Viridor EfW earnings offset recycling revenue drop

But, Viridor ‘remains cautious’ after revenue generated from recycling dropped £30 million on the previous year and average price of recyclate and gate fees per tonne fell by 7.7%.

Pennon reported that the waste firm’s earnings before interest, tax, depreciation and amortisation (EBITDA) rose from £76.3 million to £80.4 million in 2014/15.

And, Viridor’s underlying EBITDA also increased 7.5% on the previous year to £135.3 million in 2014/15.

The Group has attributed the growth to Viridor’s energy recovery operations, having brought five new EfW facilities on stream in the UK over the last 12 months. Two thirds of the firm’s portfolio capacity is now in operation and 80% is expected to be operational by the end of 2016/17.

For instance, Viridor’s Lakeside energy recovery facility, the first of its EfW projects, “continues to outperform” its financial close assumed power generation and waste processing targets. Its share of the plant’s EBITDA rose by £2.9 million in 2014/15.

The energy from waste facilities brought online by Viridor in 2014/15 are: Runcorn I and II, Ardley, Trident Park Cardiff, and its smaller capacity Exeter plant.

Pennon had forecast Viridor’s underlying EBITA would exceed the 2013/14 figures based on the growth of the EfW business in a pre-closing trading statement published in March (see letsrecycle.com story).

Recycling

In total, Viridor’s revenue rose 4.2% to just under £836 million in 2014/15. The results are expected to offset the firm’s loss on earnings from its recycling operations, with recycling revenue down £30 million due to “lower volumes and prices” and “adverse market conditions” which were previously flagged by the company.

During the year, recycling volumes traded dropped 151,000 tonnes to 1.7 million tonnes, while average revenues from recyclate sales and gate fees fell to £86 per tonne – 7.7% lower than in the previous year.

The Pennon report states that while the drive and demand for recycling remains healthy, any further decline in recyclate prices would impact Viridor’s profits in 2015/16.

The report reads: “The drivers and demand for recycling in the UK remain strong, although Viridor remains appropriately cautious about the future prospects for recyclate prices. The company is nonetheless strongly positioned, and remains focused on its ITOO programme to maximise revenues and achieve efficiencies to sustain margins. A further decline in recyclate prices and UK power prices, would impact profitability next year.”

‘Resilient’

Pennon Group Chairman Ken Harvey said: “The Group has delivered a resilient set of results for 2014/15. South West Water’s EBITDA was higher than last year despite the tariff freeze, thanks to a strong focus on cost efficiency, and as expected Viridor’s EBITDA exceeded last year. Viridor has made excellent progress in its Energy business bringing five new Energy Recovery Facilities on stream in the year.

“Pennon is well positioned to continue to deliver profitable growth and consistent, sustainable cash returns to shareholders. The Board was pleased to announce in March the continuation of the current dividend policy, targeting 4% year-on-year growth above RPI inflation to 2020.”