Episode 69: Crystal Ball Insights on the Economics of Waste & Recycling

In our latest episode ofNothingWasted!, we chat with Michael E. Hoffman, managing director and group head of diversified industrials, Stifel Financial Corp.

We spoke with Hoffmanabout the effect of COVID-19 on the waste industry, the status of M&A activity, what to expect going forward and more.

Here’s a sneak peek into the discussion:

Waste360: What is your take on the impact of COVID-19 on waste and recycling?

Hoffman: I would describe the past few months in three buckets: there’s a before, during, and after. If you were talking to companies at the end of March or early April, but didn’t know there was a pandemic, and you asked how the first three months of the year went, they’d say, “We’re off to a great start; better than last year.”

Of course the pandemic hit at the end of March; the worst was seen in April—and that’s the “during.”  What we’ve found is that the market pretty much found its bottom in April, with gradual recovery starting in early May. Every week it’s incrementally better with improving trends. But it really depends on a company’s geographic mix and what was the condition of and current state of economic restart. It’s really state- and locally driven. But the bottom wasn’t as deep or prolonged as feared.

Waste360: What will need to happen for you to feel like we’re out of the woods?

Hoffman: What I fear…there will be some businesses that won’t make it. And some garbage companies will have losses greater than the one percent they talked about in early May when they were doing first-quarter reporting. Through the “during” phase, the public companies ran at full steam, didn’t furlough anybody, maintained the integrity of services, took the right safety and PPE measures… The employee base rose to a level of excellence, showed up everyday, and what I believe we’ll see going through the next six months is that there will be some rightsizing of the economy. And the waste industry will have to adjust.

One positive is that the garbage industry learned a lot about how to adjust its business model quickly because of the Great Recession and will be able to repeat that as needed. And there won’t be any unit pricing pressure. From prior cycles, many smaller companies learned they are better at 80 percent full at 100 percent pricing than 100 percent full at a discount. And that will be a major difference as we come through this cycle.

Waste360: Could you tell listeners about the upcoming Waste360/Stifel Investor Summit coming up online on August 10^th?

Hoffman: For participants who’ve come in the past, it will feel a lot like a normal Investor Summit in the sense that it’s a full day of getting caught up on solid waste, industrial waste, medical waste. We have four topical panels this year—on rail hauling, waste-to-energy lessons from the UK and Europe, safety, and private equity. We’ll also talk to Ron Mittelstaedt, Executive Chairman of Waste Connections and this will be his first big public appearance stepping back into the marketplace since taking his leave a year and a half ago, so we’re really excited to catch up with him.

And learn more about the Waste360/Stifel Investor Summit here.

Read transcript here.

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