Waste Management reducing overtime hours, limiting hiring in Q2 due to COVID-19

The company is also eliminating non-essential expenses and reducing incentive compensation accruals as WM expects to end the year down 4 to 5 percent compared with 2019.

Subscribe

Waste Management Inc., Houston, has announced financial results for the second quarter of 2020. Revenues were $3.56 billion compared with $3.95 billion for the same period in 2019.

“I am proud of how our employees have continued to provide dependable, essential services to our customers and communities during the pandemic,” WM President and CEO Jim Fish says. “While keeping health and safety as the top priority, the team adapted through difficult circumstances, finding ways to improve efficiency across the collection and disposal business and reduce discretionary spending."

WM and Advanced Disposal also recently revised acquisition terms along with an agreement to sell substantially all anticipated regulatory divestures to GFL Environmental. Both transactions are expected to close by the end of the Q3.

Additionally, WM has recently entered into a supplemental $3 billion revolving credit facility maturing July 27, 2021, to be used for general corporate purposes, including funding a portion of the Advanced Disposal acquisition and refinancing.

“With all the additional work we've done since the deal was announced in April 2019, we're confident in our projection to achieve more than $100 million in synergies even though divestitures are greater than we originally expected,” Fish says. “We are looking forward to completing this transaction, integrating the ADS team and operations and creating long-term value for our shareholders as we add 3 million additional customers to our platform and service capabilities."

Highlights for Q2:

  • Revenue declined $331 million in collection and disposal.
  • Core price for Q2 was 1.3 percent compared with 4.2 percent in Q2 of 2019.
  • Q2 pricing results were muted relative to historical results and the initial full-year expectations because of proactive customer-centric steps to temporarily suspend price increases and certain fees for customers impacted by the COVID-19 pandemic.
  • Total company volumes declined 10.3 percent in Q2.
  • Volumes declined almost 11 percent in the commercial line of business, 16 percent in industrial and 18 percent in landfill, primarily related to the COVID-19 pandemic.
  • Interruptions related to the COVID-19 pandemic had a negative revenue impact of approximately $400 million.

“We saw robust improvements in volumes and earnings each month as we progressed through the quarter, with June standing out as the strongest month. This early stage of economic recovery combined with our successful cost flexing in the second quarter provide greater clarity for our 2020 financial results under current economic conditions,” Fish says.

Continued response to COVID-19

“On our first-quarter call, we discussed the actions we took to protect our employees’ health, safety and financial well-being. We also took steps to support our customers—particularly the small and medium-sized businesses that have been impacted most adversely during the COVID-19 pandemic,” Fish says. “We helped our customers right-size their service levels, temporarily paused price increases, extended payment terms and gave a free month of service to qualifying open market small and medium-business customers."

Fish adds that customer service digitalization, starting at customer contact through the point of service confirmation, is the best approach for protecting workers and customers since the fully digital end-to-end online model will work post-COVID-19 also.

Updated 2020 outlook:

  • Total revenue for 2020 is expected to decline between 4 percent and 5 percent compared with 2019.
  • WM expects adjusted operating earnings before interest, taxes, depreciation and amortization (EBITDA) margin to be in the range of 28 percent to 28.5 percent.
  • Capital expenditures are projected to be between $1.55 and $1.65 billion.
  • WM expects to generate free cash flow approaching $2 billion, exclusive of transaction and advisory costs incurred for the acquisition of Advanced Disposal.