Packaging producer says higher cost levels and labor and material availability have increased the total projected cost of the conversion project, reports Q2 2022 financial results.
In its second quarter financial report, Kingsey Falls, Quebec-based packaging producer Cascades Inc. has announced its Bear Island conversion project in Ashland, Virginia, has been impacted by the "current inflationary environment."
The company says higher cost levels combined with labor and material availability constraints have led to temporary delays in certain construction milestones and have increased the total cost of the project near $470 million to $485 million. The conversion originally was projected to cost approximately $380 million when the project first was announced in October 2020.
"Our team is working closely with contractors to mitigate any potential delay caused by these elements in order to meet the targeted mid-December 2022 start date," Cascades President and CEO Mario Plourde says. "However, it is important to note that the timing of some critical construction milestones may be at risk due to these issues and, as a result, the start-up of paper production may be delayed to the first quarter of 2023."
Cascades says capital investments into the Bear Island project totaled $81 million in the second quarter of 2022 and year-to-date investments are at $145 million.
When completed, the conversion of the White Birch Bear Island paper mill to a containerboard machine will have an annual production capacity of about 465,000 tons of lightweight 100-percent-recycled linerboard and medium for the North American market.
The company also reported its second quarter 2022 financial results, posting $1,119 million in sales compared with $956 million in the same period last year.
"Our packaging businesses delivered good sequential performances in the second quarter, with improved pricing and sales mix, higher volumes and lower raw material costs in the case of containerboard outweighing the impact of continued cost inflation," Plourde says.
He adds, "Sequentially, results in our Tissue Papers business highlight the momentum being generated by the profitability initiatives underway. While pricing and mix improvements realized to date helped to mitigate the unprecedented headwinds on the cost side, these initiatives are trailing the pace of the current high inflation environment. These initiatives remain on track to generate important contributions in the back half of 2022 and are being closely monitored and regularly adapted to address the changing cost environment."
The company saw a net income of $371.9 million and 21.4 percent revenue growth.
Republic Services Inc., Phoenix, has released its financial results for the second quarter 2022, which ended June 30. The company is reporting revenue growth and has announced plans to expand with acquisitions in the second half of the year.
According to the report, the company saw a net income of $371.9 million or $1.17 per diluted share, for the second quarter, compared with $331.1 million, or $1.03 per diluted share, for Q2 2021. Excluding certain benefits and expenses, on an adjusted basis, net income for the three months was $418.4 million or $1.32 per diluted share, compared with $349.9 million or $1.09 per diluted share, for 2021.
"We are very pleased with our second quarter results, which demonstrate our ability to dynamically adjust the price to offset higher levels of cost inflation and drive margin expansion in the underlying business," Republic President and CEO Jon Vander Ark says.
The company is reporting total revenue growth of 21.4 percent, which includes 11.1 percent organic growth and 10.3 percent growth from acquisitions. Revenue growth from acquisitions includes US Ecology, which closed May 2. Second quarter revenue growth from average yield was 5 percent, and volume increased revenue by 2.4 percent.
Republic's core price for the second quarter increased revenue by 6.2 percent. The core price consisted of 7.8 percent in the open market and 3.5 percent in the restricted portion of the business. EPS was $1.17 per share, and adjusted EPS, a non-generally accepted accounting principle (GAAP) measure, was $1.32 per share. Adjusted EPS increased 21.1 percent over the prior year.
Year-to-date cash provided by operating activities was $1.563 million. Adjusted free cash flow, a non-GAAP measure, was $1.152 million, an increase of 14.1 percent compared with the prior year. Second quarter adjusted earnings before interest, taxation, depreciation and amortization (EBITDA), a non-GAAP measure, was $1 billion and the adjusted EBITDA margin was 29.6 percent of revenue, compared with 30.6 percent in the prior year.
Year-to-date cash invested in acquisitions was $2.5 billion, $2.2 billion of which related to the acquisition of US Ecology. Vander Ark says the integration of US Ecology is well underway and progressing as planned.
“We now expect to invest over $600 million in acquisitions apart from US Ecology for the year,” Vander Ark adds. “Substantially all of these deals are in the recycling and solid waste space.”
Year-to-date cash returned to shareholders was $494.7 million, which included $203.5 million of share repurchases and $291.2 million of dividends paid.
The company's average recycled commodity price per ton sold during the second quarter was $218. This is an increase from the first quarter of 2022 of $17 per ton and an increase of $48 per ton compared with the prior year.
As a result of the company’s strong performance and outlook for the balance of the year, Vander Ark says the company is raising its full-year financial guidance.
