Investors rubbish company gains

Kim Ellis

Waste Management is still turning trash to treasure, but despite improved half-year profits and a full-year forecast to match, shareholders cut 19c from the rubbish collector's share price yesterday.

With a net profit of $14.8 million, the company bettered last year's interim result by $2.1 million. It also forecast a similar rise in its annual profit to around $30 million, up from $25.6 million last year, despite a "challenging" Australian market.

Investors may have been troubled by economic warnings on both sides of the Tasman as the share price fell 30c to a day low of $6.48 before recovering some ground to close at $6.59.

Waste Management shares have traded between $4.75 and $6.80 in the last year.

Managing director Kim Ellis said the company's challenge was how to break out across the Tasman.

"We're on the beachhead there, we've got the guns pointed at us, and we've got a pretty good group of guys holding the fortresses there - but we need to climb the bank and get on the mainland."

Its Inkerman landfill and Wingfield waste transfer station north of Adelaide had now been bedded in for seven months, but things were highly competitive.

It was still early days, though, and initiatives were under way to improve performance, Ellis said.

"Volumes and pricing need to improve, but directors are confident a number of opportunities have been identified to ensure the project will achieve the desired return."

The dry waste collection business in Adelaide and Melbourne performed well, with improving margins, he said.

The company, which dominates New Zealand's waste collection industry, is still a tiny player in Australia, where it ventured four years ago.

Now it has about 15 small to medium-sized acquisitions in Brisbane, Melbourne, Queensland and Albury in New South Wales. Inkerman is its biggest opportunity so far.

The hope is for consolidation in Australia's industrial waste disposal sparked by the pullout of large European players, which would allow Waste Management to lift its presence there.

Ellis said the pace of growth had been frustrating and he was hungry to significantly expand the business.

Back home, its disposal division had been a strong performer, with revenue growth of 27 per cent.

The collection division also performed well, with revenue and earnings growth in all branches.

Increased power generation at its Redvale and Whitford tips and higher prices saw power generation revenue and profitability rise.

Construction of a new regional landfill at Kate Valley, Canterbury - with Canterbury Waste Services - had been completed on time and budget, opening on June 8.

The company said the 51 per cent rise in interim dividend to 15c was in line with a policy to distribute 75 per cent of net profit, compared with the previous 50 per cent.