Although third quarter revenues reached record levels for some of the nation’s top five haulers, plummeting OCC pricing in October was an indicator for commodity values heading into 2025. | 2p2play/Shutterstock
Third-quarter commodity prices contributed to record quarterly revenues and margins for several of North America’s largest publicly traded garbage and recycling companies, according to recent financial disclosures. But that has changed moving into the final stretch of the year.
North America’s five largest publicly traded garbage and recycling companies – WM, Republic Services, Casella Waste Systems, GFL Environmental and Waste Connections – all recently reported their quarterly financial results, showing significantly higher revenues and margins compared to the same period last year.
However, the haulers noted that plummeting commodity prices for OCC – which typically makes up 50-60% of the material from a MRF – present headwinds for the remainder of the year, as markets balance out oversupply related to the short dockworker strike. They largely held a bearish outlook for recycled commodity pricing in Q4 and into 2025.
Even so, they cited automation upgrades for higher-quality recycling streams, which help support pricing and increase processing volumes.
In the calls, mostly held in late October before the U.S. presidential election, executives said they expected little effect on their business from the political outcome.
“No matter what happens with the election, no matter what happens with the economy, barring a disastrous geopolitical event, we’re very optimistic about 2025, 2026, 2027,” said WM CEO Jim Fish.
“I don’t think there’ll be much change from us in terms of how we operate or where we operate,” said GFL Environmental CEO Patrick Dovigi.
The following are details on recycling-related quarterly updates for the top five publicly traded garbage and recycling companies in the third quarter of 2024.
WM
Q3 revenue gains for WM, the country’s largest hauler, 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.
Nevertheless, with the brief dockworker strike in October and “continuing uncertainty associated with those impacts going into the fourth quarter, we’re less optimistic that you’ll see upside to recycling commodity prices continue into the quarter ahead or into 2025,” said CFO Devina Rankin, adding that WM is “cautious” about recycling commodity prices through the end of 2024.
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. The company’s investment thesis assumed $125 per ton, “so getting a higher blended value on our commodities is very important,” said Tara Hemmer, chief sustainability officer, adding that WM assumes a price of $85 per ton in Q4.
The faster processing speeds and additional size of new and upgraded facilities offer increased volumes, but also “we’re creating a cleaner product” in the recycling commodities, she said. For example, automation has enabled WM to capture more OCC and improve the quality and value of the mixed paper it produces, she said. OCC represents about 55-60% of WM’s overall blended value.
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.
“Our automated recycling facilities are consistently delivering lower labor costs per ton and higher blended value on our commodity sales compared to our legacy plants, which translates into better operating EBITDA margins,” said Fish, the company’s CEO. Nevertheless, the recycling EBITDA margin dropped in the quarter to 12.7%, lower by 2.4 points on the year.
By the numbers
The following is a look at key third-quarter 2024 recycling numbers from the five largest publicly traded haulers in North America:
Waste Management
- 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 U.S. from Canadian dollars on Nov. 13, 2023)
- 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
- Average Q3 OCC price: $139 per ton, up 55% YoY
COO John Morris added: “While inflation is generally coming down, we’re not seeing that with our front-line wages. And that’s part of the reason why you hear so much conviction about the continued investments in automation and technology, whether it’s the core business, whether it’s recycling facilities.” For example, WM is hiring technicians at an hourly rate that “starts with a four now, and it’s going to start with a five,” Morris said.
The company expects a payback period of six to seven years for new facilities, Rankin said. “When we look at the thing that made us so confident in this investment strategy, it really was the payback period of the recycling investments relative to investments we make in our traditional Collection and Disposal assets,” she said. “And we’ve always talked about the recycling investments being one of the best return on invested capital that we have across our portfolio. And we are seeing that not just hold, but accelerate.”
WM plans to complete the Denver MRF by Q2 2026, part of the $1.4 billion in investment from 2022 through 2026. The company also is building a new facility in Portland, Oregon.
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, which he said reflected the sharp decline in OCC.
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. Republic said it’s on track to complete the facility, which will be co-located with a Blue Polymers plant, by the end of 2024.
In regards to the Las Vegas Center, whose customers include Coca-Cola, Vander Ark said the company is happy with the pricing it’s getting and with the ramp-up in volume. “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.”
The second Blue Polymers facility, in Buckeye, Arizona, is still expected to be completed in late 2025, he said.
“Listen, we think we’re producing some of the cleanest flake in the world,” Vander Ark said, which is “what the market needs.”
Vander Ark added that Republic M&A over the next few years would include several new recycling centers. “We’re going to go studs up because there’s markets where we need capacity on that front.” However, he said, most of the capital expenditures would be put toward upgrading the existing sites, which number around 75.
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.
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.
GFL expects EPR contracts to contribute $5 million to $10 million of EBITDA for full-year 2024, and $40 to $50 million in 2025, said CEO Patrick Dovigi, with potential for more contracts in Canada’s eastern provinces of Nova Scotia, New Brunswick and Prince Edward Island, as well as Alberta and Saskatchewan and parts of Manitoba. “Those are the sort of next big ones to fall,” Dovigi said.
He added, “From an asset positioning perspective, we’re in very good shape in a lot of these markets.” And considering GFL’s existing relationship with Canadian producer responsibility organization Circular Materials, “I think we’re in a good spot to get our fair share.”
CFO Luke Pelosi added that EPR should contribute at least $130 million to margins over the next couple of years.
As for commodity prices, Pelosi noted that in Q4 northeastern oversupply due to the short-lived port strike has applied downward pressure on pricing. He added, “I do think folks believe that this is going to come back, but if you line today’s pricing up with the average you realize in 2024, 2025 would be a slight headwind.”
With labor costs a top concern among North American haulers, GFL has benefited from its focus on secondary markets, which has experienced lower wage pressures than in dense urban areas, and from effort to reduce employee turnover, Dovigi said. “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.
Looking ahead, Dovigi said GFL does not intend to shift its longtime strategy focus away from Canada, though U.S. market size and scale is larger by nature. GFL will focus on expanding in existing markets where it has post-collection capacity. As for 2025 M&A, Dovigi said that as yet no M&A activity is planned.
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. 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.
GFL recently has been the target of arson and drive-by shootings at several 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
As with other haulers, Waste Connections enjoyed strong year-on-year gains in Q3 OCC pricing before prices plummeted in October. CFO Mary Anne Whitney said pricing has the potential to drop an additional 5-10% in Q4.
Even so, Waste Connections’ Q3 OCC revenues were up by 55% on the year, though prices softened slightly from the previous quarter, Whitney said. She cited the brief port strike and weaker demand for the drop of about 15% in October, after quarter-end.
The average OCC value for Q3 was $139 per ton, lower than the expected $145, said CFO Mary Anne Whitney.
However, Whitney warned that next year commodity prices “based on where they are right now, would be a slight drag year-over-year.”
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, she said.
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. Of the total, OCC accounted for 888,759 tons or 67.4%. 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.