Renewi resilient amid tough pricing environment

Waste-to-product specialist Renewi said in its preliminary results on Thursday that, despite challenges including lower recyclate prices, reduced volumes and high inflation, it achieved a resilient financial performance in the year ended 31 March.

The London-listed company reported revenue of €1.89bn (£1.64bn), comparable to the prior year's figure of €1.87bnb.

Its underlying earnings before interest and taxes (EBIT) remained steady at €132.9m - slightly lower than the €133.6m it recorded a year earlier.

The firm said it effectively managed the impact of lower prices and volumes during the year through cost control measures and increased customer prices.

Basic earnings per share (EPS) declined to 79 euro cents, from 93 cents in the 2022 financial year.

Renewi maintained a group underlying EBIT margin of 7.0%, compared to 7.1% a year earlier, with Commercial, Maltha, and Coolrec all operating close to a 10% margin.

The company's statutory profit after tax stood at €66.6m, down from €75.4m in the prior year.

However, Renewi's core net debt widened to €370.6m due to the acquisition of Renewi Westpoort (Paro) during the year, and its net debt-to-EBITDA ratio rose to 1.8x at year-end, from the previous year's 1.4x.

Looking ahead, Renewi said it was expecting to perform in line with market expectations for the 2024 period.

Recycled metal, paper, and plastics prices were expected to stabilise around current levels, except for wood, which was expected to remain strong.

The firm said it believed that its price increases, and the positive impact of initiatives such as Renewi 2.0, Mineralz & Water recovery, and its investments, would offset cost inflation, including energy and wages.

Renewi said it was aiming to achieve €3bn in revenue within the next five years, with high single-digit margins as a minimum.

“Renewi has had another successful year - thanks to the great efforts of our employees and the loyalty of our customers we have been able to cope with some extraordinary circumstances, including high inflation,” said chief executive officer Otto de Bont.

“We have also achieved significant progress with the execution of our strategy - increasing our recycling rate, our investments in advanced sorting in Belgium, producing secondary materials to the highest standards for children’s toy production and extending our leading position in the Netherlands by a key acquisition in the construction and demolition market in Amsterdam.

“Although the macroeconomic environment remains unpredictable, Renewi has proven that it is able to operate successfully in the recent years of high volatility, adapting our cost structure to reduced volumes and protecting our margins by passing on cost increases to customers.”

De Bont said the company’s dynamic pricing policy, where the price for its waste collection was linked to the index price of the recyclates produced from waste, had proven successful, particularly in times where some recyclate prices were fluctuating.

“We expect recyclate prices to remain more stable at normalised levels in the coming year; volumes in the year are expected to develop in line with economic activity.

“With the Renewi 2.0 programme benefitting the business, the recovery of Mineralz & Water progressing and the investment in new lines coming on stream, we are confident in Renewi’s ability to grow in the future.”

The company’s investment programme was ongoing, with de Bont reporting that the business was continuing to identify investment opportunities that were expected to yield strong returns.

“In addition, Renewi anticipates a consistently improving cash position going forward due to efficiencies across the business and an end to deferred Covid tax payments.

“We now expect to be in a position to pay a dividend for 2024.”

At 1007 BST, shares in Renewi were down 3.92% at 563p.

Reporting by Josh White for Sharecast.com.