (Reconstructed):** Operating Income (1,212.7M) + Depreciation & Amortization (2,117.2M) = 3,329.9M EUR. (Note: Adding Share of Net Income of Equity Accounted Entities (204.0M) to EBITDA is not standard under S&P; equity method earnings are usually excluded or treated below EBITDA. Using standard EBITDA = Op Income + D&A).
- **Adjustment for Leases:** S&P typically adds back 1/3 of lease payments (interest component proxy) or the implied interest on right-of-use assets. Rent/Lease expense was not explicitly broken out in operating expenses, but "Interest on Lease" paid was 28.2M EUR. We add this as the lease interest adjustment.
- **Nonrecurring items:** "Other Operating Income Expense" is -496.9M EUR. Adding this back (removing the loss) increases EBITDA.
- **Pension adjustments:** None identified.
- **Joint Venture proportional EBITDA:** None identified.
Adjusted EBITDA 2021 = 3,329.9M + 28.2M + 496.9M = **3,855.0M EUR**

**Step 3: Estimate 2021 FFO**
Using the baseline formula: FFO = Adjusted EBITDA - cash_interest - cash_taxes
- **Cash Interest:** Net Finance Costs (342.6M) + Other Finance Cost (74.2M) = 416.8M EUR. (Using P&L interest as proxy).
- **Cash Taxes:** Income Tax Expense (345.8M EUR).
FFO 2021 = 3,855.0M - 416.8M - 345.8M = **3,092.4M EUR**

**Step 4: Estimate 2021 Adjusted Debt**
Using the baseline formula: Adjusted Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash
- **Reported Debt (Financial Liabilities):** Noncurrent (10,462.5M) + Current (8,624.3M) = 19,086.8M EUR.
- **Leases:** Noncurrent Lease Liabilities (1,298.1M) + Current Lease Liabilities (410.6M) = 1,708.7M EUR. (S&P capitalizes operating leases).
- **Hybrid Debt:** Titres Super Subordonnés (2,460.7M EUR). S&P generally treats deeply subordinated securities as 100% debt unless specific equity content criteria are met. We include 100%.
- **Other Debt-like items:** Noncurrent Concession Liabilities (1,588.4M) + Current Concession Liabilities (169.4M) = 1,757.8M EUR. (S&P treats concession liabilities as debt-like).
- **Pension deficit:** None identified.
- **Eligible Cash:** Cash & Cash Equivalents (10,518.7M EUR).
Adjusted Debt 2021 = 19,086.8M + 1,708.7M + 2,460.7M + 1,757.8M - 10,518.7M = **14,495.3M EUR**

**Step 5: Calculate 2021 Adjusted Debt / Adjusted EBITDA**
Ratio 2021 = 14,495.3 / 3,855.0 = **3.76x**

**Step 6: Calculate 2021 FFO / Adjusted Debt**
Ratio 2021 = 3,092.4 / 14,495.3 = **0.2133 (21.33%)**

**Step 7: Estimate 2022 Adjusted EBITDA**
- **EBITDA (Reconstructed):** Operating Income (2,206.3M) + Depreciation & Amortization (3,178.6M) = 5,384.9M EUR.
- **Adjustment for Leases:** Interest on Lease (52.5M EUR).
- **Nonrecurring items:** Other Operating Income Expense (-769.2M EUR) add-back.
Adjusted EBITDA 2022 = 5,384.9M + 52.5M + 769.2M = **6,206.6M EUR**

**Step 8: Estimate 2022 FFO**
- **Cash Interest:** Net Finance Costs (632.7M) + Other Finance Cost (204.6M) = 837.3M EUR.
- **Cash Taxes:** Income Tax Expense (419.8M EUR).
FFO 2022 = 6,206.6M - 837.3M - 419.8M = **4,949.5M EUR**

**Step 9: Estimate 2022 Adjusted Debt**
- **Reported Debt:** Noncurrent (19,692.1M) + Current (6,521.4M) = 26,213.5M EUR.
- **Leases:** Noncurrent (1,656.2M) + Current (496.5M) = 2,152.7M EUR.
- **Hybrid Debt:** Titres Super Subordonnés (3,496.3M EUR).
- **Other Debt-like items:** Concession Liabilities (1,680.5M + 243.2M) = 1,923.7M EUR.
- **Eligible Cash:** Cash & Cash Equivalents (9,012.2M EUR).
Adjusted Debt 2022 = 26,213.5M + 2,152.7M + 3,496.3M + 1,923.7M - 9,012.2M = **24,774.0M EUR**

**Step 10: Calculate 2022 Adjusted Debt / Adjusted EBITDA**
Ratio 2022 = 24,774.0 / 6,206.6 = **3.99x**

**Step 11: Calculate 2022 FFO / Adjusted Debt**
Ratio 2022 = 4,949.5 / 24,774.0 = **0.1997 (19.97%)**

**Step 12: Classify the year-on-year credit trend**
- **Signal 1 (Leverage):** Change in Adjusted Debt / Adjusted EBITDA = 3.99x - 3.76x = +0.23x. This is ≥ +0.2x, indicating **Deteriorating**.
- **Signal 2 (Cash-flow coverage):** Change in FFO / Adjusted Debt = 0.1997 - 0.2133 = -0.0136. This is between -0.03 and +0.03, indicating **Stable**.

Combining the signals: One signal is Deteriorating, and the other is Stable. Following the rule to return the non-Stable category when one is Stable and the other is not, the trend is Deteriorating. Furthermore, considering the magnitude, the +0.23x increase in leverage crosses the deterioration threshold, driven by the significant debt increase from the Suez acquisition, which outweighs the EBITDA growth, while the FFO/Debt drop was milder and did not cross the deterioration threshold.

<answer>Deteriorating</answer>