For many of the largest garbage and recycling companies in the U.S., recycling proved a bright spot during an otherwise dismal second quarter.
Waste Management, Republic Services, Waste Connections and Advanced Disposal Services all reported their recycling-related revenues were higher in the second quarter of this year than they were a year prior. For most, higher commodity prices helped drive the numbers.
But those same haulers also said their total revenue dropped during the second quarter as COVID-19 economic shutdowns took their toll, particularly with business closures.
Two other haulers, GFL Environmental and Casella Waste Systems, reported better recycling business performance year over year but also said their total revenues were up.
For most of the six companies, which make up the largest publicly traded haulers in North America, the second-quarter recycling performance was a reversal from a down first quarter.
The Houston-based company’s recycling business brought in $275 million in revenue during the second quarter, up over 4% year over year, according to a quarterly filing (that number includes the company’s recyclables brokerage business revenue).
In a July 30 conference call with investors, John Morris, Waste Management’s chief operating officer, said the blended commodity price was $57 a ton during the second quarter, according to a transcript from Seeking Alpha. In its quarterly report, Waste Management described that market price as up 30% year over year (and up 43% from the first quarter of 2020).
Waste Management’s recycling business also boosted profits during the second quarter. Its earnings before interest, tax, depreciation and amortization (EBITDA) increased by nearly $8 million year over year, according to a press release. The higher profitability was because of the better prices, cost reductions and the company continuing to charge fees for recycling.
The market price increase in the second quarter occurred because the pandemic left manufacturers with a recyclable feedstock appetite that exceeded supply in the U.S. But Waste Management sees the pandemic-driven pricing boosts as temporary, and the company will continue its strategy of charging customers fees to cover its MRF processing costs, according to the quarterly filing. OCC pricing has dropped from its recent high of $107 per ton in May to $57 this month, according to RecyclingMarkets.net.
“We expect this dislocation will normalize and overall, average market prices for recycling commodities are expected to remain meaningfully below long-term averages,” according to the quarterly report. For example, during the first half of this year, average market prices for recovered commodities were down 3.5% year over year.
“While the recent decline in supply of recycled content drove an increase in market prices for certain commodities, we remain steadfast in our commitment to improve the profitability and returns of the recycling line of business,” the report stated. “We have maintained our focus on converting to a fee-based pricing model that addresses the cost of processing materials and the impact on our cost structure to manage contamination in the waste stream.”
Recycling now makes up nearly 8% of the company’s revenue pie. Overall, the company’s revenues took a dive during the second quarter, the first full quarter of pandemic impacts. The company brought in $3.56 billion, down 10% year over year.
Phoenix-based Republic’s recycling business brought in $74 million in revenue during the second quarter, up 2% year over year.
According to the company’s quarterly report, the increase was mainly because of higher commodity prices. The average prices for recovered commodities (excluding glass and organics) was $101 per ton during the quarter. That was up 29% from $78 during the second quarter of 2019 (it was also up from $76 during the first quarter of this year).
In an Aug. 6 conference call, Jon Vander Ark, Republic’s president, said the higher average commodity values were partially offset by an 11% decrease in inbound recyclables volumes, according to a Seeking Alpha transcript.
By the numbers
The following is a look at key second-quarter recycling-related numbers from the largest publicly traded haulers in North America (GFL Environmental, the fourth largest, is omitted below because it did not provide recycling-specific numbers):
- Recycling revenue: $275 million
- Revenue change YoY: Up 4%
- Commodity price: Average $57 per ton
- Price YoY: Up 30%
- Recycling revenue: $74 million
- Revenue change YoY: Up 2%
- Commodity price: (excluding glass and organics): $101 per ton
- Price YoY: Up 29%
- Recycling revenue: $20 million
- Revenue change YoY: Up 20%
Advanced Disposal Services
- Recycling revenue: $3 million
- Revenue change YoY: Up 30%
Casella Waste Systems
- Recycling revenue: $12 million
- Revenue change YoY: Up 19%
- Commodity price YoY: Up 45%
Recycling now makes up 3% of the company’s revenue pie. Overall, Republic Services brought in nearly $2.5 billion in revenue during the quarter, down 6% year over year.
The Woodlands, Texas-headquartered company’s recycling business brought in $20 million in revenues during the second quarter, up 20% year over year, according to a press release.
The recycling business brings in money from charging fees and selling commodities. While the overall business was up, sales of recovered commodities, specifically, were down by about $500,000 during the second quarter, according to the company’s quarterly report. That was for a couple of reasons: The coronavirus and its associated economic disruptions meant reduced commercial recyclables volumes, and prices for plastics and aluminum were lower year over year. Those decreases were partially offset by increased OCC prices and residential collection volumes.
Recycling now makes up near 2% of the company’s revenue pie. Overall, Waste Connections brought in $1.3 billion in total revenue during the second quarter, down 5% year over year.
Vaughan, Ontario-headquartered GFL Environmental reported its recycling business provided a slight bump to its overall solid waste business performance in the second quarter, but the company didn’t release recycling business details.
According to an investor presentation, solid waste material volumes were down substantially during the second quarter, particularly from commercial, industrial and institutional customers.
That was slightly offset by higher recyclables prices. In an Aug. 6 conference call, Patrick Dovigi, president and CEO of GFL, noted that average commodity values were up in the quarter, driven by a spike in OCC prices early in the quarter.
The company reported total revenues of $993 million during the second quarter, up 19% year over year. According to a press release, the company said revenue growth was because of both organic growth across the company’s different businesses and added revenue from GFL acquiring other companies since the second quarter of 2019.
Advanced Disposal Services
Ponte Vedra, Fla.-headquartered Advanced Disposal Services reported that its recycling business brought in $3.0 million during the second quarter, up 30% from $2.3 million the year before. In its quarterly filing, the company said revenues increased because of “a moderate increase in recycling commodity prices.”
Recycling makes up less than 1% of Advanced Disposal’s revenue pie. Overall, the company brought in $380 million in revenue during the second quarter, down 9% year over year.
Waste Management is working to acquire Advanced for $4.6 billion. As part of the deal, which is expected to close by the end of September, GFL will acquire a number of the companies’ operations for $835 million.
Casella Waste Systems
Rutland, Vt.-based Casella’s recycling business brought in $12 million during the second quarter, up 19% year over year, according to a press release.
The company reported better commodity prices gave it a revenue boost of $2 million during the quarter, overcoming lower collection volumes. The added revenue came from the following: $1.2 million from better favorable commodity pricing, $600,000 from higher recycling processing fees, and $200,000 from the acquisition of recycling operations, according to its quarterly report.
Regarding that last point, Casella acquired a number of other companies between the second quarter of 2019 and the second quarter of 2020, so quarter-to-quarter revenue comparisons aren’t exactly apples to apples. Last year, Casella acquired nine businesses, including one with recycling operations. During the first half of this year, it acquired another four businesses, including another recycling operation.
In an Aug. 4 conference call, Ned Coletta, the company’s chief financial officer, said Casella’s second-quarter average commodity prices were up 45% year over year. That was mainly because of higher OCC prices, partially offset by lower plastics and metals prices, according to a transcript from Seeking Alpha. Coletta noted that OCC has come down from its peak in May.
Recycling now makes up 7% of Casella’s revenue pie. Overall, the company brought in nearly $189 million in revenue during the second quarter, up less than 1% year over year.
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