The past year has been marked by notable extremes in the waste sector. Healthy revenues, pricing and M&A activity that wrung in 2020 were offset by a COVID-inspired downswing that prompted slowdowns in the commercial sector, increased residential volumes and an uncertain economic forecast.

As we head toward 2021, most public waste companies have reported that revenues, volumes and M&A interest have started to solidify after mid-year lows.

At Waste Today’s 2020 Corporate Growth Conference held Oct. 14, waste industry executives, investors and analysts tried to make sense of recent changes in the industry and laid out expectations for the near future.

Effram Kaplan, managing director for Brown Gibbons Lang & Co., moderated a session titled “Market Dislocation: Where is the Market Post-Coronavirus?” The session covered the near- and long-term impacts of COVID-19 on the environmental services and waste markets.

Panelists included Bob Cappadona, president and COO, Veolia North America; Pat Dovigi, founder and CEO, GFL Environmental; and David Stanton, president of Harsco’s Clean Earth division.

COVID brings changes

Dovigi noted that COVID has had more of an impact on business in certain regions than in others due to the presence of, and adherence to, stay-at-home orders. He noted that citizens in Canadian markets generally abided by such mandates without much pushback, which allowed for less disruption outside of a 6- or 8-week window in March and April when all but essential businesses were shuttered. Similarly, he noted that U.S. operations experienced significantly different ramifications from the virus based on the state, population density within those states, and how strictly stay-at-home orders and mask wearing were prioritized

Dovigi also stated that business in urban markets was more likely to be affected than those in more rural locales.

“When COVID hit, it was more of a regional dynamic based on how hard-hit the regions were and how drastic the shutdowns were, so I don’t think the [bottom fell out] industry-wide,” Dovigi said. “In urban markets, there was much more of a shift towards residential volumes versus commercial volumes.”

"When COVID hit, it was more of a regional dynamic based on how hard-hit the regions were and how drastic the shutdowns were, so I don’t think the [bottom fell out] industry-wide,” –Pat Dovigi, founder and CEO, GFL Environmental

Dovigi said that the first two months of the pandemic brought about increases in urban market volumes of 10 to 15 percent on the residential side and decreased commercial volumes between 20 and 30 percent. In rural and secondary markets, business was still negatively affected, but the blowback was not as drastic due to more lenient stay-at-home orders and less population density.

As of early Q4, Dovigi said that volumes have normalized a bit, and are up only 2 to 5 percent year over year on the residential side and down between 5 and 10 percent on average on the commercial side because of lingering impacts on restaurants, sporting venues and other businesses.

Dovigi noted that he expects a “rebalancing of the volumes” to occur toward summer 2021 as people return to more of a normal routine with work and commercial spending.

Cappadona followed up on Dovigi’s comments to say that Veolia’s operations fared differently at the onset of the pandemic not only based on location, but also between different lines of business.

“As companies moved to a work-from-home [blueprint], we immediately saw an uptick in business and people prepared for vacating their facilities,” he said. “In the April and May timeframe, we were dealing with decontamination work that we were doing for some of our core customers and preparing these customers so they could go back to a work from the office scenario, and we were also dealing with some geographic issues.

“We saw a major impact in the New York/Tri-State area, while at that time, other parts of the country were continuing to operate as they always had. And now we’ve seen a shift of that as we’ve gone through the summer and into the fall. At the end of the day, our business mix changed dramatically over time, but we remained busy throughout. But the type of work we were doing and the type of customer we were serving may have shifted a bit over time.”

Cappadona noted that Veolia works for a number of companies and universities involved in pharmaceutical research, which is one segment that has been working around the clock and has required a pickup in service intervals. Conversely, the company’s municipal accounts were hit hard and its general manufacturing market customer volumes have been inconsistent.

“How does that wind up impacting the different businesses we’re associated with? The markets we can predict that are going to be up include pharmaceuticals, biotech, research—we’ll continue to see activity there,” he said. “Some of the other business segments are going to be a little bit more unpredictable such as in general manufacturing. Oil and gas has been relegated to a new norm with the stabilization of the price of oil to this point, but heading into the winter, our focus is going to be being nimble enough to adjust to the market.”

He says that the ability of Veolia’s workers to adjust on the fly to meet the needs of its customers has been pivotal in the company’s performance during the last half year.

