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WM details MRF investment plans, profit forecasts

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Despite falling earnings from its recycling business in 2022, Waste Management is planning significant MRF investments. | Create Jobs 51/Shutterstock

Waste Management will spend $1 billion over four years upgrading and building new MRFs, with much of the spending occurring this year, the company disclosed last week. 

Already North America’s largest MRF operator, Waste Management (WM) said it will invest $1 billion from 2022 through 2026, up from the $800 million the publicly traded company previously planned to spend over that period. The capital investments are expected to greatly boost the recycling business’ profitability.

“Our portfolio of projects to automate existing and build new material recovery facilities have three key financial benefits: reduced labor costs, improved product quality that commands a price premium and capacity growth,” said Jim Fish, WM’s CEO, during a Feb. 1 call with investors

The forward-looking capital investment details were included in a presentation released alongside the company’s fourth-quarter and full-year 2022 financial results. 

Over a year ago, the company announced it would spend big to improve its MRFs by installing automated sorting technologies. But with the latest disclosure, WM revised upward its expectations, while also revealing new details about the profitability of its recycling business. 

Meanwhile, WM reported that lower commodity prices hurt its recycling revenues and profits in 2022, with earnings falling by about 80% from the year prior. 

Big spending ahead

WM’s supplemental presentation, released Jan. 31, explained what factors accounted for the 25% increase in how much the company plans to invest in MRFs from 2022 through 2026. 

For one, company leaders decided to add more projects, including four additional MRF upgrades and the construction of two new MRFs in markets currently not served by WM. It has also expanded the scope of some previously planned projects. 

The presentation notes that the company expects municipal recycling program expansions to recover additional commodities and that inflation is driving up the tab for the projects. 

That $1 billion will be spent over four years, with a lot of checks being cut this year. WM spent $321 million in recycling capital expenditures in 2022. It plans to spend another $455 million this year, $180 million in 2024 and $45 million in 2025. 

WM also published financial projections showing how much additional profit the recycling expansion might bring, as measured by operating earnings before interest, taxes, depreciation and amortization (EBITDA). 

According to the presentation, the $1 billion in investments will boost the company’s recyclables sorting and marketing capacity by about 2.8 million tons by 2026. Relying on a number of assumptions, including that the blended average value of a ton of recyclables will be about $125 over that time, that additional capacity could boost WM’s total recycling operating EBITDA to $240 million per year by 2026. 

Of course, that estimate depends on recyclables prices. If the blended average recyclables price is closer to $75 a ton, then WM’s recycling EBITDA would be about $200 million a year, the company forecast. 

For comparison, in 2022, WM’s recycling operating EBITDA was $15 million. 

According to WM’s presentation, the additional profits will come from four main improvements to its recycling business: automating MRFs and reducing labor costs; improving materials separation, which allows the company to capture more material and fetch better prices; increasing its sorting capacity at existing MRFs, allowing it to sell more material; and building single-stream, C&D and commercial sorting plans in communities that currently lack recycling access, unlocking volumes of recyclables WM could sell. 

With regard to labor costs, Fish said during the Feb. 1 conference call that MRF automation projects allowed the company to reduce its headcount by 137 positions through attrition in 2022. This year, the company expects to reduce another 200 positions. 

Impacts of down recyclables prices

Meanwhile, looking backward, WM’s recycling business brought in $360 million in revenue during the fourth quarter of last year, down 25% year over year. For the full year 2022, WM’s recycling business tallied $1.70 billion in revenue, up 1% from 2021. 

According to a press release, recycling operating EBITDA in the fourth quarter was down by $51 million compared with the fourth quarter of 2021. And for the full year, EBITDA was down by $59 million compared with 2021. 

“The decline in both periods was primarily driven by a sharp decline in market prices for recycled commodities in the fourth quarter and persistent inflationary pressures on operating costs, particularly for labor at non-automated facilities, throughout the year,” the press release states.

Fiber grades, in particular, have felt the pinch. According to, a ton of OCC averaged about $100 throughout 2022, down from an average of $122 the prior year. But the price slipped throughout 2022 and ended the year at a low of $29, which was down a whopping 80% from a year earlier. 

During the conference call, John Morris, the company’s chief operating officer, said WM saw an average commodity price of about $47 per ton in the fourth quarter. Tara Hemmer, WM’s chief sustainability officer, said December ended with recyclables averaging just over $50 a ton. 

WM is forecasting more pain. For 2023, the company is expecting recycling EBITDA to be down another $40 million to $50 million, again because of lower commodity prices. That projection is based on an assumption that the average value of a ton of recyclables will hover around $70 this year. 

Recycling now makes up nearly 9% of WM’s total revenue. Overall, the company tallied operating revenue of $4.94 billion and $19.70 billion during the fourth quarter and full year 2022, up 5% and 10%, respectively.

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