Cleanaway Faces Fire Damage and Legal Risks Amid Earnings Plateau

Financial Performance Overview

Cleanaway Waste Management Limited has released its half-year results for the period ending 31 December 2024, reporting a 3.7% increase in revenue to $1.94 billion compared to the prior corresponding period. Despite this top-line growth, statutory profit after income tax remained essentially flat at $74.2 million, a marginal 0.1% decrease from $74.3 million in the prior year.

Underlying profit after tax, which excludes certain one-off adjustments, showed a more robust 14.1% increase to $93.1 million, reflecting the company’s ongoing operational improvements and strategic initiatives.

Segment Performance and Operational Highlights

The Solid Waste Services segment delivered solid growth with net revenue rising 7.0% and underlying EBIT increasing 11.4%, supported by volume growth, pricing discipline, and the full six-month contribution from the Container Deposit Scheme operations in Victoria. Operational Excellence initiatives helped expand the EBIT margin by 60 basis points to 15.2%.

Liquid Waste & Health Services also posted gains, with revenue up 3.5% and underlying EBIT margin improving by 310 basis points to 11.4%, driven by strong demand for technical services and a successful business transformation in Health Services.

Conversely, Industrial & Waste Services faced challenging market conditions, with revenue down 7.6% and EBIT declining 30.1%, reflecting cost-cutting measures by key customers and softer project activity. However, a recent restructure has delivered $10 million in annualised cost savings, positioning the segment for a recovery in the second half of the financial year.

Capital Management and Dividend

Cleanaway declared an interim fully franked dividend of 2.80 cents per share, up from 2.45 cents in the prior corresponding period, signaling confidence in its cash flow generation despite operational headwinds. The Dividend Reinvestment Plan remains in operation without a discount.

The Group’s net assets increased slightly to $3.02 billion, while gearing edged up to 36.3%. Operating cash flows decreased by 28.4% to $164.5 million, primarily due to the recommencement of tax payments following the expiry of the government’s Instant Asset Write-Off Scheme.

Impact of St Marys Facility Fire

A significant fire at Cleanaway’s liquid waste processing facility in St Marys, New South Wales, on 4 February 2025 has resulted in the temporary closure of the site. The extent of damage and financial impact remain uncertain, with asset write-offs and clean-up costs expected to be recognised in the current financial year. The company anticipates insurance recoveries to mitigate losses, though these will only be recognised when virtually certain.

Regulatory and Legal Matters

Cleanaway disclosed a $288,000 fine and associated costs related to environmental breaches at its New Chum landfill following the 2022 Queensland floods. The company continues to face ongoing legal proceedings and regulatory reviews, including disputes over landfill levies and employee entitlements, but does not expect material impacts from these matters at this stage.

Looking ahead, Cleanaway has secured an increase of $100 million to its Facility E syndicated debt commitments, enhancing liquidity as it navigates operational challenges and pursues growth opportunities.