Renewi on track for full year as Q3 trading in line

Waste-to-product business Renewi expressed confidence on Wednesday that its full-year results will be in line with the expectations it set out in its half-year results.

In an update for the period from 1 October 2018 to date, the company said trading in the third quarter continued to be broadly in line with management's expectations.

Its merger integration projects have made good progress in recent months and the company is on track to deliver the committed €30m of cost synergies for the year to 31 March 2019 and €40m for the following year.

In the commercial division, trading was steady, with volumes softening slightly in Q3 but still slightly above the previous year. Renewi said the hazardous waste segment performed in line with management's expectations, while the monostreams division continued to see positive trading at Orgaworld and Mineralz, offset by weaker performances at Coolrec and Maltha where new management and improvement initiatives are being introduced.

Meanwhile, the municipal division continued to perform well, with a strong improvement in performance compared with the prior year, as expected.

"Given our continued expectation of a strong fourth quarter performance, the board remains confident that Renewi will deliver full year results in line with its expectations as set out with the half year results in November 2018," the company said.

Renewi also gave an update on ATM, its contaminated soil and water facility in the Netherlands, where regulators have temporarily suspended permits for the use of thermally treated soil.

"Since the update in November 2018, the Dutch Secretary of State for Infrastructure and Water Management has publicly confirmed that thermal soil is an important secondary material for future use in the Netherlands and announced the intention to introduce an enhanced regulatory regime for the use of all recycled soils in the country.

"Following this announcement, the regulator has acknowledged the importance of determining an interim solution, in anticipation of a new regulatory regime, and we continue to co-operate in defining this solution. We maintain a strong order book of customers ready to take our soil product as soon as this regulatory approval is received. We remain confident that our treated soil meets the existing required specification and that our operations are amongst the best in the industry."

RBC Capital Markets analyst Olly Jeffery said it was a positive development that the Dutch Secretary of State for Infrastructure and Water management confirmed the importance of thermal soil as a secondary material.

However, he also pointed out that a resolution is nowhere in sight.

"With credit metrics starting to look stretched, any further meaningful difficulties in the business could stretch the balance sheet to breaking point. That said the business is on a path to deleverage with the disposals of REYM and the Canadian municipal business this year. Beyond this, Renewi’s path towards strong organic growth lies not in its top-line growth, but in its own delivery of the cost synergies available from the VGG merger."

At 1305 GMT, the shares were up 4.6% to 28.92p.