Waste Management financial report shows 17.8 percent increase in earnings for 2021
Strong organic growth and technology investments lead to an increase in revenue for Waste Management, according to its newest financial report which shows the results for the quarter and year ended December 31, 2021.
"In 2021, we delivered on each of our strategic priorities, including successfully integrating the acquisition of Advanced Disposal, driving disciplined organic revenue growth, advancing technology investments focused on customer retention and growth, and cultivating our people-first culture," said Jim Fish, Waste Management's President and Chief Executive Officer.
Revenue and profitability highlights for the fourth quarter and full year of 2021
Revenue
- The core price for the fourth quarter of 2021 was 5.1 percent compared to 3.2 percent in the fourth quarter of 2020. For the full year, core price was 4.8 percent in 2021 compared to 2.9 percent in 2020.
- Collection and disposal yield was 3.7 percent in the fourth quarter of 2021 compared to 2.3 percent in the fourth quarter of 2020. For the full year, collection and disposal yield was 3.5 percent in 2021 compared to 2.2 percent in 2020.
- Total company volumes increased 2.8 percent in the fourth quarter of 2021, or 2.3 percent on a workday adjusted basis, compared to a decline of 2.6 percent in the fourth quarter of 2020. There was no workday adjustment in the fourth quarter of 2020. For the full year, total company volumes increased 2.8 percent in 2021 compared to a decline of 4.5 percent in 2020, or a decline of 4.7 percent on a workday adjusted basis.
Profitability
- Operating EBITDA in the company's collection and disposal business, adjusted on the same basis as total company operating EBITDA, was $1.39 billion, or 31.0 percent of revenue, for the fourth quarter of 2021, compared to $1.28 billion, or 31.6 percent of revenue, for the fourth quarter of 2020. Operating EBITDA in the company's collection and disposal business, adjusted on the same basis as total company operating EBITDA, was $5.52 billion, or 31.6 percent of revenue, for the full year 2021, compared to $4.85 billion, or 31.9 percent of revenue, for the full year 2020.
- In the fourth quarter of 2021, operating EBITDA in WM's recycling business improved by $44 million compared to the fourth quarter of 2020. For the full year, operating EBITDA in the company's recycling line of business improved by $186 million compared to 2020. The improvement was driven by an increase in market prices for recycled commodities and labour savings from the company's investments in improved technology and equipment.
- In the fourth quarter of 2021, WM realized $36 million of operating cost and SG&A synergies from the acquisition of Advanced Disposal. For the full year, the company realized $94 million of operating and SG&A cost synergies, bringing the total to over $100 million since the acquisition.
Over 5 percent revenue growth expected in 2022
- Total company revenue growth is expected to be 5.8 percent to 6.2 percent, which includes organic revenue growth from the collection and disposal business of approximately 6 percent. The company's disciplined pricing programs are expected to result in core price of more than 5.5 percent, yield approaching 4 percent, and volume of approximately 2 percent.
- Market prices for recycling commodities are expected to average $125 per ton in 2022, an approximate increase of 10 percent from the average rate the company realized in 2021.
- Adjusted operating EBITDA is expected to be in the range of $5.325 to $5.425 billion for the full year.
- WM expects adjusted operating EBITDA margin to expand in the second half of 2022 as pricing activities progress in offsetting cost inflation and the company achieves operating efficiencies through the application of technology.
Investments in recycling
WM has used technology to automate sorting at four materials recovery facilities across its network of 49 single-stream facilities in North America. These investments have reduced the operating costs of recycling services, improved the quality of delivered product, and increased the amount of material ultimately recycled.
The company plans to invest growth capital of approximately $275 million in 2022 and an incremental $525 million from 2023 to 2025 to accelerate the investment in technology automation in a number of our single-stream facilities and to expand our recycling footprint including in under-served markets.
These capital investments are projected to have strong returns and payback periods of approximately six years based on a blended average recycling commodity price of $125 per ton. In the near term, the incremental operating cash flow growth from the Company's new and enhanced projects is expected to be more than offset by the incremental growth capital investment. By 2026, the Company expects the planned automation benefits and market expansion to generate incremental annual run-rate operating EBITDA of approximately $180 million, which will flow through to free cash flow as growth.
Through the investments that focus on automation through accelerated technology deployments the company expects total labour savings of approximately $60 to $70 million, which is one of the primary contributors to the expected incremental operating EBITDA growth by 2026.
