Covanta reports first quarter results

Covanta Holding Corp., Morristown, New Jersey, a sustainable waste and energy solutions company, has reported financial results for the three months ended March 31, 2017.

For the three months ended March 31, 2017, total revenue increased by $1 million to $404 million from $403 million in Q1 2016. Higher waste and service, metals and construction revenue were largely offset by lower energy revenue.

"We continued making meaningful progress across our strategic initiatives in the first quarter, nearing completion of construction of the Dublin (Ireland) facility, driving growth in our Environmental Solutions business, and beginning to process metals at our centralized non-ferrous processing facility," says Stephen J. Jones, Covanta's President and CEO. "The fire and resulting downtime at the Fairfax facility impacted results in the first quarter, but recovery is well underway, with credit to our outstanding team on the ground.”

Jones adds, “We expect to recoup much of the financial impact later in the year as we receive insurance payments. We also took the opportunity to accelerate scheduled outages at a few facilities into the first quarter while these facilities were down for other reasons, which contributed to our completing about 35 percdnt of our annual planned maintenance expense in Q1. We are very well positioned to post improved year-over-year performance for the balance of the year, and remain squarely on track with our full year outlook."

Organic growth contributed an overall revenue increase of $14 million as follows:

    Waste and service revenue grew by $8 million, which primarily consisted of:

• EfW waste processing of $4 million (1.7%), driven by improved pricing and growth in profiled waste, partially offset by lower volume due to plant downtime; and
• environmental services revenue of $6 million;
• energy revenue decreased by $3 million due to lower production volume related to plant downtime.
• recycled metals revenue increased by $3 million driven by improved ferrous market prices and better price realization after metals processing, partially offset by lower volume due to the timing of shipments; and
• other revenue increased by $6 million due to construction activity.
  

Contract transitions reduced revenue by $4 million, as the expiration of certain long-term energy contracts offset an increased share of energy revenue following service fee to tip fee contract transitions.

Transactions, most notably the exit from our China operations, resulted in a net decrease of $8 million in revenue year-over-year.

Excluding impairment charges, operating expense increased by $26 million to $427 million. The year-over-year net increase included a $33 million increase in same store costs, driven primarily by a $9 million increase in plant maintenance, largely due to the timing and scope of outage activities, and an $18 million increase in other plant operating expenses, including additional costs related to plant downtime, organic growth in the Environmental Solutions business, and normal wage and benefit escalation. Transactions overall reduced operating expense by $7 million.

Adjusted EBITDA declined by $25 million on a year-over-year basis to $51 million, as improved waste and metals pricing were more than offset by facility downtime, impacting both revenue and plant operating expenses, increased scheduled maintenance activity, and the impact of contract transitions and the China asset sale last year.

Free Cash Flow decreased by $16 million to $(17) million, primarily as a result of the factors that drove Adjusted EBITDA as noted above, partially offset by lower maintenance capital expenditures.

Adjusted EPS decreased by $0.18 to $(0.37). The decrease was driven primarily by lower operating income as previously discussed.

The full release is available here.