“We're experiencing higher than expected inflationary pressures that continue to persist,” Vander Ark says. “That said, we expect to continue to price more than our internal cost inflation, ultimately leading to full-year results that are projected to exceed original expectations.”
The company says it expects adjusted EPS in the range of $4.77 to $4.80 and adjusted free cash flow in the range of $1.7 billion to $1.725 billion. This represents an increase of about 4 percent from the midpoint of the prior guidance.
The company also expects the full year 2022 adjusted EBITDA margin to be about 29.3 percent. The change in margin from our initial expectations relates to the impact of US Ecology and fuel.
"Recycling Today” recently spoke with SK Geo Centric’s CEO Na Kyung-Soo to discuss the company's “Waste & Carbon Zero” strategy, its related investments and the plastic industry.
SK Geo Centric, a subsidiary of SK Innovation, has been developing petrochemicals in South Korea for 60 years. The company says its goal is to transform into the world's leading plastic recycler by leveraging what it calls “vast opportunities” for the development of "urban oil fields.”
To achieve this, the company has launched its Waste & Carbon Zero strategy. Through 2021 and into 2022, SK Geo Centric has invested $260 million to further mechanical and advanced recycling of plastics and the necessary infrastructure. In the North American markets, SK Geo Centric has invested $56.5 million in Quebec-based Loop Industries, $55 million in PureCycle Technologies of Orlando, Florida, and $10 million with Closed Loop Partners, New York City, to advance circular business models, scalable recycling technologies and material recovery infrastructure in the U.S.
Recycling Today recently spoke with SK Geo Centric CEO Na Kyung-Soo to discuss the company's Waste & Carbon Zero strategy, its investments and the plastic industry. The following interview has been edited for clarity.
Recycling Today (RT): SK Geo Centric has launched its Waste & Carbon Zero strategy. Can you explain in detail what this strategy encompasses and what your specific goals around plastics are?
Na Kyung-Soo (NKS): The SK Geo Centric Plastic & Waste Zero strategy is to recycle 2.5 million tons of produced plastic, accounting for 100 percent of the [company’s] global production volume, and expand the proportion of eco-friendly products, such as ethylene and acrylic acid (EAA) copolymers, to 100 percent by 2027.
To meet this goal, we are running a 3R strategy to reduce plastic usage and replace it with eco-friendly or recyclable products. Ultimately, SK Geo Centric is committed to reducing its carbon emissions by half compared with 2019 levels and achieving a net zero target by 2050.
RT: What do you believe the biggest hurdles in plastics recycling are? How can they be overcome?
NKS: Recycling plastic is inherently difficult and faces numerous challenges. Firstly, we need to create a social atmosphere of recycling plastic and build a social system to encourage it. We should also drive the shifts in people’s perception of the reckless use of plastic.
Another challenge comes in the form of collecting plastics. The amount of plastic that is recyclable is quite limited based on the variation in the types of plastic. Each plastic has its own set of challenges when it comes to recyclability. Incorrectly discarded plastic mixing with recyclable plastic can disrupt the recycling process. In some cases, items discarded with plastic recyclables are not plastic. Once contaminated by outside elements, including food, plastic is much more difficult to recycle.
Korea is good at separating plastics from the waste stream, but the Asian region is still lagging. Investments in facilities to collect and sort plastics are needed. It is also essential that the government and citizens should be engaged in efforts to do that.
By adopting great technology, we should increase the rate at which discarded plastic is collected and sorted. Establishing a circular economy to efficiently collect and recycle plastic requires the construction of more recycling facilities.
Developing a plastic circular economy is not something SK Geo Centric can do alone. As a company, we have acquired a 10 percent equity stake in Loop Industries. Additionally, we recently joined as an equal partner [in] a joint venture with Loop Industries and Suez to build an “infinite loop” facility.
[The] SK Geo Centric Research and Development Center is also working to improve postprocessing pyrolysis technology to remove impurities like chlorine and sulfur.
RT: Many chemical companies that have embraced chemical recycling have been accused of greenwashing. How do you respond to those accusations?
NKS: SK Geo Centric’s commitment to developing a more sustainable business model speaks for itself. We are building the world's first large-scale plastics recycling cluster in Ulsan, South Korea. As a company, we are taking concrete steps to reduce carbon emissions. As part of this effort, SK Geo Centric’s pyrolysis oil carbon reduction process was certified by the country’s Ministry of Environment for its carbon reduction effect. When processing 1 ton of plastic, the technology could capture as much as 2.7 tons of carbon without incineration.
There is a perception that the chemical recycling process requires a lot of utility and energy, and residues from the process are not good for the environment. The process often refers to pyrolysis, which can be a competitive solution compared to landfilling. The latest research in pyrolysis includes technology that allows for minimizing the use of energy and recycling of residues.