“They were scared to death of getting sick and scared to death of losing their jobs, and we worked to make sure they were comfortable [on both those accounts] immediately to ensure the sustainability of what we do every day,” he said. “And our group responded outstandingly to the challenge to put us in a good position to take advantage of the opportunities ahead that we have.”

Stanton said that Harsco was forced to shift gears coming into the year as it went from riding a wave of healthy business to having to suddenly face upheaval among its customer base.

“It feels like it was 10 years ago, but Q1 was a very robust quarter, and if you focus on retail, commercial and healthcare, it might have even been record-setting in terms of performance, but it was certainly one of our peak quarters in the history of our businesses,” he said. “Then we hit Q2 and experienced those massive shutdowns. But doing some more prognostication, I think some of the top retailers you saw in 2019 versus where they are going to be in 2021, you’re going to see some massive shifts, and the big one is going to be from big box to online retailers.”

He said that the shift to e-commerce in the retail space may have accelerated trends by 5 to 10 years, as this sector grew 20 percent in a quarter’s time.

“The adoption rate went through the roof [with e-commerce], and it’s never going back to what it was,” he said. “It might become adjusted [downward when COVID slows], but it is never going back to where it was. So, we do see and are projecting a shift away from just having the box retailers to [there being a bigger focus on] distribution and logistics management of retail materials, which will be a growing business for us.”

Stanton said that the gap between the Amazons of the world and the brick-and-mortar retail customers is going to widen, while bankruptcies and shutdowns might become more commonplace for retailers.

Overall, Stanton noted that although businesses slowly started to come back in Q3, the company’s volumes have been hit-or-miss depending on location, with some markets seeing booming activity while others struggle to build back to normal. He added that Harsco is working to bridge communication gaps with its customers to provide better service that aligns with changing needs.

“I think this is going to be a really long road back, and we’re going to have to stay close to our customers, talk and communicate with them a lot, make sure we’re meeting their needs and understand where they’re going so these adjustments that are going to happen are things we are prepared for,” he said.

Photo Courtesy of Tanzi Propst, The Park Record.

M&A appetites

M&A activity in the waste and environmental services markets continued at a torrid pace going into the year. When COVID hit, it caused many companies to slow, but not halt, their appetites for activity.

“On March 13, we hit a very quick pause and had to consider what the impact was going to be to the market. At the time, I thought [the fallout of the pandemic would be [measured in] weeks, and it’s been months,” Cappadona said. “I think a year, a year and a half [is when we’ll be completely back to normal], but I do see Veolia’s trajectory the same. Where we were pre-COVID hasn’t changed in terms of our investment in North America. We continue to develop our assets and look at opportunities that fit well in terms of technology, in terms of geography, for Veolia going forward. You’ll see us do things before the end of the year. You’ll see us be focused going into 2021, and we have a positive outlook here in North America.”

Cappadona said that the company is keeping on its trajectory of measured M&A and is assessing opportunities as they come about. Although the economic downturn has caused potential complications in terms of pulling deals through for some, he notes that it may help fast-track deals in the future for business owners looking to sell.

“Maybe there have been some opportunities that have been created because of a result of the stress that some companies have been under over the last few months that may create [openings where we’d be able to do a deal now] that maybe we wouldn’t have otherwise,” he said.

Stanton said that Harsco anticipates completing some smaller tuck-in acquisitions related to its recent ESOL and Clean Earth deals, but there are also bigger moves that may be in store for the company to help it transition into a “single-thesis environmental services company.”

“More ambitiously as you’ll hear from Harsco, there are still strategic opportunities to make bigger moves in the environmental services direction,” he said. “Those are going to be big moves, carefully contemplated and timed with our strategic desires, and somewhat, market cooperation.”

Dovigi said that going into 2021, GFL will be primarily focused on integrating assets from its WCA acquisition and those divestiture assets from the Waste Management/Advanced Disposal deal, but that the company’s ample experience with asset integration will position it to be aggressive in short order if the right deal were to come along.

“The first three to four months are going to be solely focused on executing on the integration plan that we have [for the Waste Management/Advanced Disposal divestiture and WCA deals], but assuming that goes the way we think it will, … we’ll get back to our regularly scheduled programming [in terms of looking at M&A] like we have over the last 13 to 14 years,” he said.

Panelists in another Corporate Growth Conference session titled “The State of Mergers & Acquisitions” shared similar sentiments regarding slowed activity during Q2, but noted that there appears to be ample opportunity for those looking to buy or sell a waste business as 2020 comes to a close.

