European waste-to-product firm Renewi (RWI) has raised the bar yet again with the announcement that full year profits will be above its recently-revised forecasts.
Trading in January and February has been better than expected, meaning EBIT (earnings before interest and tax) will top the firm’s previous target of €120 million.
By 10am Renewi shares had gained 1.3% to 711p on above-average trading volumes.
CONFIDENT OUTLOOK
The firm, which was formed through the merger of the UK’s Shanks and Van Gansewinkel of the Netherlands five years ago, has repeatedly confounded analysts by raising its guidance.
Today it said the combination of better than expected prices for recyclates and tight cost control in the final quarter had more than offset a drop in volumes due to Covid restrictions.
The firm said it was ‘confident in the medium and long-term outlook’, with its strategic growth programme ‘on track to deliver significant additional earnings over the next three years and beyond’.
Positive structural growth drivers include increased incentives for recycling and the use of secondary materials, and tougher taxes on companies with large carbon footprints by Dutch and Belgian regional governments.
Renewi extracts value from industrial waste and used materials rather than sending them to landfill, making it a popular holding for investors with ESG (environmental, social and governance) mandates.
PRICING POWER
Given the increasingly essential nature of its services across all sectors of the Benelux economy, Renewi has been able to pass on price increases to offset its own input cost inflation.
Price hikes introduced on 1 January are expected to cover the whole of this year’s cost rises while the firm has also hedged its energy costs for the year.
The S&P consensus EBIT forecast for the year to March was still well below the company’s forecast at €106 million before today’s announcement, suggesting analysts need to raise their sights by a good 15% to 20%.
Moreover, while the firm says it expects recyclate prices to ease this year, the consensus EBIT forecast for the year to March 2023 also looks well wide of the mark at just €98 million.
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