Pennon Group Plc, owner of Viridor, has blamed a £8.1m drop in profits at the waste business on a slump in global recyclate prices.
In its half-year financial report the company repeated warnings that the average half-year price per tonne had fallen by 17.6% to £103.
It added that recyclate prices were “significantly lower” by the end of the second quarter. Viridor’s recycling revenue accordingly fell by £18.8m, while landfill revenue fell £7.5m due to lower volumes.
The report said “about half” of the profit hit from low prices had been compensated for by the “terms of customer supply contracts” and cost reductions.
But the company remained upbeat about future profits and pinned its hopes on a a growing portfolio of public sector waste partnerships and energy from waste (EfW) projects. These include projects in Glasgow, London, Peterborough and Dunbar.
Viridor’s capital expenditure and investment for the half year stood at £132m.
Pennon Group chairman Ken Harvey said: “Viridor is responding to the near-term challenges and has recovered about half of the impact of the reduction in recyclate prices through the terms of customer supply contracts and cost reductions.
“We remain cautious about the future prospects for recyclate prices. We have, however, made further strong progress on our PPP and EfW pipeline this half year which will form the basis for future growth.”
Pennon Group’s other main business, South West Water, reported a 10% increase in profits.