Charles Appleby, founder of Advanced Disposal Services, said that now is the right time for those looking to make a deal.

“We believe that [the impacts of] COVID-19 will be short-lived—maybe longer than we expected it to be, but I think it would be a mistake to take your foot off the accelerator if that’s what you’re doing because I think now is a good time to be looking at the right opportunities and to take advantage of them,” he said.

Joe Cassin, vice president of business development at Waste Management, said that although there have been some slowdowns to activity, Waste Management is moving forward and looking at what deals the company might be able to capitalize on.

“I think the time is right to continue the [M&A] momentum going forward,” Cassin said. “I will say regarding deal flow, it’s not as robust as it was last year in 2019, but we’ve closed half a dozen transactions this year and have several more lined up that will close before the end of the year, and I’m sure several new ones that will go into the first quarter of 2021.”

Photo courtesy of Veolia

Economic outlooks

Business dealings don’t happen in a vacuum, which is why forecasting the economic conditions of 2021 is critical for understanding what may await the waste industry.

Jeff Korzenik, economist at Fifth Third, gave his thoughts on future trends in a Corporate Growth Conference session tilted “Economic Outlook: 2021 and Beyond.”

As part of his forecast, Korzenik said that the business mix in the U.S. will change based on how various industries have been affected.

“We see the post-pandemic economy being [highlighted by] not so much new trends, but by trends that have become supercharged by the disruptions of the pandemic,” he said. “And those disruptions are in policy, industry, geographies, even employer/employee relationships, and then we think there is another trend that is going to accelerate in the wake of the pandemic, and that’s the opportunity to bring more manufacturing jobs back to the United States.”

Although the business landscape may shift to accommodate new trends, Korzenik said he is optimistic that there won’t be a pandemic-fueled hangover that will cast a shadow over the economy as we move through the coming year.

“I think it’s critical to understand that the recession that we’ve been through [due to COVID]—and we’re probably out of it—is unlike most recessions we’ve had in our lifetimes. … Unlike in 2008-09, we’ve gone into this [recession] with no economic imbalances,” he said. “Historically, you go into recessions when there are imbalances. In the case of 2008-09, we had too much housing inventory. We had too much leverage in the financial system. It takes a long time to wring those excesses out and to repair the damage. This time around, we had a healthcare-inspired shutdown of the economy, but we didn’t have those imbalances, and that bodes well for the opportunity to rebound quickly.”

The recent upturn in COVID cases, a new presidential administration and the promise of new vaccines are just a few of the variables that will be sure to play an outsized role in determining how the waste industry fares as we trend into a new year. As we punctuate what happened in waste in 2020, the prevailing sentiment from many seems to be that the waste industry isn’t where it was, yet, but it could have been a whole lot worse.

The author is the editor of Waste Today magazine and can be reached at aredling@gie.net.

Gaeta Recycling Co. Inc. in Paterson, New Jersey, is a fifth-generation waste and recycling business whose roots date back to 1935. To serve its client base of roughly 30 municipalities and 6,000 commercial customers, the company boasts 180 employees and a fleet of 120 trucks.

The company also operates its own material recovery facility and transfer station for the municipal waste, bulky waste, dry industrial waste, vegetative waste and construction & demolition materials it processes. And while the company is licensed to process 400 tons per day out of its existing transfer station, Gaeta has been routinely handling more than 700 tons per day over the last several months thanks to COVID-related exemptions.

With the high volume of incoming material the company has to contend with, the right equipment is essential for facilitating smooth and seamless operations, which is something Gaeta Recycling President Michael Portannese learned the hard way.

A new solution

Gaeta has long relied on excavators for its material handling operations at its transfer station, but after buying a new unit three years ago only to be let down with nonstop maintenance issues, the company decided to go in another direction.

Mr. Portannese says that a friend at a nearby scrap recycling and auto wrecking company recommended Gaeta give Sennebogen material handlers a try due to their positive experiences operating them at their facility. After testing some of Sennebogen’s competitors’ equipment, Mr. Portannese says the Sennebogen machine stood out right away when they finally got a chance to operate one.

“[The other equipment] couldn’t pick up the loads that we were hoping for, the grapple size was just wrong, it wasn’t working out,” Mr. Portannese says. “I was then introduced to a salesman at Komatsu Northeast who offered to bring the Sennebogen 818 material handler for us to test out, and we loved it.”