RT: Recently, your company acquired three different methods of plastics recycling, pyrolysis, depolymerization and solvent extraction technology for polypropylene. How does SK Geo plan to use this technology to meet its recycling goals?
NKS: As well as our research scaling pyrolysis technology, we are also working with our partner Loop Industries to scale depolymerization, a process that breaks down large molecular blocks, such as polyethylene terephthalate (PET), into reusable basic materials. Additionally, SK Geo Centric and PureCycle announced the location of Asia’s first polypropylene (PP) recycling plant. We are also negotiating a joint venture agreement with PureCycle Technologies and [its] solvent extraction technology to recycle large amounts of PP.
RT: What role does mechanical recycling play in your strategy?
NKS: What matters is how smart we can be when it comes to the use of plastics. If we care about the environment, we need to reduce the use of single-use plastics and shift toward multiuse plastics. If that is not possible, the obvious alternative is recycling. It’s important to use plastics in the longest possible and smartest way. Among the recycling methods, mechanical recycling is the cheapest. However, mechanical recycling has limitations because materials can only be recycled a limited number of times until degradation happens, causing a reduction in quality.
As a method to remove the limitations, we are considering advanced recycling. SK Geo Centric believes that the advanced recycling process we are developing could help solve the plastic waste problem. As part of this global approach, we anticipate forging deeper collaborations with North American companies.
RT: How do the company’s North American partnerships with Loop Industries and PureCycle factor into its recycling goals?
NKS: With Loop Industries and PureCycle, we are building facilities and ramping up plastic reduction efforts across Asia and globally. We are also working to recycle the synthetic fibers from clothes containing large amounts of polyester. Boosting the technology’s applications will increase recycling rates and help achieve our stated goals.
With PureCycle’s technology, we anticipate producing 60,000 tons of recycled plastic annually from raw PP material as part of our urban oil field strategy. If successful, we could replicate the model driving the development of our Ulsan recycling cluster to other markets, including China.
SK Geo Centric is partnering with Loop and Suez to build an infinite loop manufacturing facility in Europe. The partnership will combine SK’s petrochemical manufacturing, Suez’s resource management expertise and Loop’s breakthrough proprietary technology.
RT: Your company is also expanding into Asia. Where will the facilities be located, what will they specialize in and when will they be operational?
NKS: By 2025, a large-scale recycle cluster will be built in Ulsan, near our existing refining and chemical plants. At full capacity, the Ulsan cluster could recycle about 200,000 tons of plastic, which will help capture 500,000 tons of carbon emissions annually.
The advantage of the Ulsan recycling cluster is the synergies it unlocks. For example, various byproducts extracted from the recycling process, including PP and PET, can be used as feedstock to support other recycling processes. Some of the waste can also be used to support pyrolysis. Even the final discharges captured by the recycling process can be utilized by the refinery located next to the cluster. Having a recycling cluster completed in Ulsan, we are also considering expanding it into China and Southeast Asia.
RT: Where will you source the material for these facilities? What types of materials will you be targeting?
NKS: We are working with several companies in South Korea and Asia to secure PP materials and PET, including hard-to-recycle colored PET bottles, as part of our ongoing effort to grow our recycling feedstock. Korea generates about 8 million tons of plastic waste annually. Despite that volume, there is still a shortage of recyclable-ready plastic waste. Only when we can secure a stable source of raw material will we be able to establish a profitable circular economy underpinned by advanced recycling operating at scale.
Our target feedstock is mostly from municipal recycling facilities. We are also considering using waste generated from industrial manufacturing processes as feedstock. [The] most commonly used plastics, PET and PP, will be our priority. Our priority is to recycle flexible films by pyrolysis. To that end, advanced recycling will be used to recycle colored PET bottles or polyester fiber that cannot be processed by mechanical recycling.
RT: Why is it important to invest in recycling plastic and the circular economy of plastics?
NKS: A plastic circular economy is fundamental to solving the plastic waste problem. It is difficult for us to create a plastic circulatory system alone. We found the Closed Loop Partners (CLP) Fund shares the same values with us. The CLP Fund, which brings together companies invested in eco-friendly businesses, has also accelerated the establishment of a circular economy.
Plastic recycling is in the early stage of rapid development. SK Geo Centric looks forward to developing new technologies and business opportunities that the CLP Fund could help foster. We look forward to cooperating with different stakeholders and expect to find opportunities for new technology.
Adel Omrani spent more than 20 years at General Electric Co., where he held numerous leadership and senior operational roles across the United States, the Middle East and Africa.
