Weather adds to costs burden as Shanks trims profit forecasts

Waste management group Shanks has warned its profits will fall below analysts’ expectations this year due to strong competition, wet weather, high fuel prices and costs of preparing for legislation.

But the company said it is still likely to post profit before tax of 45 million in the year ending 31 March 2001, up 20% on the previous year. And it is now starting to break even on its recycling operations.

Mike Averill, group chief executive of Shanks, said: “We’re going through what is a temporarily difficult time. But the right things are in place and we think we’ve set ourselves up well for recycling.”

John Shaughnessey, group head of external relations, said profits were being squeezed between the increased cost of Environment Agency inspections and permits and downward pressure on prices. Increased pressure on the company’s landfill prices was a key factor as rival companies offer low gate fees to try and fill void ahead of the Landfill Directive.

“It’s difficult all round,” he said. “ In our last report we said market conditions were difficult. Since then things haven’t got any better and on top of that we’ve had exceptionally bad weather. Landfill sites have been disrupted with restrictions on when we can use them. Engineering work is also delayed.”

Shanks is one of many waste management companies to be hit by the wet weather. One senior contracts manager in a leading waste management company said wet weather was hampering business in a number of ways. “It is increasing our collection times and tipping at landfill sites has slowed. Damage has been caused to some lorries, particularly at muddy landfill sites where trucks have got stuck and oil seals and other parts are damaged.”
He added that some landfill sites are also becoming hard to operate as liners become more difficult to lay and parts become waterlogged.

Shanks also experienced difficult market conditions in Northern England and Scotland and with its hazardous waste operation. In April the company also loses a London waste by rail contract worth 2.5 million in revenue. No immediate improvement is foreseen for the next financial year and the City is also downgrading expectations about the company’s profits for 2001/02.


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