Wanting added hydraulic power and weight, Gaeta made the decision to invest in the larger Sennebogen 821 wheeled material handler. The company also decided to upgrade to a longer boom and a three-over-two-grapple attachment as opposed to a rotating clamshell grapple.

After taking possession on Oct. 22, 2019, Mr. Portannese says the company wasted no time in putting the Sennebogen into action, deploying it to the facility’s operating floor the very next day.

New and improved

After dealing with repetitive service issues with the company’s older excavators, often stemming from software diagnostic issues, Mr. Portannese says that the scaled back design of the Sennebogen gives the company all the functionality it needs without the superfluous gadgets and technology it doesn’t.

“What really sold us on the machine is the fact that there’s only one computer that runs the injectors on the engine, besides that, the entire machine is not computerized. Sennebogen has simplified the machine and they’ve made it very, very user friendly,” Mr. Portannese says. “They’ve made it for the basic user. Our model has a Cummins engine, and [when we need to service the software], we can plug our laptop into the computer, which makes it so easy. You don’t have to worry about a tech coming out and having to work on it. We can do it all in house.”

Beyond better uptime, the switch to the wheeled Sennebogen material handler has allowed for safer, more efficient operations thanks to its design and more responsive joystick control that facilitates easier sorting and handling.

“We were used to the tracked excavators and having to drive on the piles of waste to move our incoming volumes. Now with the wheeled Sennebogen, we can simply work next to the piles because that material handler has a longer reach and it also makes it easier to pick up a bigger scoop, a heavier payload, which in return, allows us to load a trailer that much faster, a lot safer and we don’t have to get on top of a pile,” Mr. Portannese says.

Mr. Portannese also says that since the material handler isn’t built for digging like excavators are, operators don’t have to worry about trying to manage the downward force of the boom. This allows operators to quickly collect material and load it into the on-site trailers. The Sennebogen 821 also has an elevated driver’s cab, which makes it easier for drivers to see what they’re doing and cut down on the possibility of accidents. Plus, Sennebogen upfitted the unit with a reversing fan, allowing the radiator to be cleaned periodically and the machine to stay cool.

Looking to grow

Mr. Portannese says that since taking possession, his Sennebogen 821 has been in operation from 6 a.m. to 10 p.m. six days a week with little exception outside of routine maintenance to keep up with demand.

Despite this workload, Gaeta Recycling is currently looking to expand and renovate its transfer station to allow the company to process even more material. According to Mr. Portannese, the company is awaiting approval to take in an additional 500 tons per day.

With the potential for greater volumes in the near future, Mr. Portannese says that should the company need help in ramping up its material handling capacity, it knows where to turn.

“Upon our expansion, if we need another material handler, it’ll definitely be a Sennebogen,” he says.

Not only does New Way Trucks have the most robust dealer network in North America, New Way also produces the widest lineup of traditional rear-load (RL) refuse trucks in an increasingly automated solid waste industry.

Though the company also manufactures two industry-leading automated side-load, a satellite side-load, and two well-known front-end-load models, New Way’s RL lineup reigns supreme.

Additionally, the company’s RL lineup offers customers diverse options, ranging from the quick and nimble 6-yard Diamondback to the tough and rugged 32-yard King Cobra. In all, the company’s six traditional rear-load models are available in 21 body sizes.

• The King Cobra is the waste industry’s unequivocal packing leader. It features a staggering 1,100 to 1,300 lbs./cubic yard compaction rate. Built to take on a lot of work without requiring a lot of maintenance, the New Way King Cobra is available in four sizes ranging from 20 to 32 yards.
• The tried and true Cobra Magnum’s fast 21-23 second cycle time and overpowering 1,000-plus lbs./cubic yard compaction rate come together in a lighter body weight than the competition. The New Way Cobra Magnum is available in four sizes ranging from 20 to 32 yards.
• Production of the exciting new Cobra High Compaction (HC) model is now underway. The HC matches the compaction rate and speed of its larger siblings while featuring a lighter body and an overall lower profile for height-restricted routes. The New Way Cobra High Compaction comes available in 20, 25 and 27 yards models.
• The New Way Cobra is the most sought-after RL model in the industry today. The Cobra has long been the contractor’s choice by striking the perfect balance between outstanding compaction and a lightweight body. This packer comes available in 16, 18 and 20 yard body capacities.
• A lighter, faster version of the industry-leading Cobra, the Viper is more maneuverable than its larger counterparts. The ever-popular 11 yard Viper can be configured as an under-CDL model, creating opportunities for more driver candidates. The New Way Viper is a reliable favorite of fleet managers from coast to coast and is available in 9, 11 and 13 yard configurations.
• The under-CDL Diamondback is a compact, low-profile refuse truck with a low load sill threshold, but don’t let its small size fool you. Its compaction rate ranges from 800-1,000 lbs./cubic yard. The New Way Diamondback’s quality, affordability and maneuverability makes it best-suited for residential and park routes. The Diamondback is available in 6 and 8 yard body sizes with both standard and high compaction configurations.

