Waste Industry Expected to Improve Despite Slower Economic Growth

Date: July 2, 2011

Source: Standard & Poor's

Rating agency Standard & Poor's remains optimistic about the waste management industry despite signs of slower economic growth. It is their opinion that both collection and landfill volume will gradually recover, while pricing will continue to drive top-line growth. Companies will use their strong cash flows to repurchase shares, raise dividends, reduce debt and make strategic acquisitions. Consequently, they will divest underperforming assets and acquire accretive niche businesses, while seeking to enhance customer services to maintain a high retention rate. And while some companies have reported less volume of higher profit new business relative to business lost, resulting in a negative "churn" rate, they believe it to be more important to maintain their pricing strategy at the risk of sacrificing some market share. Construction & demolition (C&D) and commercial volume are expected to remain weak in the near term but gradually recover, while residential and some specialwaste industrial volume show more favorable trends. The economic recovery will stabilize commodity recycling prices while hedges and surcharges will continue to offset higher fuel and energy costs. Similarly, haulers will look to reduce other costs through improved vehicle maintenance, safety and insurance programs.

See also: "S&P Optimistic about Waste Industry," (www.wasteinfo.com/news/wbj20100921C.htm). September 18, 2010.

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