St Marys Fire Casts Shadow as Cleanaway Confidently Pursues FY26 Ambitions

Strong Financial Momentum

Cleanaway Waste Management Limited (ASX: CWY) has delivered a solid set of half-year results for the six months ending December 31, 2024, underscoring its position as Australia's leading waste management and environmental services provider. The company reported underlying EBIT growth of 12.2% to $195.2 million, supported by a 3.7% increase in gross revenue to $1.94 billion. This performance reflects disciplined pricing, volume growth, and operational efficiencies across its business segments.

Underlying EBIT margin expanded by 80 basis points to 11.8%, a testament to Cleanaway's ongoing focus on operational excellence and branch-level performance improvements. Net profit after tax on an underlying basis rose 13.7% to $94 million, with earnings per share increasing 13.5% to 4.2 cents.

Segment Highlights and Strategic Initiatives

The Solid Waste Services segment led growth with a 7% revenue increase and an 11.4% rise in EBIT, driven by strong contributions from container deposit schemes (CDS), commodities, and municipal operations. The commissioning of the Western Sydney Material Recovery Facility and the transition to Food Organics and Garden Organics (FOGO) processing at Eastern Creek are expected to bolster future earnings.

Liquid Waste and Health Services posted a remarkable 42.6% EBIT increase, largely due to the successful transformation of Health Services, which is on track to deliver over $15 million EBIT in FY25. Meanwhile, Industrial & Waste Services faced headwinds with a 7.6% revenue decline and a 30.1% EBIT drop, attributed to lower industry activity and site closures. However, a completed restructure is positioning this segment for a return to prior earnings levels by Q4 FY25.

Operational Excellence and Growth Outlook

Cleanaway's CEO and Managing Director, Mark Schubert, highlighted the company's disciplined execution of its Blueprint 2030 strategy, emphasizing branch optimisation, data analytics, and fleet transformation as key drivers of sustained margin expansion. The rollout of the Branch-led Operating Model and targeted SWOT programs have already delivered significant EBIT improvements at underperforming branches.

Looking ahead, Cleanaway is tracking towards the midpoint of its FY25 underlying EBIT guidance range of $395 million to $425 million. The second half is expected to see a step-up in earnings, supported by operational excellence benefits, growth in solids volumes, earnings from a new joint venture in landfill gas monetisation, and the return of Industrial & Waste Services to its earnings run rate.

Challenges and Risk Factors

A notable challenge during the period was the fire at Cleanaway's Liquids and Technical Services site in St Marys, NSW, in February 2025. While no injuries were reported, the incident is estimated to result in net costs between $20 million and $40 million after insurance recoveries. The timing and final quantum of these costs remain uncertain and will be treated as an underlying adjustment.

Despite this setback, Cleanaway remains confident in achieving its FY26 mid-term ambition of underlying EBIT exceeding $450 million, driven by continued operational improvements and strategic infrastructure investments.

Capital Discipline and Shareholder Returns

Capital expenditure guidance for FY25 remains steady at approximately $400 million, reflecting a nearly $50 million reduction from FY24 as part of management's commitment to disciplined investment. The company declared a fully franked interim dividend of 2.8 cents per share, up 14.3%, representing a payout ratio of 67.1% of underlying NPAT, signaling strong cash flow generation and shareholder confidence.