With product offerings that fit the needs of any waste hauling operation, it is no wonder that New Way Trucks is the fastest-growing company in the $80 billion solid waste industry.

To learn more about how New Way’s product lineup can benefit your fleet, contact your local authorized New Way dealer by visiting newwaytrucks.com/dealer-locator.

What changes are happening with fleet strategies in the COVID market?

Specific to our niche, the changes, or as I see them “adaptations,” are rooted in the capital/balance sheet strategies the COVID-19 pandemic has impressed across all sectors of the economy. Haulers altogether (corporate, independent and municipalities) have experienced decreased revenues; cancelled or delayed equipment purchases; and are taking a much closer look at the costs of operating old, expensive or unpredictable assets in their fleets. We are more engaged than ever before with our client organization about enhancing rental as a part of their overall fleet and capital strategy. There is a much greater appetite now from the industry to monetarily map out with us how rental, as a strategy, allows them to preserve capital, decrease overall maintenance costs, improve asset utilization and positively impact their bottom line. In addition, some haulers are taking advantage of this economic environment to “thin the herd” and strengthen the health of their fleet.

You mentioned “thinning the herd”, what benefits can an organization expect from that?

The benefit is simply getting old, expensive, underutilized and unreliable trucks out of a fleet. That has a positive ripple effect on a fleet by lowering the overall age of the fleet, decreases the risk of unexpected major component failures, and, in turn, improves overall up-time. We see it as a way that our customers can “own to known and rent to demand.”

Are you seeing municipalities change their approach to fleet?

In the last few years, municipalities were having to manage around shrinking budgets. With COVID-19 shutdowns, these shrinking budgets have been amplified due to fewer taxable dollars being collected. We are engaged with staff and elected officials at localities who provide garbage and recycling services, and they are looking for ways to reduce capital spending without sacrificing the essential services they are providing to their residents. We have created specific municipal programs to benefit the safety and efficiency of their crews by providing an injection of capital and reduction of operating expenses.

What has changed in the rental industry?

In a general sense, the overall perception of rental has positively changed. This perception has been changing over the last several years and rapidly moving forward over the last several months as fleet, operations and corporate leaders have been challenged to seek out new strategies and ideas to navigate the waters ahead, or in some cases, stay afloat. Rental is now being embraced to manage maintenance costs, provide on-demand access to best in-class equipment, provide flexibility to scale your business with the market and minimize customer disruptions. Another change has been the use of technology. At Big Truck Rental, we are constantly seeking out opportunities to leverage and invest in technology to enhance the total customer experience. Technology gives us the ability to meet the needs of the on-demand marketplace, provide visibility into our fleet and deliver meaningful data back to our clients to fuel our partnerships.

What other industry trends do you see impacting fleets moving forward?

Strong merger and acquisition (M&A) activity and integrations will certainly have some impact on fleets moving ahead. Organizations will be rightsizing, rebranding, rerouting and putting all the pieces of the puzzle together. That will create some opportunities for independents to strategically grow in certain markets. Strategies to stretch every dollar and maximize return on invested capital (ROIC) will be scrutinized more than ever moving forward. We’ve seen this since the initial COVID-19 impact in our business. Specific to fleets, haulers are examining the value of purchasing like-new, off-rent trucks more than ever before. Our Big Truck Rental Route Ready program customer portfolio is also rapidly expanding. Clean technology and new original equipment manufacturers (OEMs) entering the marketplace will certainly add another new dynamic to things moving forward. I have absolute confidence the industry will continue to innovate to find safer, cleaner and more cost-effective ways to service our communities.