Business Report May 2024—Highlights from WasteExpo 2024

The mood was ebullient on the show floor, as attendees frequently commented on how well the industry is doing, with the publicly-traded solid waste companies being rewarded with improving stock price valuations as a result. Also, with regard to the publicly-traded companies, it was repeatedly noted that strong pricing was holding as costs are (albeit slowly) coming down, resulting in the strong margin performance evident in the first quarter results that had just been reported.

Leone Young, Principal

May 20, 2024

7 Min Read

WasteExpo was held in Las Vegas May 6th through May 9th.  An enthusiastic crowd of over 13,500 attendees and more than 500 exhibitors descended on Las Vegas for four days of education sessions, the sights and sounds of the show floor and networking opportunities.

Tidbits from the Show Floor

The mood was ebullient on the show floor, as attendees frequently commented on how well the industry is doing, with the publicly-traded solid waste companies being rewarded with improving stock price valuations as a result. Also, with regard to the publicly-traded companies, it was repeatedly noted that strong pricing was holding as costs are (albeit slowly) coming down, resulting in the strong margin performance evident in the first quarter results that had just been reported. Regarding the underlying macro environment, industry players seemed pretty sanguine, though pockets of construction and demolition (C&D) and temporary roll-off weakness were noted. But, overall, there were no reports or fears of a widespread economic downturn. That said, commentary on the traditional seasonal uptick was mixed, as several players noted that some of the typical second quarter volume upswing may have been pulled into the first quarter given the milder weather in some of the colder regions. Supply chain issues, particularly with regard to truck deliveries, seem to be easing, with the wait time to receive a truck quoted in the range of 6-9 months versus a year or more. One fly in the ointment, and a bit of a puzzling one, was that several of the container manufacturers were not as busy as they expected to be given the service providers’ strength, even in commercial containers. Acquisition activity, always a perennial favorite topic on the show floor, was widely expected to pick up in the second half, though there were a few comments on the poorer quality of some of the likely acquisition targets.

Insights from the Stifel Investor Summit

Stifel has held the well-regarded and much anticipated Investor Summit the Monday of WasteExpo week for 12 years. This year there were 16 panels, covering both industry topics as well as featuring individual companies. The panels conveyed a wealth of diverse information, but several commonalities emerged. Although the labor situation appears to have eased somewhat from the difficulties of the past several years, it is still an important issue in terms of improving recruitment and retention. A number of firms have started their own in-house driver (CDL) and technician training schools to help bring in the workforce they need. Another common theme was the promise of artificial intelligence (AI). Technology and automation investment has been an industry focus for several years, but more recently, the pairing of technology investment, enhanced by AI, is thought to have real promise, particularly in the areas of on-board truck cameras, routing efficiency and MRF optical sorting capabilities. Among the commonalities, one area of difference between the companies is their approach to electric vehicles (EVs). Republic Services is seemingly the most out front in the adoption of EVs, noting both growing EV truck purchases and capital investment in charging infrastructure. The other providers seemed more uniformly cautious—noting continuing issues with cost, range, efficiency and lack of supporting power and charging infrastructure. Most thought that EVs were part of the future, but perhaps not the immediate one!

Takeaways from the Spotlight Session with Ron Mittelstaedt

Tuesday’s CEO Spotlight Session featured a Q&A with Ron Mittelstaedt, CEO of Waste Connections. He addressed WCN’s labor efforts—noting that the in-house CDL school offered opportunities to upskill current employees, such as spotters or helpers, giving them a path to go from $20 per hour to $30-$35 per hour, and he also noted that they tend to end up being more loyal to the company as well. The in-house schools, along with enhancements in truck automation technology, have also increased the number of women candidates. He also confirmed that, in his view, the economy was pretty flat but not bad, with positive MSW but some weakness in C&D. He also noted that the privately-held players are seeing their input costs—such as fuel, labor and interest rates—going up, so the privates are moving price up which supports the publicly-traded solid waste company pricing programs. He also elaborated on what he saw as the current disadvantages of EVs, noting a 70 to 110 mile range for EVs versus 250+ miles for diesel trucks, which may work in an urban setting but is not practical at this point beyond that. In answer to a question on PFAS, he noted it is early days, but it will present both a cost issue and an opportunity. But, he also noted that the technology to treat PFAS in leachate was advancing rapidly and foam fractionation was showing promise, such that at a 1500-2000 ton per day landfill, he was hopeful that the cost to treat leachate for PFAS could end up being below a four cent per gallon additional cost.

