Republic Services announced it's raising financial guidance for the year during its earnings call Thursday, noting an 8.1% increase in volumes during the quarter and MSW and C&D landfill volumes that both exceeded their pre-pandemic baselines.
Executives highlighted a pipeline of possible M&A opportunities and landfill gas-to-energy projects, likely investment to upgrade and expand their recycling facilities, and growing emphasis on its environmental solutions businesses as focuses going forward. At the same time, they acknowledged uncertainties posed by the surging delta variant of the coronavirus and their inability to hire enough drivers to take full advantage of certain growing markets.
Pandemic recovery and performance
- Volume increases occurred across both small container (8.6%) and large container (13.7%) business lines. Those overall volumes nearly matched 2019 pre-pandemic baselines.
- In recycling, commodity prices were $170 per ton in the quarter, up from $101 on a year-over-year basis. Revenues from recycling processing and commodity sales totaled $103 million, up approximately 40% compared to the second quarter of 2020.
- The company also laid out the specific performance of its environmental solutions business. Revenue totaled $29.3 million in the quarter. Chief Financial Officer Brian DelGhiaccio said that the petrochemical and industrial manufacturing portions of that business (which are about 70% of the unit) grew 8% year over year.
Despite the recovery seen in the second quarter, CEO Jon Vander Ark recognized the potential for some positive trends to reverse. "With the delta variant and the third wave happening, and pockets of the country starting to retrench a bit, we're very mindful that we don't know exactly what's going to happen in the next six months, we're not past this thing," he said. "In the near term, there just remains some uncertainty." Those comments are a slight departure from competitors' takes on the pandemic shared during other recent earnings calls, which have expressed confidence in continued positive trends going forward.
Thus far, the pandemic environment has not greatly disrupted supply chains for Republic’s equipment orders this year. Vander Ark said the company is adding 1,200 trucks this year and has already received 700 of them, with “a good line of sight to the 500” that remain outstanding.
“We’d certainly take more drivers if we could get them right now,” Vander Ark said. “We certainly are forgoing some growth opportunities in certain markets where the economy is booming.” He said additional hiring would be particularly advantageous in the industrial and large container lines of business. Alternatively, while Waste Management recently acknowledged on its own recent earnings call that hiring challenges are affecting service for current customers, the company doesn’t feel it’s held back expansion to new customers.
Areas of opportunity