Republic CEO previews more M&As by end of year, denounces waste brokers
- Republic Services released its third quarter earnings which showed a 2.8% increase in revenue, a higher than expected adjusted EPS of $0.62 and projected growth into 2017. A 12% increase in the average price of commodities — excluding glass and organics — compared to Q3 2015 helped, as well as growth in small container business.
- During the earnings call, CEO Don Slager noted "we're still committed to recycling for customers that are willing to pay," but said the company is being more strategic with its decisions. This includes avoiding long-term contracts with decreasing value over time, closing unprofitable facilities and not "enabling" waste brokers. "...We don't think they are good for our business, we don't think they add value to our customers," he said.
- Slager also said Republic plans to spend the remaining $70 million of its approximately $100 million M&A budget on companies in existing markets with reoccurring revenue by the end of the year. Republic could potentially have a similar M&A budget for 2017.
Slager's comments on "reimagining the recycling business" reflect similar thoughts from Waste Management's leadership. While commodity prices are up, they still present a challenge for most materials and many haulers have been looking for ways to more efficiently weigh environmental benefits with financial ones. Republic's recycling volume is expected to remain similar in the near future.
Looking farther ahead, Slager predicted that coal ash would be a "2018 story" as companies begin to deal with their stockpiles but said these volumes will decrease in the long-term due to lower natural gas prices. Under new federal regulations states are now working on their own disposal plans, a process which could accelerate depending on the fate of a bill in Congress, though only one has passed rules so far. According to CFO Charles Serianni, Republic has landfills in more than half of the top 10 states which produce 50% of the country's coal ash, so the company is "very well-positioned" when the time comes.
Other developments which are projected to save money in the future are a corporate restructuring, customer service center consolidation and plans to have all company vehicles certified in the One Fleet standardized maintenance program by mid-2017. Republic has also been touting its use of natural gas vehicles and was recently part of the Carbon Disclosure Project's "Climate A List" for its role in reducing greenhouse gas emissions.
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