Advanced Drainage Systems, currently the largest plastics recycling company in the U.S., saw lower sales over the past year due to lower demand in the construction and agricultural markets in mid-2023. But the company still reported record profit, largely due to lower feedstock prices.
The Hilliard, Ohio-headquartered company on May 16 reported financial results for the 2024 fiscal year, covering the 12 months ending March 31. ADS manufactures plastic pipes, septic systems and other wastewater management products, and it purchases over 1.1 billion pounds of virgin and recycled resin annually from 525 suppliers.
In the 2024 fiscal year, recycled resin made up 50% of the company’s feedstock. The company reported it typically purchases roughly 360 million pounds of recycled HDPE and 130 million pounds of recycled PP, volumes that include both post-consumer and post-industrial material.
Total sales decreased by 6.4% year over year, dropping from $3.07 billion in fiscal 2023 to $2.87 billion in 2024. This was driven by a $172.9 million decline in pipe sales, which make up more than half of the company’s total sales.
“The decrease in overall domestic net sales was driven by lower demand in the U.S. construction and agriculture end markets during the first half of the year,” the company said in a statement. Demand picked up as the year progressed, including at the end of 2023 and moving into the first three months of 2024, when sales totaled $653.8 billion, up 5.9% year over year.
But despite the lower full-year sales, the company reported a year of record profits: Gross profit totaled $1.15 billion, up 2.5% year over year. The company reported the increase was “primarily due to favorable material cost,” partially offset by the lower sales and other costs. Net income totaled $513.3 million, up slightly year over year.
Indeed, post-consumer HDPE and PP costs remained significantly depressed in 2023 compared to the prior few years.
Post-consumer color HDPE, a major feedstock source for ADS, ranged between 5 and 19 cents per pound throughout the period of ADS’s 2024 fiscal year, according to RecyclingMarkets.net. During the prior fiscal year, color HDPE started off in the range of 29 cents per pound, and the year before that it reached as high as 58 cents per pound.
Post-consumer PP followed a similar course, hovering between 4 and 10 cents per pound throughout ADS’s 2024 fiscal year, after reaching as high as 34 cents per pound during the prior fiscal year, according to RecyclingMarkets.net.
Capital expenses to continue
The company spent $183.8 million in capital expenditures, up from $166.9 million in 2023 and $149.0 million in 2022. The 2024 fiscal year spending helped to “support new facilities, facility expansions, equipment replacements and technology improvement initiatives,” the company reported.
And it has no plans to change that trajectory. Capital expenditures will “remain elevated in fiscal 2025 as we continue investing in growth, productivity, automation and recycling capacity,” company leaders stated in a May 16 presentation to investors. In its annual report, the company estimated it will spend $250 million to $300 million in the coming fiscal year on such projects.
One of its in-progress capital projects is a $65 million Hilliard, Ohio, engineering and technology center, first announced in 2022. The facility will focus on product development, testing operations and manufacturing engineering development, including recycled content. Initially planned to start up in late 2023, the facility is now slated to open this summer, according to the presentation to investors.
