Low Commodity Prices Dent Hauler Revenues
Wednesday, May 06, 2015
Posted by: Anne Piacentino
Source: Resource Recycling
By Bobby Elliott, Resource Recycling
May 5, 2015
First quarter results for America's largest publicly traded waste management companies indicate recycled commodity pricing is causing significant losses.
Comparing the first quarter of 2015 to the first quarter of 2014, recycling-related revenues for Progressive Waste Solutions, Republic Services, Waste Connections and Waste Management were down an average of 20.5 percent, an analysis by Resource Recycling has found.
Quarterly financial reports also show recycling revenues continue to account for a smaller percentage of overall revenues for the powerful quartet: During Q1 of 2015, recycling-related revenues accounted for just 4.4 percent of company revenues. (Quarterly results for Casella, the nation's other major publicly traded waste and recycling company, are not yet available.)
In financial reports filed with the Securities and Exchange Commission by all four companies, low recycled commodity pricing is signaled as a major driver of the losses and a looming impediment for 2015 and beyond. Waste Management's CEO, David Steiner, called the situation around recycling an "imperfect storm."
Here are more notable financial results from the four hauling giants:
During the first quarter of 2015 (Jan. 1 to March 31) Progressive Waste Solutions' overall revenues were down 2 percent and totaled $460.2 million.
A steep drop occurred in the recycling arm of the company.
Recycling revenues for the quarter totaled just over $12 million, but were down 26.2 percent compared with Q1 of 2014. As a percent of total revenues, Progressive's recycling business accounted for 2.6 percent of revenues, compared with 3.5 percent at this time last year.
In all segments of the company's U.S. operations, recycled commodity prices fell, Progressive's Q1 financial filing shows.
Progressive did not return a request for comment.
At Republic Services, company revenues during Q1 of 2015 outpaced revenues from Q1 of 2014. According to the company's quarterly filing, revenues neared $2.2 billion after nearing $2.1 billion last Q1. Up $92.2 million, quarterly revenues were not aided by sales of recycled commodities.
According to the company's Q1 filing, Republic made $85.7 million on the sales of recycled commodities, accounting for 4 percent of overall revenues and down 13 percent compared to Q1 of 2014. This was "due to the decline in commodity prices," the company states.
Darcie Brossart, Republic's spokesperson, said in an email recycling is still seen as "one of our core competencies."
"We remain committed to making recycling investments where there is customer demand for our service and we receive an adequate return on our investment," Brossart stated.
Overall company revenues were also up for Waste Connections. In the company's Q1 report, Waste Connections reported quarterly revenues of $506.1 million, up 5.1 percent compared with last year.
Waste Connections' recycling business, however, was hurt by "lower than expected recycled commodity values."
The recycling business brought in about $10.9 million, accounting for 1.9 of overall revenues and down 24 percent compared with the first quarter of 2014.
Waste Connections did not return a request for comment.
Reporting on the first quarter of 2015, Waste Management (WM) generated revenues of just over $3 billion. Compared to the first quarter of 2014, WM revenues were down $356 million, or 10.5 percent.
In explaining the fall, WM's financial report notes recycled commodity prices as a significant factor. The company states that compared with Q1 of 2014, the average price it received for recycled commodities in Q1 of 2015 was down 14 percent and resulted in sales that were down $42 million. Revenues from WM's recycling business fell 18.7 percent and totaled $282, accounting for 9 percent overall revenues.
But it was comments made by WM's CEO David Steiner that caused the most stir in the industry.
"Recycling is in a crisis," Steiner said in an interview with the Wall Street Journal. "It isn’t profitable for us, and we have to react to that by shutting down plants."
In extended comments to Resource Recycling, Steiner noted contamination levels, high glass volumes and low commodity pricing have made for an "imperfect storm."
"We’re looking at our operations, ensuring they’re as efficient as possible and evaluating whether some rationalization and consolidation makes sense in some areas," Steiner said. "In other words, we are striving to keep our recycling operations afloat, rather than investing to create more recycling capacity."