Waste Management, Republic Post Strong Fourth Quarters

The final three months of 2010 provided very strong cash flows for the two largest companies in the solid waste industry. Furthermore, both Houston-based Waste Management and Phoenix-based Republic Services are projecting some improving business conditions for the year ahead.

Waste Management, the largest waste services firm in the country, took in $3.19 billion in revenue in fourth-quarter 2010, up from $3.01 billion in revenue during the same period in 2009. The company posted a net income of $281 million in fourth-quarter 2010, down from the $315 million profit the firm posted one year earlier. Waste Management attributed the decrease in profits in part to $20 million in litigation charges that it paid during the fourth quarter.

“We are pleased that we exceeded our expectations for the fourth quarter, driven by strong internal revenue growth from yield, which offset lower-than-expected volumes,” said David Steiner, president and CEO of Waste Management, in a statement that accompanied the release of the firm’s fourth-quarter financial report.

Meanwhile, Republic Services, the nation’s second largest waste services firm, also saw its revenues rise in the fourth quarter. During the last three months of 2010, the company took in $2.02 billion in revenue, up slightly from the $2 billion it collected in fourth-quarter 2009. Republic also posted a net income of $147.6 million in fourth-quarter 2010, up from the $35.6 million profit of one year earlier.

For all of 2010, Waste Management posted a net income of $953 million while taking in $12.51 billion in revenue. In 2009, Waste Management posted a net income of $994 million on $11.79 billion in revenue. Meanwhile, Republic posted a net income of $506.5 million in 2010, while taking in $8.11 billion in revenue. In 2009, the firm posted a net income of $495 million on $8.20 billion in revenue.

As for the year ahead, Steiner, speaking in an earnings conference call with analysts and reporters, predicted that waste volumes will increase slightly in 2011. “We expect [volumes] to be flat to slightly positive [compared with 2010], with volumes steadily improving throughout the year,” Steiner said. “Certainly, the severe winter weather in the first quarter of 2011 has affected volumes, and we expect this to have a negative impact on first-quarter earnings. But starting in the second quarter of 2011, we expect volumes to resume the previous trend of slow but steady improvement.”

Steiner added that Waste Management will “aggressively push” pricing for its commercial, industrial and landfill services this year.

Republic lost two important customers at the end of 2010, when its collection contract with San Mateo County, Calif., and its landfill disposal contract with Toronto expired. Still, the company is projecting its annual revenue to increase by 1.5 percent in 2011, an increase that the company says will be fueled in part by continued healthy prices for recyclable commodities. The firm also says its total waste volume could rise by up to .5 percent this year.

In Republic’s earnings conference call, Donald Slager, Republic’s president and CEO, said that acquisitions will be a focus of his firm in 2011. “We have a pipeline of potential acquisitions and are focused on strengthening our infrastructure, especially in the area of recycling, to enhance our capabilities,” Slager said.

Look for the company to continue its aggressive pursuit of various “green” initiatives, Slager added during the call. “In 2010, we increased our investments in single-stream recycling facilities, alternative fuel trucks and landfill gas-to-energy projects,” Slager said. “These investments are not only environmentally beneficial but are good business decisions, which enhance infrastructure and generate solid returns. We will continue to pursue these investments in 2011.”

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