Enviri executives said on the company's earnings call Monday that the process to sell its Clean Earth business is attracting strong interest from potential buyers. The company has amended its credit agreement to allow for the sale, and it expects to have an update on the strategic review process for a deal before the end of the year, they said.
Enviri announced the strategic review in August after abandoning a previous attempt to sell its Harsco Rail business segment. At that time, the company disclosed Clean Earth may be up for sale, and it has tested the market for a sale since.
"We have seen strong and definitive interest in our Clean Earth business," Enviri CEO Nick Grasberger said on the third quarter call. "While nothing can be certain, we believe that there is a path to crystallizing its value in a tax-efficient manner for our shareholders."
The discussion comes as Clean Earth once again propelled Enviri's overall earnings results. The business segment reported revenue growth of 6% year over year to $250 million, recording its strongest quarterly performance to date. Grasberger also said Clean Earth's backlog of business remains strong.
Enviri has viewed the hazardous waste business as a platform for investment since it acquired Clean Earth, as well as Stericycle's Environmental Solutions business, in 2019 and 2020, respectively. The segment's competitors include U.S. Ecology, which Republic Services acquired in 2022; Clean Harbors; Veolia; and Reworld. But Enviri noted in its annual report that Clean Earth operates in "a very fragmented, regionally-driven market,” leaving room for growth.
Across the U.S., the Clean Earth business operates 19 permitted treatment, storage and disposal facilities, as well as several wastewater treatment facilities and 10-day transfer facilities for hazardous waste, according to Enviri's most recent annual report. It also reported a fleet of roughly 800 vehicles. About 83% of the segment's revenue comes from hazardous waste services, with the remainder coming from services related to soil and dredged materials.
Enviri's other two business segments reported mixed results. Harsco Environmental saw revenue decline 6% year over year, and adjusted EBITDA was down 17%. Those results reflected the impact of business divestitures like that of Reed Minerals last year, site curtailments and exits, and lower volumes of certain products, according to the company's earnings presentation. Grasberger said the segment reached its trough in the first half of the year, and he expects results to improve somewhat moving forward.
Harsco Environmental provides the global metals industry with onsite environmental services and material processing, and it has seen demand for products and services weaken in line with a slump in the global steel market. Pending policy changes in the European Union to raise tariffs on imported steel and lower quotas may provide a lift to the business next year, Grasberger said.
Harsco Rail reported 10% revenue growth but a decline in adjusted EBITDA, as it remains hampered with unfavorable contracts. The segment is unlikely to return positive cash flow until 2027, after those contracts mature, executives said. Harsco Rail's base business generates $35 million to $40 million of adjusted earnings before income, taxes, depreciation and amortization annually, CFO Tom Vadaketh said on the call.
The company has reduced its guidance for the fourth quarter and full year. Executives noted deferred maintenance and weak demand for aftermarket parts have pushed back some revenue generating business to next year. Enviri lowered the midpoint of its full-year revenue guidance by $27 million and its free cash flow guidance by $50 million. Following the changes, the company now projects to be cash flow negative for the year.
