Rising Debt Costs and Integration Risks Shadow Cleanaway’s Strong FY25 Results

Strong Financial Momentum

Cleanaway Waste Management Limited has reported a solid financial performance for FY25, with underlying EBIT rising 14.6% to $411.8 million. This marks the third consecutive year of double-digit EBIT growth, reflecting the company’s disciplined execution and operational leverage. Earnings per share increased by 15.8% to 8.8 cents, while the return on invested capital (ROIC) improved by 50 basis points to 6.0%, signaling enhanced capital efficiency.

The company sustained EBIT margin expansion to 12.5%, up 130 basis points year-on-year, driven by pricing discipline and volume growth across its diversified waste management services. Net revenue grew 3.4% to $3.3 billion, underscoring the resilience of Cleanaway’s recurring revenue base.

Strategic Acquisitions Fuel Growth

Key to Cleanaway’s growth story are the recent acquisitions of Contract Resources and Citywide Waste, completed in July 2025. Contract Resources, an industrial services provider with strong Tier 1 Oil & Gas relationships, is expected to contribute approximately $25 million EBIT in FY26 pre-synergies. Citywide Waste, acquired for $110 million, brings the strategically important Dynon Road Transfer Station near Melbourne’s CBD, unlocking network benefits and future growth opportunities.

Collectively, these acquisitions are forecasted to add around $30 million EBIT in FY26, supporting Cleanaway’s raised underlying EBIT guidance of $470 million to $500 million for the coming year. The company also anticipates realizing $12 million in cost synergies from Contract Resources by FY28, with modest benefits starting in FY26.

Operational Excellence and Sustainability

Operational initiatives remain a cornerstone of Cleanaway’s strategy. The rollout of the Branch Operating Model (BOM) and fleet transformation programs have driven labour efficiencies and cost control, particularly in the Commercial & Industrial collections segment. The company also reported significant environmental and safety improvements, including a 30% reduction in environmental notices and a 62% drop in medium-sized fires compared to the prior year.

On sustainability, Cleanaway is progressing well toward its 2030 emissions reduction targets, achieving a 4.9% net operational greenhouse gas emissions reduction in FY25 and a 13% reduction since FY22. Investments in resource recovery infrastructure, such as the Western Sydney Material Recovery Facility and the Tasmania Container Deposit Scheme, further bolster its environmental credentials.

Capital Discipline and Shareholder Returns

Capital management remains disciplined, with total capital expenditure in FY25 at $403 million, slightly below the $415 million guidance for FY26. The company is increasingly leveraging leases to optimize free cash flow, which stood at $270.2 million in FY25, down 6.2% due to catch-up tax payments but expected to improve next year.

Reflecting confidence in future cash generation, Cleanaway increased its fully franked total dividend by 20% to 6.0 cents per share, with a payout ratio rising to 68.2%. The company also introduced a 1.5% discount on its Dividend Reinvestment Plan as a proactive capital management measure following recent acquisitions.

Outlook

Looking ahead, Cleanaway is on track to deliver its mid-term ambition of more than $450 million underlying EBIT, supported by operational excellence, integration of acquisitions, and growth initiatives including new contracts with the Department of Defence and expanded resource recovery capacity. Net finance costs are expected to rise to approximately $150 million in FY26, reflecting higher debt levels from acquisitions, but the balance sheet remains strong with a leverage ratio of 1.85x at year-end.

Overall, Cleanaway’s FY25 results reinforce its position as Australia’s leading waste management company, combining defensive earnings with a clear growth trajectory and commitment to sustainability.