Renewi’s UK revenue has fallen in the past six months as the company’s half year results warn of “potential future risks” from Brexit and the Dutch incinerator tax.
And, today’s (07 November) half year results –which are for first half of the financial year (April- September)– say that the potential tax on RDF exports to the Netherlands could render some of its UK contracts “onerous”.
Despite this, Renewi reports that most of its UK contracts – including those in East London and Barnsley Doncaster and Rotherham – have made financial progress.
The figures also show that that globally, Renewi’s trading for the first half of the financial year was in “line with expectations”. Its full year outlook will remain unchanged.
According to the results, Renewi’s overall commercial division saw a 5% increase in revenue, with underlying earnings before interest and tax up 13% on a like for like basis.
Otto de Bont, chief executive officer of Renewi, said the group had traded well in recent months.
He explained: “We delivered a good performance in our core Commercial Division and made good progress at ATM [at the market] in both scaling up capacity for the manufacture of new building materials.
“Looking forward, our outlook for the current year is unchanged. We remain focused on cash generation and driving down leverage over time, and we are increasingly confident that ATM will increase production in 2020.”
He added: “While the near-term macroeconomic environment has weakened, the growing circular economy is expected to generate significant opportunities for sustainable growth over the long term.”
Renewi’s UK business however reported a 9% reduction in its revenues at €94.3 million (£81.4m).
There was an expected €4.5 million (£3.9m) dip in profitability, which the company says is largely due to its contract in Derby.
Delays to the completion of Derby’s Sinfin gasification plant – which was being developed by a partnership between Renewi and infrastructure firm Interserve – led to the £900 million contract being cancelled this August.
In its end of year results for 2018/19 Renewi announced it had provided financially for the “complete termination” of the contract with Derby city and Derbyshire county councils (see letsrecycle.com story).
In its latest figures Renewi states that the contract remained profitable for the first half of the last financial year, but became onerous in March 2019.
Outside of the Derby contract Renewi reports “operational and financial improvements” in most of its UK contracts, particularly those with the East London Waste Authority (ELWA) and Barnsley, Doncaster and Rotherham (BDR).
In its comments on its UK business, Renewi includes warnings about the financial impact Brexit and a potential Dutch incinerator tax could have upon its operations.
It says a hard Brexit could “disrupt the export of waste and recyclates internationally, creating offtake costs in the UK and over-capacity of incineration in the Benelux”.
The possibility that the Dutch government will levy an incineration tax of €32 (£28) per tonne on RDF imports from 1 January 2020 is also highlighted as a key risk for the business.
Renewi believe it would particularly impact the ELWA contract, which exports 200,000 tonnes of RDF per year to the Netherlands.
It estimates the annual impact at around €4 million (£3.45m) until alternative outlets are located outside the Netherlands. This risk would require an impairment of the right of use asset in ELWA and the potentially create an onerous contract provision.