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Hazardous waste woes for Renewi

The ongoing regulatory suspension of soil shipments continues to weigh on the group’s hazardous waste division
May 27, 2019

Battling “significant challenges” in FY2019, signs of recovery at Renewi (RWI) are dwindling. With the ongoing regulatory suspension of soil shipments in the Netherlands, processing of contaminated soil dropped to just 20 per cent of capacity. Underlying earnings before interest and tax (EBIT) in the hazardous waste division consequently plunged by almost two-thirds to €7.0m with margins squeezed by 5.3 percentage points. Although the group hopes shipments will resume on an interim basis in FY2020, the timing remains uncertain.

IC TIP: Sell at 36.75p

In the commercial division, price increases for inbound waste (particularly in the last quarter) served to offset a €4m headwind from lower recyclate prices and increasing residue disposal costs. Underlying EBIT jumped by 18 per cent to €86.5m. However, a shrinking end market in Asia has seen revenue from recycled paper and plastics fall by €30m over the past two years. In separating these products by quality at source, the group is hoping dynamic pricing will bolster profits and margins.

Peel Hunt anticipates adjusted pre-tax profit of £50.1m and EPS of 4.6p for the March 2020 year-end, rising to £56.6m and 5.2p in FY2021.

RENEWI (RWI)    
ORD PRICE:36.75pMARKET VALUE:£ 294m
TOUCH:36.75-37.25p12-MONTH HIGH:87.5pLOW: 19p
DIVIDEND YIELD:3.9%PE RATIO:NA
NET ASSET VALUE:40¢*NET DEBT:203%
Year to 31 MarTurnover (€bn)Pre-tax profit (€m)Earnings per share (¢)Dividend per share (p)
20150.60-20.5-4.63.45
20160.61-2.50-0.93.45
20170.78-61.4-11.33.05
20181.76-52.8-6.53.05
20191.78-89.0-9.01.45
% change+1---52
Ex-div:27 Jun   
Payment:26 Jul   
*Includes intangible assets of €606m (£533m) or 76¢ a share. £1 = €1.14