- Rising operating profits and margins
- Delayed tax payments and other setbacks cause free cash generation to plummet
The race for waste has accelerated this year as incinerators seek to increase output in response to rising electricity prices on the continent. The loser of this volume hunt was Renewi (RNW)as competition increased for its usual recycling inputs.
Despite the conditions, the company saw a slight increase in profits this year as prices for recycled materials also rose. Renewi, which operates recycling plants in Belgium and the Netherlands, is able to pass on higher costs, while increasing its recycling rate, which means it can sell more products.
Operating profit for the six months to September 30 climbed 16% to €75m (£66m) as the margin climbed 0.7 percentage points to 7.9%. Operating margins have increased over the past 18 months, after hovering around 5% since 2018.
The biggest expense during the period was the acquisition of Paro, a Dutch company that recycles construction and demolition waste, for €66 million. There was an additional 16 million euros for growth investments. This means that free cash flow has fallen from €16m last year to €4m, with the biggest one-off hit being the €10m that was used to pay deferred taxes for the Covid-19 era in the Netherlands. A further 40 million euros will be spent on this over the next two years, the company said.
As a type of utility (including its level of debt) that operates under government contracts, Renewi isn’t going to blow doors with big profit increases – but this set of numbers shows it can find growth in a volatile recycling market and further tightening. restrictions in Belgium should keep it in a competitive position. To buy.
Last seen IC: Buy, 702p, April 24, 2022
| RENEWI (RWI) | ||||
| ORDER PRICE: | 584p | MARKET VALUE: | £465 million | |
| TO TOUCH: | 560-606p | TOP OF 12 MONTHS: | 855p | LOW: 480p |
| DIVIDEND YIELD: | n / A | P/E RATIO: | 4 | |
| NET ASSET VALUE: | 426¢* | NET DEBT: | €696m | |
| Half-year to September 30 | Turnover (M€) | Profit before tax (M€) | Earnings per share (¢) | Dividend per share (¢) |
| 2021** | 916 | 43.9 | 45.0 | nil |
| 2022 | 952 | 71.6 | 66.0 | nil |
| % change | +4 | +63 | +47 | – |
| Ex div: | n / A | |||
| Payment: | n / A | |||
| £1 = €1.14 * Includes intangible assets of €635 million, or 798¢ per share ** Restated | ||||