Viridor reports 8.4% fall in profits for 2011/12
29 May 2012
A drop in the value of recycled material and the diminishing use of landfill have been blamed for Viridor’s 8.4% fall in pre-tax profits for 2011/12.
According to provisional end of year results published by the Taunton-based waste management firm’s parent company Pennon today (May 29), Viridor’s pre-tax profits fell from £62.9 million in 2010/11 to £57.6 million in 2011/12.
In November 2011 Viridor reported that it had seen a rise in pre-tax profits to £30.6 million for the six months to September 30 2011, up 7% from £28.6 million the previous year (see letsrecycle.com story).
However, Viridor says that revenue per tonne of recycled material fell from an average of £125 in the first half of 2011/12, to £111 in the second half, with the company remaining cautious about the prospect of a recovery in prices in the short-term.
Despite this, the company claims that recycling remains its largest profit generator, and has seen profits in recycling grow, but this growth was not did not match the decline in landfill as well as the increased costs involved with bidding for new contracts. And, the company claims that around 50% of its profits came from recovering value in waste including recycling and energy from waste.
Ken Harvey, chairman of the Pennon Group said: “Viridor made very substantial progress during the year in progressing its pipeline of PPP and EfW projects. However, as expected the full year profits for Viridor are below those of last year. Viridor experienced a reduction in recyclate prices in the second half of the year, reflecting world economic conditions and increased bid costs associated with the company’s growing pipeline of long-term projects.
“Accordingly, we took action to reduce the cost base which recovered more than 50% of the impact of reduced recyclate prices. Viridor’s financial performance will continue to be impacted by trends in recycling and landfill. We are cautious about the prospect for a recovery in recyclate prices in the near-term. Looking further ahead, our growing pipeline of projects will ensure the future success of the company and could more than double Viridor’s EBITDA within the next five years.”
Viridor’s earnings before interest, taxes, depreciation and amortisation (EBITDA) decreased by £6.2million in 2011/12 to £110.3 million although the company remains confident that it can more than double EBDITA within the next five years. Revenue for 2011/12 was up 6.9% to £761.1 million, but operating profit was down from £71.6 million to £63.7 million.
The volume of material sent to landfill dropped by 11.4% to 3.1 million tonnes during 2011/12, with the closure of the Horton landfill site in West Sussex accounting for around half of this reduction. Viridor cites increased recycling and landfill diversion efforts from clients and the weak UK economy as important factors in this decline.
Throughout 2011/12 Viridor has continued to expand its waste management activities which included the acquisition of waste logistics firm JWS Churngold for £14.3 million in October and Milton Keynes-based materials recycling and paper trading business Community Waste Recycling Ltd for £15.75 million.
The company was also named preferred bidder for the 25-year South London Waste Partnership residual waste treatment contract, worth around £990 million, as well as a 25-year £250 million waste disposal contract with Glasgow city council.
Viridor’s energy from waste output crept up, with landfill gas power generation output increasing by 2% to 576 Gigawatt hours (GWh). Average revenue per Megawatt hour (MWh) rose by 1% to £83.5 per MWh from £82.5 per MWh but was offset by unit cost increases. The company has a further 29MW of renewable energy capacity across its share of the Lakeside EfW, the Bolton EfW facility and the Greater Manchester Anaerobic Digestion (AD) operations.
It also began construction on a number of high profile EfW facilities including the £205 million plant at Ardley in Oxfordshire, and the £45 million incinerator in Exeter, Devon, as well as its £10 million anaerobic digestion facility near Bridgwater in Somerset.
Overall, Pennon Group which owns Viridor and South West Water saw profits rise 6.4% to £200.5 million for 2011/12.