Recycling markets increase revenue for WM and others
Soaring raw material prices led to a marked increase in recycling revenue for North America’s largest carriers last year. These companies say they will invest a lot of money in upgrading their MRFs in 2022.
Waste Management, Republic Services, GFL Environmental, Waste Connections and Casella Waste Systems recorded recycling revenue increases of 49%, 42%, 36%, 137% and 20%, respectively.
Two of them, Waste Management (WM) and Casella, also reported a strong increase in profits from recycling. WM reported that its recycling revenue in 2021 improved by $186 million, and Casella reported that its recycling revenue more than doubled.
On a recent call with investors, John Morris, WM’s chief operating officer, said that in recycling, every quarter of 2021 “earned a place among our five most profitable quarters ever, and we anticipate an equally strong year in 2022.” .”
Meanwhile, WM plans to invest up to $275 million in upgrades to its MRFs this year, and Casella announced an $18 million equipment upgrade project at its Boston MRF. .
Below are more details on the full year and fourth quarter 2021 financial results for the top five carriers.
The company’s recycling business generated revenue of $478 million in the fourth quarter, up 55% year-over-year, according to the company’s report. Press release. For the full year, the company reported revenue of $1.68 billion in 2021, up 49% from the prior year.
The company also found that its recycling business was more profitable. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the recycling business improved by $44 million in the fourth quarter compared to the prior year period, according to a press release. . For the full year, recycling EBITDA improved by $186 million compared to 2020.
“The improvement was driven by an increase in market prices for recycled raw materials and labor savings from the company’s investments in improved technology and equipment,” according to a report. Press release.
WM has spent heavily on capital improvements to its MRFs and plans to continue to spend heavily. In November, the company announced that it planned to spend $200 million in 2022 to install new technology, and in the latest release, WM has revised that capital expenditure estimate up to $275 million for 2022.
To date, WM says it has significantly automated sorting in four of its 49 single-stream MRFs.
From 2023 to 2025, WM plans to invest $525 million “to accelerate our investment in technology automation in a number of our single-stream facilities and to expand our recycling footprint, including in underserved markets” .
Investments in MRF technology are expected to save the company between $60 million and $70 million annually in labor costs, according to the statement. In one February 2 conference callJim Fish, CEO of WM, said the upgrades could eliminate 1,000 to 1,200 positions over a period of about four years.
“We’re not talking $200,000 jobs here,” Fish said. “But the high turnover, the high attrition that we’re really seeing in those jobs, I think, makes it the absolute right decision to walk away from those, especially at a time when we’re having such a hard time filling those positions.”
Meanwhile, WM says MRF retrofits produce more and better quality balls, helping it generate more revenue from commodity sales.
In total, WM estimates that MRF’s capital investments will have a payback period of approximately six years. This estimate assumes a weighted average commodity price of $125 per tonne in the future.
In 2021, WM saw a weighted average value of around $114 per ton. The average is currently around $115. For 2022, WM forecasts an average of $125 per ton.
WM also invests in systems that recover gas from landfills.
“These growth investments aim to strengthen WM’s leadership position in sustainability by increasing recycling volumes by more than 1.5 million tonnes and increasing renewable natural gas production by 21 million MMBtu. [million metric British thermal units] by 2026,” Fish said in a statement. “These investments will provide circular solutions to our customers and deliver environmental value to the communities we serve while delivering highly attractive returns to our shareholders.”
Recycling now represents more than 10% of WM’s total operating revenue. Overall, the company recorded revenues of $4.68 billion and $17.93 billion in the fourth quarter and full year 2021, up 15% and 18%, respectively.
The company’s recycling business generated $421 million in revenue in 2021, up 42% from 2020. For the fourth quarter, recycling business revenue totaled $110 million, up 36% year-over-year.
According to company annual reportthe average price of recycled raw materials (excluding glass and organic materials) was $187 per ton in 2021, compared to $96 per ton in 2020.
A Press release noted that the price of raw materials in the fourth quarter of 2021 averaged $218 per ton, up 98% year-over-year.