Date: November 18, 2011
Source: News Room
The waste collection, processing and disposal market will likely experience only modest near term growth amid uncertain economic conditions and increased price competition, according to the ratings agency Standard & Poor's. Collection and landfill volume should gradually recover during 2012 since volume in generally tracks GDP growth, which remains modest (S&P forecasts 1.6% real GDP growth for 2011 and 1.9% for 2012), while contractual price hikes drive top-line growth. Companies will use their strong cash flows to repurchase shares, raise dividends, reduce debt and make strategic acquisitions. Consequently, they will divest underperforming assets and acquire accretive niche businesses, while seeking to enhance customer services to maintain a high retention rate.
Construction & demolition (C&D) and commercial volume are expected to remain weak in the near term but gradually recover, while residential and some special waste industrial volume show more favorable trends. Although commodity prices have been dropping in recent months, we expect recycling prices to rebound again in 2012, aiding revenue growth, while fuel and energy costs stabilize.
Haulers will look to reduce other costs through improved vehicle maintenance, safety and insurance programs. Companies with landfills will continue to increase pricing even with excess capacity since the margins tend to be higher and because independent haulers have few other options. Those companies should also benefit from increasing conversion of methane gas into energy. Waste Management plans to construct waste-to-energy plants in China, and expand its medical waste business.
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