Renewi has made “good operational progress” during the second half of the financial year, but is facing continuing losses on municipal contracts with Wakefield council and for the Barnsley, Doncaster and Rotherham (BDR) partnership.
The comments come in the company’s trading update for the period 1 October 2017 to date, published today (12 February).
In the update, Renewi said its Municipal Division – which comprises contracts to deliver services on behalf of East London Waste Authority (ELWA), Barnsley, Doncaster and Rotherham, Cumbria and Dumfries and Galloway councils – has performed in line with its “revised expectations […] delivering good operational progress against the recovery plans”.
But, the company said, the operating contracts of Wakefield and BDR “continue to be loss making in the current market conditions, despite substantial operational improvements.”
The company reported that progress in the division includes the signing of a new off-take contract with the AEB incinerator in Amsterdam which “will reduce off-take costs for the ELWA site for the next decade” (see letsrecycle.com story).
According to the update, the group is currently undertaking its annual reviews of “onerous” contracts in the municipal division, “particularly in light of the full year of operations at BDR and Wakefield”. These reviews and additional actions are likely to result in “increased exceptional charges” for the year ending 31 March 2018, the company noted.
Overall, Renewi – which was created by the merger of Shanks with Dutch firm Van Gansewinke – reported that its merger synergy and integration projects are progressing well. The company said remains on track to deliver at least the €12m committed savings for the year ending 31 March 2018. And, the company said it remains confident that the overall €40m synergy programme will be delivered on schedule.
The trading update stated that the commercial division has continued to perform well in both the Netherlands and Belgium, well ahead of the prior year.
In terms of the Chinese import ban on paper and plastic recyclates, the company said it has found “alternative outlets” for its products, however, margins reduced slightly as a result. Since the start of 2018, Renewi said it has increased prices to offset “cost pressures” on wages, insurance and waste outlets
The company also noted its Hazardous Waste Division has performed “as expected”. And, its Monostreams Division – which comprises four businesses: Coolrec, Minerals, Orgaworld and Maltha – has performed well since the half year. The Maltha glass recycling business has delivered “ongoing margin recovery”.
“We have continued to make good operational progress and overall trading across the Group during the seasonally quieter second half has been in line with our expectations.
Before Christmas, the firm announced a new Shareholder Agreement (SHA) with glass bottlemaker Owens-Illinois, for their joint venture, Maltha (see letsrecycle.com story).
Commenting on the company’s performance, Peter Dilnot, group chief executive, said: “We have continued to make good operational progress and overall trading across the Group during the seasonally quieter second half has been in line with our expectations. We therefore remain confident in the outturn for the full year ending 31 March 2018.
“Our merger synergy and integration plans continue to progress well and we remain on track with the target synergies and delivering significant value accretion from the merger.”