Shanks’ end-of-year results show a 15% fall in trading profit in its municipal division in the face of falling recyclate prices in the UK and abroad - although overall the group delivered revenue and profit growth.
The company’s annual trading report says commodity prices appeared to be towards the bottom of their normal cycles, but adds that “our growth plans are based on current levels with no expectation of material recovery in the short term”.
The report says its municipal division had a challenging year, although revenue grew by 21% as a result of projects in Surrey, Canada.
“Trading profit fell by 15% at constant currency to £9.6m as a result of off-take, recyclate and energy price pressures, as well as higher insurance costs.”
The company says the global fall in commodity prices also had a direct impact on recyclate prices, particularly metal and plastics.
“This affected the municipal and commercial divisions by around £3m in the second half. The ferrous metal price fell by 40% in the third quarter of our financial year before stabilising in the fourth quarter,” the report says.
Overall we remain well positioned to make progress and meet our expectations for 2016-17
In April, the company disclosed that changes in market conditions on its Cumbria PFI contract had resulted in a £5m write-off on its contract with Cumbria County Council.
But the year also marked the commissioning of the Barnsley Doncaster and Rotherham (BDR) and Wakefield facilities.
“The £100m Wakefield site provides a range of technology solutions to meet the diversion requirements of Wakefield’s residents. The insolvency late in construction of a major supplier led to a four-month delay in full service commencement, but the site entered full service on our revised target date in December and is performing as expected.”
Peter Dilnot, Shanks chief executive
Commenting on the group’s overall group performance, chief executive Peter Dilnot said: “We have delivered revenue and profit growth in 2015-16 despite tough macro markets. Our commercial waste division returned to strong profit growth, our hazardous waste division delivered a robust performance and our municipal division experienced market headwinds but commissioned two flagship assets.
“Overall we remain well positioned to make progress and meet our expectations for 2016-17.”