Looking Up

Earnings reports describe improving business climate.

With the recent release of their second-quarter earnings reports, publicly traded waste firms said they see improving conditions for the sector, such as slowing rates of volume decline and spiking recycling commodity prices. In fact, the industry's two largest firms say year-over-year volumes could begin increasing in the second half of this year.

Houston-based Waste Management took in $3.16 billion in revenue during the second quarter of this year. That figure represents a 7 percent increase from the same period in 2009, when the refuse giant brought in $2.95 billion in revenue. The firm's net income during the second quarter of this was $246 million, down slightly from $247 million one year earlier.

Waste Management attributes the revenue increase in part to rising recycling commodity prices. Average prices were 78 percent higher than in second-quarter 2009, the company says. (For more on the improving recyclables market, see "Recycling's Rebound" on p. 30). Other factors driving the increase were acquisitions and revenue growth from yield.

Discussing the results in a conference call with investors and analysts, Waste Management CEO David Steiner said the second quarter marked the third straight quarter that the firm's year-over-year volume declines were smaller. "We expect this trend to continue, and we believe volume comparisons will continue to improve with volumes turning positive in the second half of the year," he said.

Waste Management's industrial waste collection volume was down 5.9 percent when compared with second-quarter 2009. That marks the first single-digit decline in that collection volume since the third quarter of 2008, the firm says.

Republic Services is echoing similar sentiments.

The Phoenix-based firm, the second largest waste company in the country, posted a net income of $159.7 million on revenues of $2.066 billion during the second quarter of this year. During the same period in 2009, the firm posted a net income of $225.9 million on the same amount of revenue, $2.066 billion.

In his firm's second-quarter conference call with analysts and investors, Republic President and chief operating officer Don Slager noted that volume declines also are slowing at his company. "Our volumes decline year-over-year by 3.3 percent, which is a 370 basis points improvement versus first quarter," he said. "Our commercial collection business has started to see increases in service frequency, and we continue to see volume improvement in our industrial and landfill lines of business. We expect that by the fourth quarter, our volumes will be flat to slightly positive."

Tod Holmes, chief financial officer for Republic, said during the call that the average price Republic received for its collected recyclables increased 67 percent, from $72 per ton in second-quarter 2009 to $120 per ton one year later.

Meanwhile, Folsom, Calif.-based Waste Connections, which came in at No. 5 in the most recent Waste Age 100 ranking of the largest solid waste firms, says it too experienced encouraging volume trends in the second quarter. The company took in $330.5 million in revenue during that period, an increase of 9.1 percent from second-quarter 2009. Waste Connections posted net incomes of $30.4 million in both second quarters.

"Year-over-year increases in landfill volumes, roll-off activity and recycled commodity prices enabled us to once again exceed the upper end of our expectations in the quarter," said Ron Mittelstaedt, CEO of Waste Connections, in a press release.

The country is by no stretch out of its economic tough times, and fears of a recession double dip continue to linger. But the reports of Waste Management, Republic and Waste Connections show the industry has reasons for optimism.

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