Waste disposal is a multi-billion dollar industry, and more in demand than ever. By JASON BAKER of IBISWorld.
By Jason Baker
The $3.6 billion waste disposal industry is looking ahead to growth as the demand for recycling services grows, but profits will come under more pressure as competition intensifies.
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As the industry continues to consolidate new sources of revenue will come from increasingly using waste to generate energy.
Recent Industry Performance
IBISWorld estimates that this industry has grown at an average annual rate of 4.4% over the five years to 2007-08.
More municipal, commercial and industrial waste is being produced and there has been growth in the treatment and processing of waste due to the diversion of waste from disposal in landfill, and growth in the range of collection services required due to increased recycling.
The economies of scale and scope available in the delivery of waste treatment and processing services have encouraged consolidation in this industry over the past five years.
In April 2007, Transpacific acquired Twigg, which includes operations that collect landfill gas to create electricity, for $155.8 million. These acquisitions follow the purchase of Baxter Group, Waste Management NZ, Australian Pollution Engineering and many smaller waste collection businesses in 2006.
In 2006-07, TPI had revenue of $1295 million, up 99% on the previous financial year. EBITDA was $302.8 million, up 183% of the previous year.
SITA Environmental Solutions sales revenue for the year ended December 2006, was $303.5 million, up 7.3% on the previous year. Over this year, the company experienced strong growth in their profit, with profit before tax up over 65% to $28 million.
The movement towards large scale material recovery facilities has also encouraged the trend over the current period for local governments to consolidate in planning and purchasing such services.
IBISWorld forecasts that this industry will grow at an average annual rate of 3.5% over the five year period to 2012-13.
Over this period, price competition will hurt revenue growth but there will continue to be an increased demand for recycling and recovery of waste, prices for recycled commodities, increasing revenue from the adoption of waste-to-electricity/gas technologies, and increasing economies of scale and scope available to the industry.
There is an increase in the capture of energy from waste treatment and processing, which is occurring in large landfill sites and at recovery and AWT plants.
Energy is currently predominately converted to electricity, but there is also scope for the production of biofuels. The capture of methane gas for conversion to energy will be further encouraged by any introduction of a carbon tax over the outlook period.
Products and service segmentation
Major market segments
Geographic spread 2007
Income by State and Territory