- Economic outlook: During a Q3 earnings call Wednesday, WM executives expressed optimism that the company was recovering from some of the headwinds that affected Q2, such as inflation, lower-than-anticipated renewable energy prices and slow commodity price recovery. In Q3, margin impacts related to fuel, energy and commodities “basically offset each other, giving us confidence that this quarter's results are based on the steps we're taking to price our services above inflation and to permanently reduce our cost structure,” said CFO Devina Rankin.
- Pricing: As with previous quarters, CEO Jim Fish said a “disciplined” pricing strategy is a major way to keep pace with inflation and other headwinds. Core price for the third quarter of 2023 was 6.6%, compared with 8.2% in the same quarter last year. When asked by an analyst if WM has room to push price higher, Chief Operating Officer John Morris said the company must balance pricing levers with delivering long-term “customer lifetime value.”
- Labor/attrition: WM is continuing its cost-cutting strategy of attrition, which mainly means not filling roles WM considers “high turnover or difficult to fill,” Fish said. Since January, it has reduced headcount by 1,650 positions and plans to eliminate up to 7,000 positions through both “attrition and technology” in the next four to five years.
- Volume: Total reported volumes increased 0.5%, with collection and disposal volumes growing 0.3% in the third quarter of 2023 compared with 1% and 1.4%, respectively, in Q3 2022.
- Special waste: WM’s special waste volumes grew 11.1% in Q3, a jump Morris attributed to “several high-priced projects.” Timing and pricing of special waste projects can vary due to what Morris calls their “discretionary nature,” but said WM has a robust pipeline for future special waste projects.
- Collection/disposal: WM reported its “best ever” third-quarter operating earnings before interest, taxes, depreciation and amortization margin at 29.6%. Rankin attributed this to margin expansion in the collection and disposal business. Collection and disposal yield was 5% in the third quarter of 2023 compared with 7.1% in the third quarter of 2022. Organic revenue growth from those two lines of business “remains solid and is tracking well against our expectations,” Fish added.
- Recycling: Average commodity price was $58 per ton in Q3, down from $94 in Q3 2022. WM earned $366 million in recycling revenue in Q3, down from $420 million during that period in 2022. The company expects investments in new and upgraded recycling facilities to help.
- Projects: In Q3, WM updated two recycling facilities with new technology and automation, and it expects two more automation projects, plus a new facility in Nashville, to be complete by the end of the year. Its seventh renewable natural gas facility is expected to come online in January. Four more RNG facilities are scheduled to open in 2024, including what Fish describes as its two largest projects: one at its Orchard Hills landfill in Illinois and another at its Fairless Landfill in Pennsylvania.
- Future capital expenditures: Several capital expenditures have faced minor delays due to permitting or utility connectivity, including the Fairless RNG project now expected to open in June instead of May. Tara Hemmer, WM’s chief sustainability officer, said none of the 40 recycling and RNG projects estimated to be under construction in 2024 would be canceled, and “we’re full steam ahead.”
- 2024 predictions: WM maintained the 2023 guidance that it “modestly” lowered in Q2. Looking into 2024, Fish said there are signs that commodity and energy cost headwinds are turning around, but “we're not going to try and predict what happens with the economy. The things that we can control, I think we're doing a pretty darn good job of controlling.” Fish predicted pricing would be “good” moving into 2024, and volumes would stay mostly flat.
WM reports inflation headwinds are easing, shifts timing for certain sustainability projects
WM reported “strong results” in Q3, citing its pricing strategy, as well as revenue growth in the collection and disposal lines and cost savings from attrition.
- WM lowers 2023 guidance due to commodity prices but reports ‘solid results’ despite headwinds By Megan Quinn • July 26, 2023
- Q3 earnings results for major waste and recycling companies By Waste Dive Staff • Updated Nov. 9, 2023