S&P Optimistic About Waste Industry

Date: September 18, 2010

Source: Standard & Poor's

Rating agency Standard & Poor's remains optimistic about environmental & facilities services over the next year based on the view that collection and landfill volume will continue to gradually recover, with year over year growth returning by late 2010 or early 2011. Haulers are expected to continue divesting underperforming assets in favor of more profitable and accretive niche businesses (tuck-ins) while focusing on pricing initiatives to drive top-line growth. Amid price increases, the companies will enhance services to keep customers, and make sure that new work is more profitable than business lost, the so-called "churn" rate. Even though construction and demolition (C&D) volume is expected to remain weak near term, residential, commercial and some special waste industrial volume should grow. Commodity recycling prices are also expected to continue their recovery from record lows of early 2009. And, haulers will continue to raise prices at the landfill, despite excesscapacity (averaging about 20 years), which tend to have higher margins. Finally, haulers will also continue to focus on controlling vehicle maintenance, safety and medical insurance costs. Year to date through September 10, the S&P Environmental & Facilities Services Index rose 6%, while the S&P 1500 was unchanged.

To learn more, visit: sandp.ecnext.com/coms2/page_industry?referid=4890.

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