Advanced Disposal projects more active year coming off long winter, Greentree Landfill fatality in Q1
- Advanced Disposal reported a 4.1% increase in revenue for the first quarter of 2017 compared to the same period during the previous year. That was influenced in part by a 2.4% increase in average pricing yield, 3.1% growth in commercial pricing and 1.4% increase to overall revenue from higher recycling commodity prices.
- The company's recent acquisition of CGS Services, which greatly expands their Indiana presence, also played a key role in increasing revenues during the quarter. Advanced also completed three other recent tuck-ins, including one in Polk County, FL which will help establish infrastructure for an upcoming large municipal contract. So far they have acquired $40 million in new revenue this year and anticipate that may grow in the months ahead.
- While Advanced didn't see the same volume increases as other competitors, CEO Richard Burke attributed this to the seasonal factors of their coverage area. He said they have only taken in about 21% of the usual 16 millions tons per year accepted at their 40 landfills so far and expected this to pick up in the remaining quarters. Temporary closure of the Greentree Landfill in Pennsylvania following the death of a worker in February also affected volumes and related income.
The Advanced executives described many of the same industry factors as their competitors have in recent calls: higher fuel prices, unpredictable commodity shifts, new contract terms that protect the company against those shifts and the potential for new acquisitions if corporate tax reform ends up happening. Burke noted that this hasn't affected potential for tuck-in deals, but attributed a recent increase in appointments for potential deals to anticipation around a tax change.
Looking ahead, company leadership was also optimistic about the potential for winning more new municipal contracts. While the company was unsuccessful in challenging Waste Management for a recent contract in Jupiter, FL, their wins still outpaced losses due to other deals in the first quarter. They estimate having won about 20% of contracts by revenue so far in 2017 and anticipated bidding on about $70 million worth of business during the rest of the year.
When asked whether increased cardboard from e-commerce might be a missed opportunity because only 2% of the company's revenue currently comes from recycling, Burke said that share made sense for their current markets. This also protects Advanced from commodity fluctuations and materials that aren't currently profitable for the company, such as glass.
"While it’s only 2% of our revenue, a lot of that speaks to where we operate in the South and certain parts of the East, where the recycling appetite is probably not as great as it would be on the West Coast or any of the coasts for that matter. So it’s not that that’s not part of our business, it’s just based on our demographics and where we operate a smaller portion than some of the other nationals," he said during the earnings call.
Following its successful IPO last fall — as well as expected efficiencies from continuing infrastructure maintenance and customer service consolidation — Advanced appears to be on track for another year of growth.
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