Release Date: February 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Secure Waste Infrastructure Corp (SECYF, Financial) executed a strategic transaction generating $1.15 billion in cash, strengthening its balance sheet and funding a substantial share buyback program.
- The company repurchased 57.3 million common shares, reducing total shares outstanding by 19%, which improved per share performance and enhanced long-term shareholder value.
- Adjusted EBITDA reached $490 million, at the top end of guidance, demonstrating strong demand and solid execution despite divesting 27% of the business.
- Invested $100 million in growth initiatives, enhancing network capacity and ensuring long-term cash flows backed by commercial agreements.
- The acquisition of an Edmonton-based metal recycling business expands scale and processing capabilities, creating significant synergies with existing operations.
Negative Points
- Net revenue for Q4 was down 26% year-over-year, primarily due to divestitures.
- Adjusted EBITDA declined 28% due to asset sales, although on a per share basis, it was down just 11%.
- Funds flow from operations decreased 17% compared to the fourth quarter of 2023 due to lower adjusted EBITDA.
- Discretionary free cash flow decreased 17% from the prior year, although it was up 3% on a per share basis.
- The anticipated closing of a second acquisition has been delayed, with an update expected in the first quarter results.
Q & A Highlights
Q: Can you explain the integration process and expected synergies from the recent Edmonton metal recycling acquisition?
A: Allen Gransch, President and CEO, explained that the Edmonton acquisition is key to their strategy, serving as a central hub with a mega shredder to increase volume and throughput. The integration of 10 other metal recycling locations will enhance efficiency and create synergies. The process is expected to take over 12 months, with benefits factored into 2025 guidance and further gains anticipated in 2026.
Q: How does the company manage commodity price risk in the metal recycling business?
A: Allen Gransch stated that the company aims to avoid commodity risk by turning inventory at least 12 times a year, selling within a month of purchase. They hedge foreign currency exposure to protect against FX fluctuations, focusing on efficient processing and quick inventory turnover.
Q: Are there more M&A opportunities in the metal recycling sector or other waste segments?
A: Allen Gransch mentioned ongoing evaluations of additional metal recycling opportunities and other waste segments. The company is open to acquisitions that meet economic thresholds and align with core competencies, focusing on tuck-ins that offer good value.
Q: What is the impact of tariffs on the metals recycling business, and can the company pivot sales if needed?
A: Allen Gransch noted that a significant portion of scrap is sold in Canada, with options to sell internationally if needed. The US demand for scrap remains strong, and the exemption of scrap metal from tariffs supports their business. They have levers to adjust sales as necessary.
Q: What are the expected contributions from growth capital investments in 2025?
A: Allen Gransch indicated that most growth capital investments will contribute to 2026 earnings, with some projects like the Clearwater expansion contributing from April 2025. The timing of earnings contributions is factored into their guidance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
