HARTFORD, Conn. – Waste Management Inc., the nation’s largest garbage collector, said Wednesday its first-quarter profit fell 36 percent as the recession hurt prices of recycled goods and lowered the amount of trash picked up.
The Houston-based company said in February it expected a weak first quarter. With building activity down sharply, construction companies are carting off less trash from work sites. And as people shop and eat out less, restaurants and small businesses are generating less garbage, requiring fewer trash pickups. Meanwhile, declining markets for recycled materials hit Waste Management particularly hard.
Waste Management posted net income of $155 million, or 31 cents per share, down from $241 million, or 48 cents, in the first quarter of 2008.
For the quarter ended March 31, revenue fell to $2.81 billion compared with $3.27 billion for the same period in 2008.
Excluding charges for restructuring and dropping the use of SAP software, earnings would have been 42 cents per share, edging passed analysts’ average expectations of 41 cents per share.
Shares rose 53 cents, or 1.96 percent, to $27.51 in early trading Wednesday.
Less than 5 percent of the $456 million decrease in revenue was from solid waste collection and disposal, the company said. The rest was due to the recycling business, fuel and energy and non-operational items including foreign currency translation and one fewer work day during the first quarter.
Waste Management CEO David P. Steiner said deterioration in the market for recycled paper, newsprint, metals and other materials lowered Waste Management’s profit by 9 cents per share in the quarter.
The company expects a negative year-over-year impact from recycling operations of 15 cents to 20 cents per share for 2009, most of which is expected to be in the first half, Steiner said.
The price of recycled materials began falling last year after reaching record highs along with the strong economy. But the market tanked almost in lockstep with the recession as consumer demand for autos, appliances and new homes dropped, pushing down demand among steel and pulp mills’ for scrap, paper and other recyclables.
Volumes are still down from last year, but domestic markets are growing slowly and export demand has started to return, a spokeswoman for Waste Management said. Fiber — everything from fine office paper to newsprint to cardboard — and plastics are gradually rising in price and volume.
Aluminum and steel prices remain low, she said.
WM Recycle America, a subsidiary of Waste Management, handles more than 5.5 million tons of recyclables each year in its 109 plants, the company says.
In addition, Waste Management reported that a key measure of its business — revenue from trash volumes — fell 8.1 percent in the quarter. However, adjusting for the effect of one less work day, the decline was 7.4 percent, steeper than the 5.9 percent drop in the fourth quarter of 2008.