Covanta, a provider of sustainable materials management and environmental solutions based in Morristown, New Jersey, has appointed Adel Omrani as executive vice president of safety, operations and engineering. He will report directly to President and CEO Azeez Mohammed.
According to a news release from Covanta, Omrani will oversee waste-to-energy operations in North America. There he will work to optimize safety performance and invest in technologies that will enhance the company's infrastructure and ability to support the growth of its zero-waste-to-landfill services.
"With more than 25 years of deep operational experience in transformative markets around the globe, Adel is an exceptional addition to the Covanta team," Mohammed says. "His expertise in leading cross-functional teams, managing a high-performing workforce and delivering operational excellence is perfectly matched for our strategic efforts to grow and leverage Covanta's unique zero waste-to-landfill solutions."
Before joining Covanta, Omrani spent more than 20 years at General Electric Co. (GE), where he held various leadership and senior operational roles across the United States, the Middle East and Africa. Most recently, he served as regional president and CEO of GE Gas Power, where he oversaw all commercial and operational aspects of a 20-gigawatt installed base power generation equipment and services business. This included planning and executing more than 700 maintenance events per year across more than 20 countries.
Before this role, Omrani served as chief operating officer and chief commercial officer for various power generation and services business units within GE. He began his career as a design engineer with GE Aviation and later advanced to the role of general manager for contractual services in Africa for GE Power & Water.
"I couldn't be more excited to join Covanta at such a pivotal time in its history," Omrani says. "Covanta is an extraordinary company with an exceptional team and portfolio of services that is unmatched across the industry."
Omrani holds a Bachelor of Science and a Master of Science in mechanical engineering from the University of Tennessee, and a Ph.D. in mechanical engineering from the University of Tennessee Space Institute.
The company has revised its projected its annual revenue may be $215 million more than previously anticipated.
In light of a strong second quarter, Waste Connections,Woodbridge, Ontario, has raised its expectations for the remainder of 2022, according to its second-quarter financial report.
Net income for the second quarter was $257.1 million, an increase of nearly 22 percent over last year’s net income of $210.9 million for the same period.
“Solid waste pricing growth of 8.8 percent enabled us to overcome increased inflationary pressures during the period and deliver adjusted EBITDA margin in line with our outlook for quarter two and flat on a year-over-year basis, excluding the margin dilutive impact from acquisitions completed since the year-ago period," Waste Connections President and CEO Worthing F. Jackman says.
According to the company’s filing with the federal Securities and Exchange Commission, its net income was up about 26.5 percent during the second quarter of 2022 (about $224 million) compared with 2021 (about $177 million).
Revenue for the quarter was about $1.81 billion, up 18.4 percent from the $1.53 billion Waste Connections brought in during the second quarter of 2021.
For the second quarter of ’22, Waste Connections’ adjusted EBIDTA was about $566.8 million, compared with about $485 million for the second quarter of 2021, an increase of about 16.9 percent, according to the company’s SEC filing.
The updated outlook for the remainder of 2022 includes a revised annual revenue projection of $7.125 billion, up $215 million from an earlier estimate, Waste Connections Chief Finance Officer and Executive Vice President Mary Anne Whitney says.
“Adjusted EBITDA for the full year is now estimated at approximately $2.19 billion, or about 30.7 percent of revenue, down about 50 basis points from our initial outlook as follows: 40 basis points reflect the impact of incremental price increases to overcome higher inflationary pressures, including over 100 basis points from higher fuel and third-party logistics as compared to our original outlook, and 10 basis points is from the margin dilutive impact of acquisitions completed since February,” Whitney says.
Strong pricing coupled with fuel surcharges helped protect the company from inflationary pressures, Jackman says.
“We are extremely pleased with our performance in the first half of the year, led by strong execution and continued pricing implementations to address macro challenges,” Jackman says. “In the second quarter, as cost pressures persisted, we once again delivered pricing above our outlook, and we positioned ourselves for another sequential increase in quarter three to drive higher pricing the second half of the year.”
The first half of 2022 also was marked by heavy acquisition activity, which Jackman says should help increase revenue.
“We’ve already closed 12 acquisitions year-to-date with annualized revenue of approximately $245 million, about two times the level of what we would consider average for a full year,” he says. “These transactions are all in solid waste and include West Coast franchises, as well as new market entries and tuck-ins spread across competitive markets in the U.S. and Canada.”
According to the SEC filing, Waste Connections is carrying about $5.6 billion in long-term debt, issues in notes the come to maturity between 2028 and 2052. Interest rates on those notes range from 2.2 percent to 4.25 percent.