Leaders at the second-largest North American garbage and recycling company see great promise in recycled-content packaging. | Courtesy of Republic Services
Republic Services has begun work on its second polymer center, this one a Midwest facility that will aggregate, sort, grind and wash scrap plastics from throughout the region.
The second-largest garbage and recycling company in North America, after Waste Management, Phoenix-based Republic Services is building what it calls a polymer center in Las Vegas.
The facility will take bales produced by Republic’s materials recovery facilities (MRFs) and provide a more intense level of sorting than the MRFs are able to do. Then, the facility will grind and wash some polymers, steps that are currently undertaken by Republic’s downstream bale buyers.
Company leaders have cited strong brand owner demand for recycled-content packaging as a driving force behind their decision to vertically integrate.
“This is the first time a single U.S. company will manage the plastic stream from current site collection to delivery of high-quality recycled content for consumer packaging,” Jon Vander Ark, Republic’s CEO, said during a Feb. 15 conference call with investors.
He pointed to strong pricing in offtake agreements for the not-yet-completed Las Vegas polymer center. “We’ve seen so much demand for the offtake of our first one that gives us a lot of confidence that the market is really getting value and needs that product,” Vander Ark said during the call.
The Las Vegas polymer center is expected to come on-line in late 2023. Republic is already working to develop the second facility, in the Midwest, that “will serve as a hub for aggregating and processing recovered plastics in the region,” Vander Ark said. The second polymer center is expected to open in late 2024.
Republic Services didn’t disclose exactly how much of Republic’s capital project spending has gone to the polymer centers. But Republic paid $294 million total for property and equipment during the fourth quarter, a sum that included some amount of spending on the Midwest polymer center.
Republic plans to build “at least four centers across the U.S.,” Vander Ark said. The company anticipates that, when completed, the facilities will bring in about $250 million in revenue each year. Republic’s leaders predict the earnings before interest, taxes, depreciation and amortization (EBITDA) margins will be over 30%.
For comparison, Republic’s overall EBITDA margin (including its much larger garbage collection and disposal business) was about 27% in 2022, according to a press release.
Vander Ark described the expected internal rates of return as “very attractive.” In fact, he believes the financial results will exceed those previously forecast by Republic in a pro forma document.
“We know from the conversations we’ve had and the pricing that we’re getting right now – we’re starting to take orders, obviously, for the center in Las Vegas – I’m very confident we’re going to beat those numbers in the pro forma,” Vander Ark said.
“That gave us the confidence to accelerate that investment moving forward,” he added.
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