The Cleanaway (ASX: CWY) share price has fallen 20% in early trading after providing some guidance at its annual general meeting (AGM).
Cleanaway is Australia’s largest waste management business that deals with many types of waste including general waste, recycling, industrial services, construction & demolition waste and medical waste. Cleanaway has been operating for more than 50 years.
Cleanaway’s AGM
Cleanaway is currently holding its AGM. As part of the day’s events the management reminded shareholders how good FY19 was with net profit up 18.9% to $123.1 million and a 42% increase to the dividend.
The company also referred to its ‘Energy-from-Waste’ centre that is proposed for Western Sydney. It’s important for a safe, sustainable option for general waste. Recovering residual waste to generate energy means increased landfill diversion and more cost-effective, sustainable options for customers.
The new plant can accept up to 500,000 tonnes of residual waste from Western Sydney per year, to generate safe green energy for approximately 65,000 homes. It is still awaiting approval.
Cleanaway management spoke of the change of China no longer accepting contaminated waste from western societies, increasing the importance of recycling in Australia. Earlier this month Cleanaway announced the acquisition of SKM, the largest Victorian processor of recyclable household material.
Cleanaway Trading Update
Management said it remains confident that all three of its operating segments (Solid Waste Services, Industrial Waste Services and Liquid Waste & Health Services) will report higher profit in FY20 than FY19.
However, a combination of lower economic activity, softness in commodity prices compared to the first half of FY19 and a reduction in Queensland volumes because of a landfill levy means that earnings for the first half of FY20 are likely to be in line with the first half of FY19.
However, the company does think that pricing initiatives and cost reductions will lead to a stronger performance in the second half of FY20 which will be better than the first half of FY20 and better than the second half of FY19.
Is The Cleanaway Share Price A Buy?
On the one hand Cleanaway is a business that has good prospective long term returns with more recycling being done and Australia’s population continuing to grow.
But sometimes when a company downgrades its profit expectations there can be additional ones in the coming months when profit hopes don’t eventuate.
Brave investors may like to jump in today, but I’d personally rather wait to see what happens over the next four or so months at least.
Until then, I would rather buy the reliable shares in the free report below which could produce consistent results.
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