European waste business Renewi plc has targeted operational improvements across its portfolio of UK PFI contracts, after the company reported continued challenges in its municipal division in financial results published today (25 May).
Renewi – which was formed this year following a merger between UK waste business Shanks and its Dutch competitor Van Gansewinkel Groep – has delivered its financial results for the year ended 31 March 2017, reporting a net loss for the business of around £60 million after tax, despite a growth in revenue and earnings across the group.
Peter Dilnot, chief executive of Renewi plc
However, the company has expressed optimism that opportunities for growth remain strong, with its hazardous and commercial waste divisions both having reportedly performed well throughout the year.
In the municipal division, which comprises Shanks’ contracts with East London Waste Authority, Barnsley, Doncaster and Rotherham, Cumbria and Dumfries and Galloway, as well as operations in Canada, Renewi has reported that losses totalled £2.7 million, following operational and market challenges.
In its report Renewi stated: “The older PFI contracts, ELWA, Cumbria and D&G, have a legacy structure of being exposed, at the back end of the business, to material changes in the costs of disposal of the recovered fuels SRF and RDF or to income made from recovered recyclates.”
As a result, the company has implemented a strategy to restore profitability to the municipal division, which includes potential renegotiation of contracts, operational improvements and finding new outlets for material.
Performance
Speaking to letsrecycle.com, Renewi chief executive, said: “We are announcing today trading profit up 9%. Underpinning that is some really strong performance in the Benelux region and we are reinforcing in those markets.
“That has been offset by some challenges in the municipal market but overall performance is very much in line with expectations.”
On the challenges in the municipal division, Mr Dilnot added: “I think it is going to be hard yards from here. What has happened is that we have got market and operational issues.
“On the market side there is huge pressure and in addition to that what we do is create a lot of RDF that is exported to the Benelux. Prices have hardened in recent years, our average gate fee to the Netherlands has almost doubled compared to a few years ago.
“Operationally, we have some new plants that are not performing as we would like at this stage.”
Future
However, Mr Dilnot stated that he does not have concerns over the long term future of any of the UK PFI contracts, and added that work to realise savings within its ‘estate’ of contracts.
Shanks’ Frog Island MBT facility at Rainham, where waste is treated on behalf of ELWA
He said: “PFI is the core of our business now. We have got an estate of long term contracts and our focus is to right that.
“There is a challenge that local authorities have which is to try and realise savings. Our work with our local authorities to realise material savings is ongoing. We are not in a situation where we are facing any concerns on that front. Although financially challenging for us, they are driving the operational objectives.”
Looking forward Renewi has stated that its board “remains confident” that 2017/18 will be a year of good progress in line with its expectations. Current trading for the year to date and the initial stages of the integration process support this view, the company has reported.
It added: “Renewi plays an important role in the emerging circular economy, a market that is expected to grow rapidly in the coming years with the support of European Union and government legislation. Moreover, the fully integrated Renewi has a compelling offering for customers, combining local service, international expertise and an unrivalled breadth of products.
“This strong positioning, coupled with synergy delivery and the roll-out of our proven margin expansion initiatives across Renewi, will deliver sustainable growth, enhanced margins and attractive returns.”
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Source: letsrecycle.com Waste Managment
