Strong third-quarter commodity prices bolstered earnings for the nation’s top five haulers. | Courtesy of Republic Services
North America’s five largest publicly traded garbage and recycling companies recently reported quarterly financial results, reaching record revenues and margins.
Third-quarter commodity prices – primarily on the fiber side – contributed to stronger results compared to the same period last year for WM, Republic Services, Casella Waste Systems, GFL Environmental and Waste Connections.
However, they expressed bearish outlooks heading into the end of 2024, and into 2025.
Here are financial highlights from Q3 investor calls:
WM
Q3 revenue gains for WM were helped by strong performance in Midwest markets, executives said during the call. This includes the new MRF in Germantown, Wisconsin, that opened earlier in the year and the upgraded Twin Cities facility near Minneapolis.
The quarterly average blended commodity price rose by 74% on the year to $101 per ton, and WM still expects full-year average commodity pricing at about $90 per ton.
Revenue growth exceeded expectations as a result of the higher commodity pricing, as shown in the breakout box. Quarterly revenue grew by 7.9% on the year to $5.6 billion.
Margins for adjusted operating earnings before interest, taxes, depreciation and amortization – known as EBITDA, a way of measuring profitability – grew to a record 30.5%, driven by collection and disposal, which comprises 95% of the business. The recycling business accounts for 3-4% of WM’s operating EBITDA.
Operating expenses dropped to 60.6% of revenue, accounting for the record profit margins in the overall business. A year ago operating expenses were 61.6% of revenue.
WM completed eight recycling projects during Q3, including six automation upgrades and new facilities in New York and Florida. This brings the total to 24 of its 39 planned automation and new market projects, which have added 1.5 million tons of annual recycling capacity in North America.
On Nov. 4, WM completed its acquisition of medical waste handler Stericycle, which is now included in the Healthcare Solutions division.
Republic Services
Like WM executives, Republic Services CEO Jon Vander Ark cited improving recycled commodity quality as a driver for plant automation upgrades, with a goal to “create the best product we can for the marketplace, which drives more circularity and drives a higher price per product on that front.”
Although quarterly average blended commodity prices rose by 58% on the year, to $177 per ton, said chief financial officer Brian DelGhiaccio, at the time of the call in late October they were at $106, largely due to declining fiber prices.
Vander Ark said production volumes at the Las Vegas Polymer Center continued to increase in Q3, and equipment is being commissioned at the new Indianapolis facility. The company is happy with the pricing it’s getting and with the ramp-up in volumes from the Las Vegas center, whose customers include Coca-Cola, Vander Ark said.
“We got off to a little later start than we would have liked, for things all unrelated to the equipment,” he said, citing permitting and installation of utilities. “Maybe we were a little aggressive in our time line to begin with.”
Casella
The Vermont-based company finalized its acquisition of Royal Carting and Welsh Sanitation on Oct. 1, bringing its acquisitions total for the year to six.
The acquisition “provides us entry into adjacent markets of New York’s middle and lower Hudson Valley region,” said CEO John Casella.
Quarterly revenues were higher by 16.7% on the year at $411.6 million, with higher recycling commodity volumes and prices among the drivers. The quarter marked the first time the company has exceeded $400 million in revenue and $100 million in adjusted EBITDA.
“Yes, improvement in the recycling commodity prices was a tailwind. However, we experienced a greater contribution in the quarter from our strategic investments, namely our upgraded Boston MRF is firing on all cylinders,” Casella said. He added that modernization of the Willimantic MRF in Connecticut will start later this year.
By the numbers
WM
- Q3 recycling revenue: $503 million, up 30% YoY
- Average Q3 commodity price: $101 per ton, up 74% YoY
- Q3 recycling EBITDA: Up by $9 million YoY
- Q3 recycling EBITDA margin: 12.7%, down by 2.4 points YoY
Republic Services
- Q3 recycling revenue: $107.6 million, up 41% YoY
- Average Q3 commodity price (excluding glass and organics): $177 per ton, up 58% YoY
- Adjusted EBITDA, recycling & waste: 32.8%, up 2.1 points YoY
Casella Waste Systems
- Q3 Resource Solutions (which includes recycling) revenue: $86.462 million, up 14.5% YoY
- Resource Solutions portion of total revenue: 21%, lower by 0.3 points YoY
- Q3 Resource Solutions operating income: $5.5 million
- Operating income YoY: Up by $1.4 million
GFL Environmental (converted to USD from Canadian dollars on Nov. 9, 2024)
- Q3 commodity price: $150-155 per ton
- Q3 Solid Waste revenue: $1.12 billion, up 7.7% YoY
Waste Connections
- Q3 recycling revenue: $69.748 million, up 93% YoY
GFL Environmental
The company has commissioned two new MRFs so far in 2024, including one in Calgary, and expects two more to come online in early 2025. Some extended producer responsibility related collection contracts started up in Q3, and more will start by 2026.
With labor costs a top concern among North American haulers, GFL has benefited from its focus on secondary markets, which have experienced lower wage pressures than in dense urban areas, and from efforts to reduce employee turnover, said CEO Patrick Dovigi. “The labor dynamics is something near and dear to us that we’re watching closely.”
GFL’s previous guidance assumed a commodity price of $225 Canadian (U.S. $162) per ton, but Q3 pricing eased from the previous quarter by $10-15 Canadian.
For the first time in its history, GFL exceeded the 30% mark for EBITDA margins, at 31.1%, higher by 3 points on the year. Chief financial officer Luke Pelosi cited commodity pricing among the tailwinds during the quarter.
Moving forward with divesting its Environmental Services segment, GFL narrowed bids to four, from about 10 proposals, Dovigi said, and hopes to close a deal in Q1 2025. Based on first-round bids, the company has raised its expectation for the sale proceeds to U.S. $4.6 billion to $5 billion, higher by about $35 million.
Executives also addressed recent arsons and drive-by shootings at several GFL facilities.
“Regarding the recent events, we are not going to comment on any specifics because the police are investigating these incidents and the investigations are ongoing,” Dovigi said. The company is also working with third-party security consultants to review security measures and any additional precautions needed, he added.
Waste Connections
Waste Connections’ Q3 fiber commodity revenues – specifically corrugated containers – were up by 55% on the year, though prices softened slightly from the previous quarter, said chief financial officer Mary Anne Whitney. She cited the brief port strike and weaker demand for the drop of about 15% in October, after quarter-end.
Whitney added that any increase in commodity-driven revenues or incremental volumes as a result of cleanup related to hurricanes Helene and Milton are not factored into the company’s Q4 outlook.
As a result of better-than-expected Q3 results, the company adjusted its 2024 outlook, raising estimated full-year revenue to $8.9 billion, up by $150 million from the original guidance. Adjusted EBITDA now is estimated at about $2.91 billion, up $50 million, while guidance for capital expenditures remained unchanged at about $1.15 billion.
In its most recent sustainability report, released Oct. 24, Waste Connections said 2023 recycled commodity volumes totaled 2.21 million tons, an increase of 1.1% from 2022 and 20% from 2021. Fiber makes up more than two-thirds of that volume.
The company is approaching its 2033 goal of 2.31 million tons of recycled material, which will represent an increase of 50% over 2018 volumes.