Even amid the COVID-19 firestorm, Covanta Holding Corporation (CVA) executives reported being a highly contracted and stable business.
Q1 performance was strong and key highlights include:
- Total revenue for the quarter was $468 million, up $15 million or 3 percent from the first quarter 2019.
- Strong Q1 results, Adjusted EBITDA and Free Cash Flow up $13 million year-over-year.
- Tip fee prices up 5 percent on same-store basis and profiled waste revenue up 18 percent.
- Business operating well, providing essential service with limited disruption.
- Executing robust response to COVID-19, including proactive cost reduction program.
- $15 million to $30 million in total cost savings in 2020.
Covanta’s president and CEO Stephen Jones said, "Our first quarter performance was strong, in particular demonstrating the secular tailwind for waste pricing in our markets". Towards the end of the quarter, we began to see the effects of the COVID-19 pandemic and we took decisive steps to protect our employees, keep our facilities operating safely and reliably for our client communities, and offset potential financial impacts. Covanta is well positioned to navigate this storm, and as we look beyond, we have confidence in the long-term growth drivers of the business."
Covanta expanded on their results in their earnings call. The majority of Covanta’s waste and service revenue was stable and largely unaffected by the pandemic. This includes their long-term service fee contracts with municipalities, where they are relatively agnostic to waste volumes and tip fee revenues that are generated from processing residential waste, which has remained strong.
The company reported feeling pressure on commercial MSW and profile waste volumes, which is largely generated from industrial and the manufacturing sources, given the stay-at-home and similar mandates in core regions. They have been able to backfill shortfall volumes thanks to the location of their assets, logistics and transfer station capabilities and the talent of their waste procurement team.
Covanta Environmental Solutions (CES) was a large contributor in the first quarter with significant revenue growth in profile waste at their waste-to-energy plant, which was up 18 percent and their material processing facilities where revenue grew seven percent. Jones credited this growth to their revamped CES sales and customer care team and systems, which were done in 2019 and bore fruit in Q1 2020.
Confidence in future growth here and abroad
When asked about the future, Jones said, “There is no crystal ball and we can't say when things will return to normal. What we can say is the business has a very high degree of resiliency and stability, and we're also operating as normally as possible. We are a value partner to our clients and continue to provide the same high level of service that is expected from us.”
He went on to say that their plans to grow the business will continue, including their waste to energy investments. In the U.K., Covanta will remain focused on growth with the three facilities under construction and others in development. Jones also sees opportunity in the U.S. saying, “development activities in the U.S. are at an earlier stage, but as I've mentioned before, we're seeing more activity. For example, as you may have recently seen, we are in negotiations with our client in Pasco County, Florida, to support the potential expansion of their waste to energy plant. This will take time to play out, but it's a positive sign on the potential for domestic growth and of our strong position in the market.”
Overall, Covanta feels good about starting the year off on a strong note, but noted that the COVID-19 pandemic is now their overriding focus. Jones said that, “How we navigate this period will tell the story for 2020, and I believe, will demonstrate the strength of our Company.”