Higher Prices and Diversification Compensate for Volume Declines in the Hazardous Waste Industry

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Higher Prices and Diversification Compensate for Volume Declines in the Hazardous Waste Industry

2009 Report Released by Farkas Berkowitz & Company

WASHINGTON, DISTRICT OF COLUMBIA, Aug. 27 -/E-Wire/-- Firms participating in the hazardous waste industry generated approximately $5 billion in revenue in 2008, half from collection and disposal services and half from adjacent and related services, according to a survey conducted by Farkas Berkowitz & Company. The twenty-six firms that responded to the survey operate 167 permitted hazardous waste facilities and received around 84 percent of the approximately 11 million tons of hazardous waste shipped to commercial facilities. Revenues for firms that participated in the survey ranged from less than $5 million to greater than $1 billion in 2008. Operating margins were in the range of 10 â 25 percent for 64 percent of respondents. Looking forward, 81 percent of survey participants expect revenues to decrease in 2009, but 67 percent anticipate that they will be able to maintain profit margins. The full report complete with charts and graphs can be downloaded for free from the Firm's website at www.farkasberkowitz.com/marketresearch.htm.

For the hazardous waste industry, 2008 was a great year; 2009 will be a lot more challenging. Growth slowed from 12 percent in 2007 to 8 percent in 2008, but operating margins increased for 77 percent of survey participants and were unchanged for 19 percent. The recession threatens future revenues. The economic downturn means less waste will be generated. Manufacturing capability in the U.S. is declining, the automobile industry being just one example. Customers are cutting costs. Economists predict a shallow trough and a very slow recovery.

In terms of traditional hazardous waste services, price increases generally exceeded volume increases in 2008, although there were exceptions. For landfills, volumes increased for 50 percent of respondents and decreased for 42 percent, but 67 percent raised prices. For incineration, volume increased for 40 percent of respondents and decreased for 40 percent, but 100 percent of survey respondents increased prices. For cement kilns, volumes also increased for 40 percent of respondents and decreased for 40 percent, but none of the cement kiln respondents increased prices.

Fuels blenders were less aggressive in raising prices in 2008 than some of the other segments. Only 40 percent of fuels blending survey respondents increased prices and 20 percent decreased prices. At the same time, volumes received increased for 30 percent of respondents and decreased for 40 percent. Most solvent recovery firms also provide fuels blending services, although not vice versa. Volumes of wastes received in 2008 increased for half of fuels blending respondents, but only 43 percent of respondents increased prices.

Volumes of waste received for aqueous treatment increased for 63 percent of survey respondents. Fifty-seven percent of survey respondents increased prices and none decreased prices. The U.S. has only three commercial hazardous waste deepwells, two on the Gulf Coast and one in Vickery, Ohio. Volume of waste received decreased for 75 percent of survey respondents and increased for only 25 percent. At the same time, 75 percent of respondents increased prices and 25 percent held prices constant.

The traditional hazardous waste industry as a whole has little growth potential and many firms have elected to diversify into adjacent and related markets. The surveyed firms as a group derived 28 percent of revenue from what we call non-traditional services, including lab packs, industrial cleaning and maintenance, remediation, and emergency response. Individual firms derived from 5 â 80 percent of total revenue from non-traditional services. For 65 percent of respondents, one of their three greatest challenges is growing the current business. For 42 percent of respondents, the challenge is diversifying into new lines of business. For 31 percent of respondents the challenge is differentiating their services from competitors.

Publicly-traded hazardous waste companies demonstrated remarkable resiliency in 2008, despite the overall economy's entering a recession. Historically, the industry has lagged general economic cycles by six to nine months, and public companies in the space experienced a significant softening in the first half of 2009.

Merger and acquisition activity has played a significant role in the hazardous waste industry. Historically, industry M&A; activity has been focused on consolidation, with larger companies offsetting the low-growth nature of the industry by acquiring smaller competitors to bolster sales growth and market share. However, as the traditional hazardous waste industry has become largely consolidated, most traditional hazardous waste companies have expanded into adjacent markets, with many participants entering these new markets through strategic acquisitions.

Farkas Berkowitz & Company is a management consulting firm serving companies that provide design, construction, and operational services for government and industry. Established in 1983, the firm assists clients with strategy, mergers and acquisitions, and organizational development. Inquires should be addressed to Joan Berkowitz at [REDACTED-PHONE] or [REDACTED-EMAIL] or visit their website: www.farkasberkowitz.com. The full report can be downloaded for free from the Firm's website.

Farkas Berkowitz & Company

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