Renewi H1 underlying earnings rise
By Iain Gilbert
Date: Thursday 10 Nov 2022
(Sharecast News) - Waste management firm Renewi said on Thursday that underlying earnings and statutory profits had both improved in the six months ended 30 September as the group's focus on pricing and cost control resulted in "good profitability".
Renewi said revenues were up 4% at €952.0m, due to price increases more than offsetting lower volumes for inbound waste, while underlying earnings were also 4% stronger at €131.9m thanks to ongoing cost initiatives, net price gains that offset inflation, and favourable one-off items in the current year relative to adverse items in the prior year.
Underlying pre-tax profits were 20% higher at €61.6m and underlying earnings per share rose 17% to €0.56 each as the group booked €9.0m of recyclate price gains, and €39.0m of other price gains, which off-set €49.0m of cost increases.
Renewi also delivered a positive adjusted free cash flow of €21.8m, down from €27.6m in 2021, while total cash outflow shot up from €1.9m to €80.5m - driven by its recent acquisition of Paro. Core net debt to EBITDA increased to 1.7x at 30 September, an increase from 1.4x at the end of March.
Analysts at Liberum said: "Renewi is well positioned in advanced circular economies. In terms of valuation, exit multiples in the waste sector imply that Renewi's share price could double." However, Liberum reduced its target price on the stock from 1,012.0p to 865.0p to reflect its full-year 2024 fully-diluted earnings per share estimates dropping by 16% to €0.92 amid ongoing macro challenges.
"We continue to expect a FY benefit from Paro, and the benefit from the value drivers. However, we expect no repeat of the one-offs in FY23, and the impact on lower recyclate prices, and weaker volumes. It should be possible to offset most of the cost inflation through price inflation - apart from recyclates - as Renewi is doing in FY 22," said Liberum.
As of 1015 GMT, Renewi shares were up 1.42% at 572.0p.
Reporting by Iain Gilbert at Sharecast.com
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