Casella posts solid Q1, details plans to 'reinvigorate' acquisition pipeline
- In its first quarter earnings call, Casella Waste Systems reported a 6.7% increase in revenues from the same period in 2016, spurred by a 2.4% increase in overall solid waste pricing and a 22.6% increase in commodity prices from the previous quarter.
- Disposal volumes were down 6.4% due to planned diversion for construction of a new cell at Casella's landfill in Ontario County, NY and an unplanned reduction in business at Casella's Southbridge landfill in Massachusetts. An expansion proposal has faced significant community opposition and while the company plans to continue pursuing its agenda, CEO John Casella said "it is possible at some point in the near future we could conclude that closing this site is in the company’s best interest."
- Executives also said they have been actively looking at potential tuck-in acquisitions, with strong encouragement from their board. While no specific budget was mentioned, Casella said the company is "working to reinvigorate our acquisition pipeline" and developing a strategic plan for the coming years.
After leaving behind the usual challenges of a Northeast winter, Casella's leadership expressed confidence in their trajectory and reaffirmed guidance for annual revenues to be at least 2% higher than in 2016. Continuing to focus on their strategy of emphasizing pricing over volume at landfills, shifting recycling commodity risks to customers and growing their organics business is reportedly paying off for the company. As they work to upgrade the second half of their fleet and make other operational changes, more savings could be coming in the future.
Excluding Southbridge and Ontario, overall landfill volume was actually up by 2.4% during the quarter and a recently issued draft permit for the proposed expansion of their Juniper Ridge Landfill in Maine through 2033 could help that continue in the future.
Yet it's hard to spin recent developments around Southbridge as anything but expensive and undesirable for the company. Despite many months of fighting responsibility for contamination in local wells, Casella has now entered an agreement with the Massachusetts Department of Environmental Protection and two local towns to collectively pay up to $10 million for a new municipal water line. This site has been a primary focus for environmental advocates in the state, some of whom have been very enthusiastic about the recent turn of events.
Though according to Casella's leadership the company is still on track to hit its end-of-year targets and could shift volumes to New York, potentially even through a newly constructed transfer station, in a worst-cast scenario. Looking farther into the future, the company could also potentially see new business in the Boston market. Casella currently has a processing contract for residential recyclables at the only facility within city limits. As the city begins exploring a new "zero waste" plan, which could include some form of food scrap diversion, that could prevent additional opportunities as well.
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