Houston-based Waste Management Inc. (WM) has achieved what WM President and CEO Jim Fish calls a strong financial performance for its 2021 fiscal year, which ended Dec. 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,” Fish says.
WM completed the acquisition of Ponte Vedra, Florida-based Advanced Disposal on Oct. 30, 2020.
Fish adds that all of those components helped the company to achieve “record growth” in full-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and net cash provided by operating activities.
According to the company’s fourth-quarter 2021 and full-year 2021 earnings report, WM achieved core price in the fourth quarter of 2021 of 5.1 percent compared with 3.2 percent in the fourth quarter of 2020, and for the full year, core price was 4.8 percent in 2021 compared with 2.9 percent in 2020. The company’s collection and disposal yield was 3.7 percent in the fourth quarter of 2021 compared with 2.3 percent in the fourth quarter of 2020, and for the full year, collection and disposal yield was 3.5 percent compared with 2.2 percent in 2020. WM’s company volumes increased 2.8 percent in the fourth quarter of 2021 compared with a decline of 2.6 percent in the fourth quarter of 2020, and for the full year, total company volumes increased 2.8 percent in 2021 compared with a decline of 4.5 percent in 2020.
WM reports that operating expenses were 63.2 percent in the fourth quarter of 2021 compared with 61.5 percent in the fourth quarter of 2020. The company attributes the increase in operating expense to higher commodity prices for recyclables and higher risk management costs. Despite inflationary cost pressures in the fourth quarter, the company says the margin impacts of higher costs improved from the third quarter of 2021.
According to WM, the company’s operating EBITDA in the collection and disposal business was $1.39 billion, or 31 percent of revenue, for the fourth quarter of 2021 compared with $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 was $5.52 billion, or 31.6 percent of revenue, for the full year compared with $4.85 billion, or 31.9 percent of revenue, in 2020.
Operating EBITDA in WM’s recycling business improved by $44 million in the fourth quarter of 2021 compared with the fourth quarter of 2020. For the full year, operating EBITDA in WM’s recycling business improved by $186 million compared with 2020. The company attributes this improvement to an increase in market prices for recycled commodities and labor savings from the company’s investments in new technologies and equipment.
Operating EBITDA in WM’s renewable energy business improved by $18 million in the fourth quarter of 2021 compared with the fourth quarter of 2020, primarily driven by increases in the value of renewable fuel standard credits. For the full year, operating EBITDA in the company’s renewable energy business improved by $81 million compared with 2020.
Additionally, the company says WM achieved $36 million of operating cost and selling, general and administrative (SG&A) synergies from the acquisition of Advanced Disposal in the fourth quarter of 2021. For the full year, WM achieved $94 million of operating and SG&A cost synergies, bringing the total to more than $100 million since the acquisition.
For the 2022 fiscal year, WM expects total company revenue growth to be 5.8 percent to 6.2 percent, which includes organic revenue growth from the collection and disposal business of about 6 percent. WM anticipates adjusted operating EBITDA to be in the range of $5.325 billion to $5.425 billion for the 2022 fiscal year. The company also expects adjusted operating EBITDA margin to expand in the second half of the year as pricing activities progress in offsetting cost inflation.
The company says market prices for recycling commodities are expected to average $125 per ton in 2022, which is a 10 percent increase from the average rate the company achieved in 2021. Additionally, WM estimates that the value of renewable fuel standard credits in its renewable energy business will be about $3, which is similar to 2021.
In 2022, WM intends to spend an incremental $550 million for capital expenditures on growth projects in the recycling and renewable energy lines of business. The company reports these investments will be focused on renewable energy generated from its landfill network, automating recycling processing and expanding single-stream recycling across North America.
Within the renewable energy business, WM expects two new renewable natural gas (RNG) plants to come into service this year. All of its RNG plants (six in total) will generate 3.6 million metric million British thermal units (MMBtu) in 2022. Additionally, WM plans to invest about $275 million this year and an incremental $550 million from 2023 to 2025 to expand its network of RNG plants. By 2026, WM expects these investments to be operational, bringing the owned asset network to 21 RNG facilities that will generate 24 million MMBtu per year.
Within the recycling business, WM has automated sorting at four of its material recovery facilities (MRFs) across its network of 49 single-stream facilities in North America. The company says it plans to invest growth capital of about $275 million this year and an incremental $525 million from 2023 to 2025 to accelerate its investment in technology automation at single-stream MRFs and to expand the company’s recycling footprint in underserved markets. WM says it expects to see savings in labor costs of $60 million to $70 million by 2026 as a result of investing in automation.
“As we look ahead to 2022, we remain committed to continuing pricing excellence, advancing technology investments to differentiate the company, automating our processes to reduce our cost to serve, providing the best workplace, and leveraging our sustainability platform for growth,” Fish adds. “In 2022, we expect to deliver another strong year of adjusted operating EBITDA growth of approximately 7 percent.
He continues, “We have a strong outlook for the year ahead, with expected collection and disposal revenue growth of about 6 percent, driven by continued execution on our disciplined pricing programs. This revenue growth is expected to drive operating leverage as we manage our costs in the face of inflationary pressure. We are pleased with the extraordinary cash generation of our business, which allows us to plan a 13 percent increase in our dividend rate for 2022. At the same time, we are excited about planned growth investments in our recycling and renewable energy businesses that are expected to total more than $1.5 billion through 2025. These growth investments are intended to further WM’s sustainability leadership position by increasing recycling volumes by more than 1.5 million tons and growing renewable natural gas generation by 21 million MMBtu by 2026. These investments will deliver circular solutions for our customers and drive environmental value to the communities we serve while also providing very attractive returns to our shareholders.”