Cleanaway Waste Management (ASX: CWY) impressed investors this morning with the company revealing an increase in revenue to $1.2 billion and an almost 14% rise in net profit after tax to $76.2 million for 1H 2020.
However, this was excluding the impact of AASB 16, which is a new accounting standard adopted during the period regarding recognition, measurement, presentation and disclosure of leases.
Including the lease liability, Cleanaway’s profit after income tax was down 25.5% to $45.3 million from $60.8 million in the previous corresponding period.
Underpinning the profit was a 4.1% lift in revenue to almost $1.2 billion from $1.15 billion.
Cleanaway chief executive officer and managing director Vik Bansal said the company’s underlying profit had risen (excluding AASB 16) despite lower commodity prices.
Additionally, the recently introduced waste levy in Queensland had reduced volumes taken to the company’s landfill in the state.
Mr Bansal said these challenges had been mitigated by reducing rebates on commodities and boosting the company’s resource recovery efforts in Queensland.
“The strategies that we have implemented in our businesses over the past four years and the performance culture that we have developed have enabled the successful integration of Toxfree.”
Toxfree integration and SKM acquisition
The Toxfree business was acquired in FY 2018 and the almost complete integration into Cleanaway is expected to provide $35 million of synergies.
Meanwhile, Cleanaway agreed to acquire SKM Recycling Group’s $60 million debt in August last year.
Then, in October, Cleanaway revealed it was the successful bidder for SKM’s properties, plant, equipment and other assets for a further $66 million.
The acquisition gave Cleanaway a further five recycling sites, including three material recovery facilities and a transfer station in Victoria and a material recovery facility in Tasmania.
“The acquisition provides Cleanaway with a strong recycling platform in Victoria and Tasmania as part of our footprint 2025 strategy and our mission of making a sustainable future possible,” Mr Bansal said.
Creating a circular economy
Cleanaway’s strategy is to develop commodities for reuse in a circular economy.
As part of this, Cleanaway finalised a memorandum of understanding during 1H 2020 to build a plastic pelletizing plant along with plans to develop energy from a western Sydney waste facility.
These initiatives are anticipated to build on the SKM recycling and Toxfree acquisitions under the company’s footprint 2025 strategy.
“Ultimately, this will only be possible when the economic framework supports investment in downstream commodity manufacture,” Mr Bansal explained.
“Demand for recycled materials must be created and underpinned by robust and consistent government policies and community support,” he added.