Higher commodity prices continue to drive revenues and profits for the largest waste and recycling haulers in North America.
During the first quarter, Waste Management (WM), Republic Services, GFL Environmental, Waste Connections and Casella Waste Services reported year-over-year recycling revenues were up 32%, 14%, 10%, 92% and 30%, respectively. The numbers mark a continuation of the upward trend seen in 2021, with WM attributing the higher average commodity prices to strong e-commerce sales and high demand by packaging producers for recycled materials.
“I think on the pricing side, what we’re seeing is very consistent and strong demand on the fiber side, mixed paper has been a good tailwind over the last couple of years, and we’re seeing continued demand increase for some of the other streams, the plastic streams,” said John Morris, WM’s chief operating officer, during a recent call with investors.
The better bale prices translated to profits. The higher values drove a $23 million year-over-year increase in earnings in the first quarter, according to WM.
The following are recycling-related financial results for the top five publicly traded garbage and recycling companies in the first quarter of 2022:
WM’s recycling business in the first quarter brought in $453 million in revenue, up 32% year over year.
Higher prices for bales of recovered commodities were to thank for the revenue growth. According to WM’s quarterly report, during the first quarter of 2022, the average market prices for recovered commodities at company MRFs were about 60% higher than the year-ago period.
“Strong demand for recycled materials strengthened through 2021, continuing into 2022, driven by the strength in e-commerce and manufacturers committing to use more recycled content in their packaging,” according to the report.
During an April 26 conference call with investors, Morris said the first-quarter blended average commodity price was $126 per ton, which is in line with WM’s expectations for the full year.
Morris said that scrap fiber and plastic pricing have been strong, buoying results, but on the downside MRF residue rates continue to average up to 20%.
“We’ve been working on getting that down over the last few years. We feel technology will continue to help us in that regard,” he said.
In terms of capital expenses, during the first quarter of this year, WM “made significant investments in recycling automation technology and customer service digitalization to further support our continued focus on optimizing operational efficiency as well as achieving improved labor productivity for all lines of business,” according to the quarterly report.
During the conference call, Devina Rankin, WM’s chief financial officer, said that the company invested $47 million in capital expenditures in the recycling and renewable energy businesses during the first quarter.
“We expect that our investments in recycling and renewable natural gas projects will ramp up as we move through the balance of the year,” she said.
In terms of profitability, higher market prices for recyclables increased WM’s recycling earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter. According to a press release, recycling EBITDA improved by $23 million compared with the first quarter of 2021.
Recycling now brings in about 10% of WM’s operating revenues. Overall, WM brought in $4.66 billion in operating revenue during the first quarter, up 13% year over year.
The company’s recycling business brought in $100 million in revenue during the first quarter, up 14% year over year.
According to the company’s quarterly report, the average price for recyclables (excluding glass and organics) was $201 per ton in the first quarter, up from $133 per ton during the first quarter of 2021. According to a press release, the average price in the fourth quarter of 2021 was $218 per ton.
According to a May 5 conference call with investors, Jon Vander Ark, president and CEO of Republic Services, provided more details on the company’s recent move into plastics processing. In March, in the runup to the Plastics Recycling Conference, Republic announced it would build a 75,000-square-foot facility in Las Vegas that will take in plastic bales and produce washed PET flake and bales of HDPE, PP and other polymers.
By the numbers
By the numbers
The following is a look at key first-quarter 2022 recycling numbers from the five largest publicly traded haulers in North America:
- Q1 recycling revenue: $453 million
- Q1 revenue change YoY: Up 32%
- Average Q1 commodity price: $126 per ton
- Commodity price YoY: Up 59%
- Q1 recycling EBITDA YoY: Up by $23 million
- Q1 recycling revenue: $100 million
- Q1 revenue change YoY: Up 14%
- Average Q1 commodity price (excluding glass and organics): $201 a ton
- Commodity price YoY: Up 51%
GFL Environmental (converted to U.S. from Canadian dollars on May 5, 2022)
- Q1 recycling revenue: $69 million
- Q1 revenue change YoY: Up 10%
- Q1 recycling revenue: $61 million
- Q1 revenue change YoY: Up 92%
- Average Q1 OCC price: $163 a ton
- OCC price YoY: Up 51%
Casella Waste Systems
- Q1 Resource Solutions (which includes recycling) revenue: $67 million
- Q1 revenue change YoY: Up 30%
- Q1 operating income: $3.7 million
- Operating income YoY: Up 48%
Vander Ark said the Republic Services Polymer Center, which is the first of three to five planned centers nationwide, will serve the growing demand from consumer product brand owners for recycled plastics.
