Waste Management, New Zealand's biggest waste collection and recycling company, drove up sales and profit last year as economic growth underpinned volumes of industrial and construction sector waste and it added landfill capacity.
Profit rose to $24.8 million in calendar 2017 from $11.5m a year earlier, according to the company's annual report. Net profit was helped by a reduction in financing costs while operating earnings rose 6.2 per cent to $129.6m, driven by a 6 per cent gain in revenue to $482m.
A breakdown of revenue shows the biggest gains were made in collections, which rose 7.2 per cent to $315m in 2017, while landfill sales gained 7.5 per cent to about $91m. Recycling revenue fell 9.6 per cent to $23.5m and sales of technical services rose 3.9 per cent to $51m.
Waste Management, which has been owned by Beijing Capital since 2014, competes with Enviro (NZ), which operates as EnviroWaste and is the No. 2 sized company in New Zealand's waste market. Enviro (NZ) is owned by billionaire Li Ka-shing's Cheung Kong Infrastructure Holdings.
Managing director Tom Nickels said general economic activity "remained strong" in New Zealand, stoking volumes of commercial and industrial waste and garbage from the construction industry. At the same time, the company included a full 12 months of contribution from the Tirohia Landfill near Paeroa, acquired in late 2016. Margins have been relatively stable, he said.
"The business is going well and we're optimistic for the future," he told BusinessDesk. "It's fairly clear the New Zealand economy has softened in its growth. The strong growth of the last few years is levelling out."
Nickels described Tirohia as a mid-sized landfill "but dead centre of the golden triangle that will be the growth engine for New Zealand going forward." The golden triangle refers to the area defined by Auckland, Hamilton and Tauranga.
Waste Management has a fleet of about 1,000 vehicles in New Zealand of which about 30 percent operate in Auckland, where road congestion "has become a real challenge for a business like ours," where some contracts constrain the hours its trucks can operate, he said.
Auckland's roads have become more choked up in the past couple of years and Nickels says he wants the government to something "that will have a genuine impact on congestion." He doubts light rail in Auckland "will take one car off the road."
Auckland's congestion has forced Waste Management to put on extra resources and has added to costs including overtime, he says.
Nickels' wishlist to the government includes changes to the waste disposal levy that was imposed on waste sent to landfills at a rate of $10 a tonne under the Waste Minimisation Act 2008 to encourage Kiwis to take responsibility for their waste and find ways to reduce, reuse, recycle or reprocess it.
Half the revenue from the levy goes to territorial authorities to use on waste minimisation projects and the rest goes into the government's Waste Minimisation Fund.
Currently, the levy is only imposed on waste disposed of in municipal facilities, although a Ministry for the Environment review last year recommended extending it to other types of landfills.
"We'd like the government to apply the levy across all disposal points, and then, as a second step, progressively increase it (the levy) and clearly signal the change so industry can invest in alternative processing such as additional recycling," he says.
"As the levy increases the economics change - the cost at the landfills goes up and so recycling technology becomes more viable in the future."
In commenting on Waste Management's 2016 results a year ago, Nickels told BusinessDesk that the two biggest challenges for the industry were attracting enough new drivers and the economics of recycling.
Twelve months down the track the driver shortage remains, despite efforts to attract more people to the industry, while the economics of recycling has deteriorated - mainly because the biggest global market for waste has indicated it no longer wants to be the dumping ground for the rest of the world.
China had been taking more than 30 million tones of recyclable waste from the rest of the world each year but under its 'National Sword' policy that began at the start of 2017, it began to stringently enforce restrictions on the importation of recycled materials.
"That's sending shockwaves through the recycling industry of the world," Nickels said. While Waste Management has a medium-term strategy to respond in the next two-three years, "short-term there are insufficient homes for the material."
"The value of waste has dropped dramatically and in some cases has become negative" and in the short term, the only option is to pass the costs on to the consumer. He was aware that some waste management firms were already stockpiling such waste.
Last month Ipswich City Council, west of Brisbane, Australia, said China's ban and the level of contamination of recyclable waste meant it had become too expensive to recycle and it was dumping the material in its landfills.
"I support the Chinese government - why should they take it," Nickels said. "We do need to communicate with the marketplace. Everyone is a fan of recycling but sadly not everyone does it well or wants to pay for it. Recycling is certainly not a bonanza for us - never has been."
Waste management has begun converting its fleet to run on electricity and later this week will unveil a plant in South Auckland capable of processing half of New Zealand's 'end-of-life' tyres. The tyres are shredded and one promising potential application would be to make a tyre-derived fuel, he said.