DOW JONES NEWSWIRES
Waste Management Inc.'s (WMI) fourth-quarter net income dropped
29% on lower revenue and margins, and demand crumbled in its
industrial and recycling businesses.
As such, the nation's largest garbage hauler and landfill
operator announced plans to cut more than $100 million in annual
costs from streamlining field operations, cutting corporate staff
and freezing salaries.
Analysts have expected waste fundamentals to remain positive
this year, citing favorable pricing and lower fuel costs. Still,
the sector isn't recession-proof and could be hurt by weak volumes
and lower recycling-commodities prices as the downturn
continues.
Chief Executive David Steiner said Thursday the majority of
Waste Management's business, from commercial and residential
customers, is "recession-resistant," though a sharp decline in
demand led to "greatly reduced" volumes and "steep" price declines
in its more economically sensitive industrial and recycling
businesses.
The garbage hauler's fourth-quarter profit was hurt by 8 cents
from deterioration in the recycling-commodities markets. A 15-cent
to 20-cent impact is expected in 2009, most of it coming in the
first half of the year.
Meanwhile, Waste Management reported fourth-quarter net income
of $218 million, or 44 cents a share, down from $309 million, or 61
cents a share, a year ago. Excluding pension impacts in the latest
quarter and prior-year gains, earnings fell to 49 cents from 54
cents.
Revenue decreased to $3.1 billion from $3.4 billion.
Analysts polled by Thomson Reuters had projected per-share
earnings of 48 cents with $3.2 billion in revenue.
Operating margin fell to 14.8% from 17.1%. Revenue from
collections, its biggest business, dropped 5.4%, while the much
smaller recycling business recorded a 37% slump. Landfill revenue
slipped 6.7%.
Looking ahead, Steiner expects that the company will acquire
more revenue than it divests in 2009 as asset prices fall, but that
it "will not make any acquisitions that would jeopardize our strong
balance sheet or our credit rating." That was threatened last year
through its effort to acquire Republic Services Inc. (RSG) amid an
attempt to stop Republic from acquiring Allied Waste.
The industry has turned to acquisitions to expand and create
efficiencies amid modest revenue growth. The sector has gone
through several waves of consolidation as larger companies buy up
regional operators, though some acquirers have had difficulty
integrating and managing their operations.
Waste Management shares closed Wednesday at $28.45 and there was
no premarket trading. The stock is down 14% over the past 52 weeks,
all of it coming since the start of 2009.
-By Shirleen Dorman, Dow Jones Newswires; 201-938-2310;
shirleen.dorman@dowjones.com