Viridor profits under pressure

Despite some improvements, Pennon said it expects the Taunton-based waste management firms profits before interest and tax (PBIT) for the first half of 2011/12 to be 27.8 million – down 30.5% on the same period for the previous year. Pennon said this was somewhat below the bottom range of current market expectations.

However, the Group notes that Viridor has made strong progress on a number of energy-from-waste projects and public private partnerships (PPP).

Information on the groups performance was published in a trading statement by Pennon yesterday (November 15) ahead of its half year results which are expected later this month.
Viridor has previously noted the impact that the value of recycled material has had on its profits, after the end of year results published by the Pennon Group in May 2012 showed an 8.4% fall in the firms pre-tax profits (see letsrecycle.com story).

Revenues

In its latest statement Pennon said Viridors performance has been impacted by recyclate prices, as the overall average price per tonne fell to 103 in the first half of 2012/13 – 17.6% lower than for H1 2011/12. It added that prices were significantly lower than this by the end of the second quarter.

In addition, recycling revenues for H1 2012/13 are expected to be 18.8m lower than the same period last year.

Commenting on this, Pennon said: While we have taken action to reduce our cost base and have recovered about half of the impact of the reduction in recyclate prices through the terms of customer supply contracts and cost reductions, PBIT plus joint ventures is expected to be 27.8m in H1 2012/13, down 30.5% on H1 2011/12.

Analyst forecasts for the full year currently assume a recovery in recyclates prices in the second half of the year. However, we have not seen an improvement in prices to date in the third quarter and are therefore cautious on the prospects for recyclate prices.

Progress

Pennon said Viridor has continued to make strong progress on its growing pipeline of PPs and EfW projects which underpins its long term profit momentum.

Since March 2012, Viridor has signed a 250 million waste treatment services contract with Glasgow city council (see letsrecycle.com story ) and a 990 million waste treatment contract with the South London Waste Partnership (see letsrecycle.com story).

In addition, the firm has been named as the preferred bidder on the Peterborough PPP and achieved a planning relaxation for its proposed Dunbar EfW enabling it to serve the whole of Scotland.