Renewi reports 'record performance', agrees to buy Paro
By Josh White
Date: Tuesday 24 May 2022
(Sharecast News) - Waste management and recycling company Renewi reported a 10% improvement in revenue in its final results on Tuesday, to €1.87bn (£1.6bn), as it also announced the €67m acquisition of the Amsterdam-based Paro.
The London-listed firm said underlying EBIT was 83% higher year-on-year in the 12 months ended 31 March, to €133.6m, with the net impact of customer pricing, recyclate pricing and cost inflation delivering a benefit of €45m.
Its commercial division's underlying EBIT margins expanded by 380 basis points to 10%, with its return on operating assets increasing to 31.6%.
Underlying EBIT was ahead 77% compared with the pre-Covid reference period in the 2020 financial year, the board added.
Renewi said its underlying earnings per share were up 118% to 98 euro cents, while basic earnings increased to 93 cents per share from seven cents in the 2021 period.
Statutory profit came in at €75.4m, up from €5.5m year-on-year, while core net debt reduced to €303m from €344m, and the firm's net debt-to-EBITDA reduced to 1.4x from 2.2x.
"Renewi delivered a record performance in the year, with revenues, profits and returns all significantly ahead of the prior year," said chief executive officer Otto de Bont.
"This is thanks to the tremendous commitment of our employees, who continued to service our customers in challenging conditions.
"Our end markets have continued to grow, with climate-driven legislation and corporate strategies supporting increased recycling and demand for high quality secondary materials which, in turn, is driving a sustained increase in recyclate prices.
"Our commercial division, which represents over 70% of group revenues, has therefore been able to accelerate its journey towards double digit margins, supported by tight control of costs and appropriate price increases reflecting wider inflationary pressures."
De Bont said the company made "good progress" on its key strategic initiatives, and had committed more than €100m of capital into its innovation portfolio.
"We remain on track to deliver the full €60m of EBIT we targeted for the 2026 financial year across our three value drivers - our innovation pipeline, the recovery of earnings at Mineralz and Water and the Renewi 2.0 programme.
"There is no doubt the transition to circular economies in our end markets will continue to increase demand for recycling and higher quality secondary materials, supporting our business model in the short and long term.
"The sustainability agenda pursued by the EU and national governments will also present increasing opportunities for Renewi to convert waste into a wider range of high-quality secondary materials."
Looking ahead, de Bont said recyclate prices were expected to remain strong, but moderate in the 2023 period.
"The board now anticipates the group's performance in the 2023 financial year to be ahead of its previous expectations."
In a separate announcement, Renewi said it had agreed to acquire GMP Exploitatie, an Amsterdam-based commercial waste and recycling business trading as Paro, from GMP Groep for an enterprise value of €67m, funded from its existing facilities.
The agreement was conditional on competition approval and the completion of relevant employee representation procedures.
Renewi said Paro operates from a "large and well-permitted" processing facility in the port area of Amsterdam, trading under the brands Paro, Cirqu and Buro.
On a 130,000 square metre site with "excellent" road and water access, Paro has two advanced sorting lines for processing mixed construction and demolition waste, as well as bulky household waste.
In addition, a newly-installed minerals classification and washing installation sees Paro produce secondary construction materials from construction and demolition waste.
With a recycling rate of around 78%, Paro would contribute towards Renewi's objective to achieve a Group-wide 75% recycling rate by 2025.
For the year ended 31 December, Paro reported revenue of €43m, EBITDA of €9.9m, operating profit of €7.3m and gross assets of €34.4m.
Cash consideration for Paro of €53.5m, including debt and other items, would be paid on completion, and funded from Renewi's existing committed debt facilities.
The acquisition was expected to increase leverage by around 0.2x initially.
"We are delighted to announce our first major acquisition since the creation of Renewi in 2017," Otto de Bont added.
"The transaction strengthens our position in secondary material production and is fully aligned with our strategy to produce higher quality secondary materials.
"It is expected to generate significant synergies with our existing operations in the Netherlands."
At 1012 BST, shares in Renewi were up 7.88% at 698p.
Reporting by Josh White at Sharecast.com.
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