M&A—Pearls of Wisdom from Two Industry Veterans

In the education session “M&A: Covering Three Decades with Two of the Industry’s Largest Dealmakers”, Joe Cassin of WM and Rick Wojahn of Waste Connections led a lively discussion moderated by Michael O’Connor of Rio Grande Waste Services. The biggest takeaway was that both felt there was plenty of M&A runway out there, even after years of industry consolidation in which these two participated extensively. Between increased private equity participation in the industry, solid waste players starting new businesses and new services being offered, both felt there was at least a decade of deals with billions of dollars to be spent and thousands of acquisitions still out there. Neither of them believes the increased technology investment by the larger players in the solid waste industry is a driver of consolidation, and in fact, both of them encouraged potential sellers to invest in technology, particularly truck cameras, to improve safety, as a good safety record is increasingly valuable to a buyer.

PFAS—Now What?

In the education session “PFAS: What’s Next?”, a distinguished industry panel, with Bryan Staley of EREF, Jenny Johnson of LaBella Associates, Lynsey Baer of the Delaware Solid Waste Authority, Sam Nicolai of Casella Waste and Anne Germain of NWRA, discussed various thorny PFAS issues. There was no disagreement that the industry would be treating more leachate on site and that the use of publicly owned treatment works (POTWs) to treat leachate was likely to become increasingly difficult and more restricted, particularly in states in the Northeast and Upper Midwest that have already instituted PFAS drinking water regulations. Yet the panelists also were in agreement that leachate treatment technology was quickly evolving and the cost was coming down. Foam fractionation was again noted as a technology looking particularly promising. Bryan Staley noted that studies have estimated that leachate treatment could add $2 to $9 per ton to the nationwide average tip fee of $59 per ton. There was also a lot of agreement that the current focus on regulating the “end of pipe” just didn’t make sense with no accompanying ban on the production of PFAS and PFAS containing materials on the front end. As such, participants noted that trying to limit PFAS intake was a largely impossible nightmare. Unanimously, panel members encouraged the audience to continue to advocate for legislation to enact a narrow exemption for MSW landfills from CERCLA designation, stressing the importance of that in limiting potential legal liability. It was noted that although the EPA had noted that it didn’t intend to enforce CERCLA cleanup up on publicly-owned MSW facilities, there still remains some question of whether privately owned MSW sites were included in that EPA proclamation. In any event, the EPA enforcement strategy does not prevent other entities (manufacturers, environmental groups, NGOs) from suing waste companies to pull them in as potentially responsible parties (PRPs). As “passive receivers”, waste companies would likely not be held responsible for remediation ultimately, but they could still get caught up in a legal web! But, amid all the worries about unintended consequences, the long-term opportunity for the industry was also cited, primarily for hazardous waste landfill and deep well injection owners. That said, given that MSW landfills have been shown to successfully sequester roughly 85% of PFAS intake in EPA studies, it was also felt that MSW landfills are likely to be part of the solution, particularly in a closed loop system with on-site leachate treatment!

About the Author(s)

Leone Young

Principal, LTY ERC, LLC

Leone Young is the Principal of LTY ERC, LLC, providing consulting and research services to, and conducting special projects for, the environmental services industry, primarily the solid waste sector. From 1990 through 2008, Young was with Citigroup in New York as Managing Director, Senior Environmental Services Analyst and was responsible for industry coverage and stock recommendations for companies in the environmental services sector for Citigroup's equity research department. She was ranked #1 in the Institutional Investor poll for eight consecutive years.

Young is noted for her historical perspective, depth of industry knowledge and collaborative approach with clients and companies.

Young has a BA in Economics and an MBA in Finance from Cornell University.

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