Cleanaway Profits Impacted By Input Cost Inflation Pushing Shares Lower

Industry News

& Articles

Cleanaway Profits Impacted By Input Cost Inflation Pushing Shares Lower

Facebooktwitterlinkedin
  • Rising fuel cost impact estimated at $10 M
  • Flood related equipment and landfill disruption cost estimated at $10 - $14 M
  • Labour shortages resulting in operational inefficiencies
  • Rise and fall clauses will see cost recoveries, with 6-month lag effect
  • Cleanaway well-positioned for a low carbon future and high circularity environment
  • Operational scale, geographical coverage, and proximity to waste infrastructure support earnings growth in a decarbonised world.

Cleanaway Waste Management Limited (‘Cleanaway’ or the ‘Company’) is Australia’s largest waste management business. It owns and operates a network of 125 infrastructure assets that manage post-collection waste and operates a waste collection fleet of 5300 vehicles.  The business comprises three operating segments:

  • Solid Waste Services – the largest solid waste and recycling services fleet in Australia, supported by the most extensive resource recovery and post collection facilities network across the country.
  • Liquids and Health Services – the largest hydrocarbons recycling business in Australia and a major player in the liquids market, collecting and processing mineral oil, hazardous liquids and healthcare generated waste streams.
  • Industrial and Waste Services – a wide range of plant and asset management services that provide solutions to reduce production down time, the risk of unscheduled plant stoppages and the reliance on labour.

Higher fuel costs and labour constraints to reduce FY22 second half result.

Cleanaway estimates that second half EBITDA will be $15-$20 million lower than original forecasts, because of rising fuel costs and labour availability constraints. These challenges are compounded by one-off operational disruptions caused by the recent East Coast floods, resulting in property damage and the loss of vehicles and equipment.

The impact of higher fuel costs is estimated at $10 million for the second half year while labour shortages related to the pandemic are negatively impacting Cleanaway’s ability to operate efficiently. Flood damage to the New Chum landfill site has resulted in its temporary closure, leading to an estimated $5-$7 million EBITDA impact in the second half year. Damage to post-collections equipment in Cleanaway’s Health Services business is likely to add temporary costs of $5-$7 million in the second half due to operational inefficiencies.

On a positive note, Cleanaway has specific rise and fall clauses in its contracts that reference fuel, labour and CPI indices. However, it is the lag affect of these cost recoveries that has impacted the second half year performance. Input prices are adjusted at least annually, resulting in the lag on cost recovery. Insurance recoveries will indemnify Cleanaway for the loss of vehicles and equipment relating to recent flooding.

The Future

Cleanaway’s earnings are diversified across 250 sites Australia-wide, and the Company delivers essential services to 130 Municipal Councils and 150,000 business customers, from more than 125 prized infrastructure assets. Its vertical integration through the waste value chain comprising collection, recovery, treatment and disposal, provides a resilient and defensive earnings stream and recurrent cashflows from a strong credit-quality client base.

Importantly, Cleanaway has embraced a low carbon future and has invested strategically in infrastructure assets and services platforms that transition the economy to a low carbon and high circularity environment. This irreversible trend is creating increasing demand for recycled content, improved land fill diversion and new waste streams. Cleanaway has the operational scale, geographical coverage, and proximity to key infrastructure to play a commanding role in a decarbonised world.

This unique market position is likely to underpin consistent earnings growth post FY22 as Cleanaway works through the one-off and short-term challenges currently facing the business.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at l.mosmann@kosec.com.au.

Comment on this company

Latest Stories

Aristocrat Delivers Strong Top And Bottom-Line Growth Sending Shares 6% Higher

Aristocrat reported a half-year Net Profit After Tax before Amortisation……

BlueScope Steel Upgrades 2H22 Earnings Guidance On Higher Steel Prices

Better than expected steel prices and spreads for BlueScope’s painted……

James Hardie Delivers Strong Fourth Quarter With A 36% Rise In Profits

Global net sales of US$3,614 million were up 24 percent, boosting……

More for you

AUB Announces Share Retail Entitlement Offer At $19.50 Per New Share

Shareholders have until 27 May to apply for New Shares under……

CBA Posts Steady March Quarter With A $2.3B Profit

A 25 percent increase in grain handling and elevated grain prices……

GrainCorp Records $246M Half-Year Profit In Favourable Wheat Market

A 25 percent increase in grain handling and elevated grain prices……

US Equity Markets Decline In 6 Week Sell-Off Amidst Global Uncertainty

Global equity markets have continued their six week decline with……

AUB Enters UK Market With A$880M Lloyds Insurance Broker Acquisition

AUB has today announced the acquisition of Tysers, a leading Lloyds……

US Federal Reserve Raises Interest Rates By 50bp to 0.75-1.00% Target

In a widely anticipated move, the US Federal Reserve Board increased……

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

Disclaimer
KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

Fees
As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

Privacy
You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.

CLAIM YOUR FREE E-BOOK &
7 DAY ACCESS TO LOTUS BLUE

STOCK MARKET SUCCESS

KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.

CLAIM YOUR FREE E-BOOK WHEN YOU LOGIN TO LOTUS BLUE INVESTMENT PORTAL

Latest TV Commercial