Scheduled to open in late 2023, the Las Vegas facility is expected to generate about $50 million in revenue each year for Republic, with its EBITDA at or above the total company performance, Vander Ark said.
In the first quarter of 2022, the company’s total adjusted EBITDA margin was 30.4%, Brian DelGhiaccio, Republic’s chief financial officer, said during the call.
Recycling now brings in 3% of Republic’s operating revenue. Overall, the company tallied $2.97 billion in revenue during the first quarter, up 14% year over year. Some of that was a result of acquisitions. Specifically, acquisitions increased revenue in the first quarter by 3.9%, compared with the prior-year period.
The company’s recycling business reported revenue of 89 million dollars Canadian (about $69 million; all dollars below in U.S.) during the first quarter, up 10% year over year, according to its quarterly report.
In the company’s financial reports, recycling operations are included under the solid waste division and broken out by U.S. and Canada segments.
In the Canada Solid Waste segment, the total revenue in the first quarter was $42 million higher than the year-prior period. Of that amount, higher prices for recyclables accounted for about $3.9 million, according to a management discussion document.
In the U.S. segment, solid waste revenues in the first quarter were up $103 million from the first quarter of 2021. Of that, higher recyclables prices accounted for $4.4 million.
Recycling now makes up about 6% of GFL’s operating revenue. Overall, the company brought in $1.09 billion in revenue during the first quarter, up 27% year over year.
Waste Connections’ recycling business reported $61 million in revenue during the first quarter, up 92% year over year.
According to the company’s quarterly report, revenue from the sale of recovered commodities in the first quarter of 2022 was $15 million higher than the year-prior period. That was primarily because of higher prices for OCC, aluminum, plastics and other paper products.
However, other factors were at play, as well: There was an increase in commercial recyclables volumes, which were depressed by COVID-19 during the first quarter of 2021, as well as a change in Waste Connections’ accounting method for recognizing certain recyclable commodity sales gross of selling and processing expenses, the report noted.
During a May 4 conference call with investors, Worthing Jackman, Waste Connections’ president and CEO, said OCC prices in the first quarter averaged about $163 per ton.
That OCC price is up about 51% from the price during the first quarter of 2021.
Recycling now makes up nearly 4% of Waste Connections’ operating revenue. Overall, the company pulled in $1.65 billion in revenue during the first quarter, up 18% year over year. Of the $250 million revenue increase year over year, about $110 million was from acquisitions, according to a press release.
Casella Waste Services
Casella’s Resource Solutions business brought in $67 million in revenue during the first quarter, up 30% year over year. Much of that was because of acquisitions, however.
The Resource Solutions division includes larger-scale recycling and commodity brokerage operations, organics services and large-scale commercial and industrial services.
First-quarter revenues in Resource Solutions increased by $15.4 million compared with the first quarter of 2021, according to the company’s quarterly report. Of that increase, $9.3 million was the result of acquisitions of other companies, $3.4 million was because of higher non-processing revenues as a result of greater volumes of material handled and favorable pricing, $2.2 million was from higher recyclables values and $500,000 was from higher processing volumes for recyclables and other materials.
In terms of profitability, Resource Solutions reported operating income of $3.7 million during the first quarter, up 48% year over year.
Casella Waste Systems relies on sustainability recycling adjustment (SRA) fees to bring in money when commodity markets are down. During an April 29 conference call with investors, Ned Coletta, the company’s chief financial officer, noted that the SRA fees mean that the company hasn’t been able to enjoy the full benefit of high recyclables prices when the markets are up, however.
With the floating SRA fees, “much of the year-over-year increase in recycling commodity prices was passed back to our customers in lower fees or higher rebates,” he said.
During the call, John Casella, the company’s chairman and CEO, noted the company in February announced plans to invest in its MRFs to boost throughput, enhance bale quality and improve returns. But with ongoing supply chain challenges, a key project, the complete equipment replacement of Casella’s Boston MRF, will be delayed from this year to 2023, he said.
Resource Solutions brings in 29% of Casella’s total operating revenues. Overall, the company brought in $234 million in revenue during the first quarter, up 23% year over year.
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