Decline in recycling commodity price impacts Waste Management revenue

waste-management

Decline in recycling commodity price impacts Waste Management revenue

Greentech Lead America: Waste Management, a provider of
recycling and waste management solutions, has reported revenues of $3.46
billion for the third quarter of 2012 compared with $3.52 billion for the same
2011 period.

The Company was negatively impacted by a decline in
recycling commodity prices, which decreased revenues by $176 million. Net
income the quarter was $214 million, or $0.46 per diluted share, compared
with $272 million, or $0.58 per diluted share, for the third quarter of 2011.

“The third quarter saw some good and improving trends. We
saw improvement in both our internal revenue growth from collection and
disposal yield and work-day adjusted volumes,” said David P. Steiner, president
and chief executive officer of Waste Management.

“Collection and disposal yield improved sequentially for
the first time in six quarters, and we saw positive internal revenue growth
from both yield and volume in our MSW, C&D and special waste landfill
operations,” Steiner added.

Overall income from operations margin, as adjusted, was
improved by 30 basis points despite a significant decline in commodity prices.

Revenue from solid waste collection and disposal
operations increased $115 million or 3.3 percent, excluding the impact of
commodity prices. That revenue increase, however, was more than offset by a
$176 million revenue decline from commodities prices, resulting in total
revenue being down by 1.7 percent, or $61 million.

 “Commodity price declines in our recycling and
waste-to-energy operations led to a $0.10 year-over-year earnings per share
negative impact in the third quarter. We anticipate another $0.04 per share of
headwinds in the fourth quarter. So, the total headwinds for the second half of
the year related to commodities are estimated to be $0.14 per diluted share, or
$0.07 higher than we previously anticipated at the end of the second quarter.”

Average recycling commodity prices were approximately 40
percent lower in the third quarter of 2012 compared with the prior year period.
Recycling operations had a negative $0.08 effect on the current year quarter
diluted earnings per share compared with the same quarter last year.

Electricity prices, which affect the Company’s
waste-to-energy plants, averaged 12 percent lower in the quarter compared with
the prior year period. Waste-to-energy operations had a negative $0.02 effect
on the current year quarter diluted earnings per share compared with the same
quarter last year.

Operating expenses improved by $32 million. Higher
expenses for third party haulers and maintenance were more than offset by
reductions in commodity rebates and landfill operating costs.

SG&A expenses decreased by $45 million compared with
the third quarter of 2011 primarily from incentive compensation accrual
reversals and reorganization savings. As a percent of revenue, SG&A
expenses improved 110 basis points to 9.7 percent.

Net cash provided by operating activities was $574
million; capital expenditures were $402 million; and free cash flow was $180
million.

Steiner added, “Recycling commodity prices and natural
gas prices have stabilized recently, with recycling commodity prices actually
up modestly in the last few weeks. Given our current outlook for relatively
stable commodity prices for full-year 2013, we do not expect significant
headwinds from commodity prices for the full year 2013.”

“With our recent restructuring anticipated to reduce
costs by $130 million in 2013, our other cost programs picking up steam, and
our focus on pricing to improve yield over our 2012 results, we expect to see
earnings and cash flows strengthen in 2013,” Steiner  said.

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