The deepening recession spawns a host of strategies
Officials at Fort Lauderdale, Fla.-based Republic Services took notice when residential construction started to decline. "Maybe a year or so ago, about 15 percent of our revenue came from temporary roll-off activity — that is the disposal associated with residential and commercial construction," says Tod Holmes, chief financial officer (CFO) with Republic. "Today, it's about 10 percent, down about one-third."
Phil Wehrman, CFO with Cincinnati-based Rumpke Consolidated Cos., saw much the same thing happening in the nation's mid-section. "Disposal related to homebuilding has been flat for about two years," he says.
It's a similar situation for Waste Pro USA, another regional waste management firm based in Longwood, Fla. "We've seen the effects of recession mainly in our construction and demolition (C&D) hauling and landfill business," says Bob Hyres, executive vice president for Waste Pro. "Our C&D revenues are off by 27 percent. Fortunately for us, C&D is only about 5 percent of our business."
The decline in construction is but one symptom of the deep economic woes now plaguing the country. In December, the National Bureau of Economic Research announced what had been readily apparent for months: the U.S. economy is mired in a recession.
"This could be more painful than other recessions we've seen," Holmes says. "In 2001, for example, the problems were isolated in the dot-com area. Once that bubble worked itself out, business came back. But today, we have the housing crash, the financial industry meltdown and consumer credit problems."
For months, waste firms have been preparing for what indeed may prove to be a severe recession. None of the firms interviewed by Waste Age are considering extreme measures such as hiring freezes or layoffs yet, but they have put a variety of coping strategies in place. Such strategies include being realistic about what is happening today, adjusting capital spending, taking advantage of available tax benefits, managing prices paid for recycling commodities, and reviewing and tweaking business models.