Currency movement since the UK referendum on membership of the EU has hit profits from the export of refuse-derived fuel (RDF), according to Shanks.
In the company’s latest trading update, which coincides with a progress report on its proposed merger with Van Gansewinkel, Shanks says its municipal division is continuing to experience “market and operational challenges in the UK, with a resultant impact on profitability”.
Overall, though, Shanks says the group is trading in line with expectations.
The update says: “The ongoing reductions in the available UK solid recovered fuel (SRF) market and increasing costs, including due to currency, in the export of RDF have further impacted margins.”
The group also says that profitability of the facilities at the Barnsley, Doncaster and Rotherham (BDR) and Wakefield facilities is lower than expected. The reason for the latter is largely down to the insolvency of contractor Royal Imtech in August 2015.
Another insolvency could mean a six-month delay in commissioning the Derby project, where a mechanical biological treatment and an on-site gasification facility which Shanks will operate is being built alongside existing waste management facilities.
“While Shanks is largely protected from the impact of this insolvency, because it is not involved in the construction of the project, there will be a financial impact in the second half of lost commissioning profits along with an expected £1.7m of liquidated damages,” it says.
During August, Shanks completed the sale of 50% of its stake in the Wakefield PFI project, announced in February, receiving £4.2m. Later this month it expects to complete the sale of a closed hazardous waste facility.
The commercial division is reported to have performed in line with expectations, with strengthened SRF demand and export shipments up “significantly” on 2015. The hazardous division has delivered growth ahead of expectations.