Renewi has recorded a profit of £2.2m in the UK municipal division of its company so far this financial year, up from a loss of £3.5 million in the same period last year.
This was put down to a number of factors including the sale of the loss-making Westcott Park AD facility last year and the exit from its Dumfries & Galloway PFI operating contract.
The figures were released as part of the company’s interim results, which cover the first half of the financial year to the end of September. Ahead of the release of the results, the company also announced that its CEO Peter Dilnot had announced his resignation to join specialist acquisition company Melrose Industries. Mr Dilnot will be replaced by Otto de Bont, currently managing director of the Renewi Netherlands Commercial Division.
Commenting on the UK municipal division, it said: “This strong performance was despite the business facing ongoing market challenges, particularly the pressure on output prices for the products produced by our MBT facilities.
“[Also] the cost of disposing of refuse derived fuel (RDF) was impacted by the further weakness of Sterling and disruption to RDF exports caused by the lack of incinerator capacity.”
It added that “pressures” in the recyclate price market cost the company over £1 million, “which cannot be passed on to customers.”
“Recyclate income was as expected, with margins reduced compared to the prior year albeit protected by dynamic pricing,” it explained.
However, the results were viewed negatively in the stock market, with shares falling by more than 15% on November 8th but rising slightly to 49.05 the following day. The share price has halved since the same time last year.
The most recent share price slump was put down to problems with its soil production machine, called ATM, in the Netherlands. The report said this was not expected this financial year resulting in “reduced management expectations of up to €3m operating profit per month”. [Updated 9th November]
Specifically for the UK market, Renewi said a number of highlights enabled it to deliver the ‘strong results’.
This includes a benefit of over £1m from the sale of the loss-making Westcott Park AD facility at the end of last year, the profitable sale of its Energen Biogas facility at Cumbernauld in Scotland, which completed its “strategic exit from merchant AD plants in the UK”. This generated €19m in cash and an exceptional profit on disposal of €11m, the company said.
Renewi, which was formed following a merger between Shanks and its Dutch counterpart Van Gansewinkel , frequently referred to a “lack of incineration capacity” throughout the report when referring to market difficulties across Europe.
It said it incurred more than € 4 million of additional costs in its recyclate income during the summer across Europe because of it and said it expects to “pass on this impact through pricing to waste producers”. In Northern Europe, it said the incinerators are “full”.
Renewi also said it expects difficulties when the Dutch government increase its incineration taxes by 120% from the start of next year to €31 per tonne.
Touching on the export of waste, the report explained that providing Brexit is “orderly”, the practise will continue “for some time”.
“With an orderly Brexit process, we expect the export of waste from the UK to continue for some time, as there is a strong economic incentive for both the Netherlands and the UK to do so,” it explained.
For the long term, Renewi said: “We believe the impact on the Dutch market is likely to remain limited. This is because an ultimate reduction in UK imports was already expected due to the commissioning of incinerator capacity in the UK and because increasing domestic demand in the Netherlands.”
The full report can be read here.