CLARIFICATION: Casella has received state permit approval for expansion of the Juniper Ridge Landfill, as stated in their earnings call, though is awaiting additional approvals for the state-owned site. This includes approval from the U.S. Army Corps of Engineers and the Old Town Planning Board.
- Casella Waste Systems reported $154 million in revenue for the second quarter of 2017, up 6.5% from the year before, along with a 2.6% increase in overall solid waste pricing and higher recycling revenues. Though it suffered a net loss of $53.7 million due to their decision to close a landfill in Southbridge, MA — which garnered the most attention during the company's earnings call.
- Following an unsuccessful ballot referendum on June 13, and a pending decision about expansion approval, Casella decided that it couldn't justify the necessary investment to try and keep the site open. "I think the difficulty is getting through the regulatory environment," said CEO John Casella. "Without the support of the community it really makes it difficult to fight through that battle." The site has an estimated 300,000 tons of capacity remaining and is now projected to close by the end of 2018.
- Looking more long-term, Casella also outlined plans to reduce general and administrative expenses while using capital to pursue selective growth. Going into more detail than their previous earnings call, the Casella team discussed upward of $500 million in potential acquisition opportunities — including at least $200 million of core tuck-ins — throughout the Northeast. The company recently completed a $4.9 tuck-in deal with an undisclosed company.
Casella had been hinting at the Southbridge closure since this spring as the regulatory situation became increasingly complex and expensive. The company has agreed to split the cost of an estimated $10 million water line extension with the state to address contamination in local wells, and was recently issued a notice of noncompliance for odor issues. Each of the four expansion phases they had outlined faced their own challenges in terms of zoning, water levels, existing contamination or structural questions. As recently as last month, even after the failed ballot referendum that they budgeted up to $100,000 for, Casella wouldn't confirm to Waste Dive whether they planned to close the site.
As Casella's executives sought to emphasize during the call, the company had a good overall second quarter despite losses attributed to Southbridge and additional expenses incurred from unseasonable amounts of rainfall in the Northeast. One of the biggest rain-related expenses was higher amounts of leachate, which cost the company an additional $1 million compared to the year before. Last month the company began piloting a new "environmental and energy" fee, similar to their recently implemented recycling fee, that will help address such costs as it's expanded to more divisions.
In a somewhat ironic twist, the tough regulatory climate that has led to more landfill closures in the Northeast is also projected to present new financial opportunities for Casella at its remaining sites. The company recently received permit approval for an expansion that will keep their Juniper Ridge Landfill in Maine open until around 2033, and has also been granted expansion approvals for similar lengths of time at two sites in upstate New York.
"...That capacity is very, very valuable, its expenses are put in place. The regulatory cost is going up everyday. So, we are playing some catch-up in our view. We are going to stay focused on returns at the landfills and pushing price at these levels," said CFO Ned Coletta during the call.
Though John Casella echoed similar recent comments from other CEOs that his business wouldn't be heavily affected by China's new scrap import ban, the company's earnings report also shows that recycling accounts for a much smaller portion of their business than solid waste, and average tip fees in the Northeast continue to be the most expensive in the country. All of these factors put Casella in a good financial position to take advantage of the remaining space they do have.