MAY 2009

ON TOPIC


Waste companies cope with challenges

Solid waste management companies (including national integrated publicly-traded corporations, regional solid waste companies, and locally-based trash and recycling collection companies and landfill owners and operators) face a complex business environment for a number of reasons.

Their businesses put many of them at the apex of some of the most pressing environmental concerns of the day.

To learn more about how the industry is coping with these various challenges, American Recycler queried Bruce J. Parker, president and CEO of the National Solid Wastes Management Association.

There have been several mergers in the solid waste management industry in the past year. Do you foresee additional mergers occurring in the next few years and is this a positive or negative for the industry?

Parker: The solid waste industry, in large part, was built through consolidation – primarily through acquisitions. The recent combination of Allied Waste and Republic Services was billed as a merger. In terms of the rationalization of the industry, the difference between these terms is a distinction without a meaningful difference. I have little doubt that we will see more consolidation in the years ahead, and, yes, I do believe that overall it is good for the industry.

I can’t remember a period when the industry has been more disciplined in getting the best efficiencies from operations and looking for returns on invested capital and margin growth as opposed to purely revenue growth.

How has the downturn in the economy affected the solid waste management industry and do the affects differ in terms of small operations compared to large multi-nationals and regional players? Is access to credit a problem?

Parker: There is a belief that the solid waste industry is recession resilient, and I believe that is true relative to most other business sectors. However, the industry certainly has been affected by this serious recessionary economy, most notably in the volume declines of both residential and non-construction waste. It’s hard to say with certainty that national and large regional companies have more easy access to capital than the smaller independents because there are so many variables.

With the price of recyclables having declined, how has that affected the revenues of solid waste management companies, contracts with municipalities, commercial and institutional clients?

Parker: The nose dive in pricing for recyclable commodities has had a downward revenue impact on companies involved in the recycling chain. In many municipal recycling contracts the inherent volatility risk is shared between the hauler and municipality, and where possible, contracts with commercial and institutional customers have been renegotiated.

How has the fluctuating price of oil affected the transportation budgets of solid waste management companies and what are these companies doing to improve the situation?

Parker: Solid waste companies want to make their transportation budgets as efficient as possible. To this end, many solid waste companies are using routing software and GPS systems for better route time management, ensuring that tires are inflated properly and oil filters are changed regularly, using alternative fuels, such as natural gas, biodiesel and ethanol, and supporting the development of new technologies, such as hybrid trucks.

Has the drop in the price of oil affected operations to recover solid fuels and gases from landfills and investment in future projects to generate electricity and exploit resources at landfills?

Parker: No. The primary drivers for investment in landfill gas as a source of clean, renewable energy are climate change and the need to reduce greenhouse gas emissions from landfills, and to reduce and eventually eliminate our national dependence on foreign oil.

As environmental concern continues to grow across the nation in terms of the public, businesses, institutions and government, is the solid waste industry finding that it is harder to secure permits to expand existing landfills and create new ones?

Parker: Environmental concerns are not new when it comes to securing permits and constructing solid waste facilities. In my judgment, the enhanced environmental concerns over the past few years have not substantially made it more difficult to obtain facility operating permits. In the past, when one discussed such matters, we often discussed opposition in terms of NIMBY (not in my back yard concerns). Today, resistance is sometimes characterized as NIMTO (not in my term of office) or NOPEs (nowhere on planet earth). However, while the acronyms might have changed, the nature of opposition to development isn’t really different. All sorts of development – even development that might seem on its face to be more environmentally desirable, such as wind farms and composting facilities – can face opposition.