Money

Post Market Wrap | Cleanaway profits impacted by input cost inflation pushing shares lower

Published

4 years ago

May 3, 2022

Michael Kodari - KOSEC Author

This Post Market Wrap is presented by KOSEC – Kodari Securities

• Rising fuel cost impact estimated at $10m

• Flood related equipment and landfill disruption cost estimated at $10 – $14m

• Labour shortages resulting in operational inefficiencies

• Rise and fall clauses will see cost recoveries, with six-month lag effect

• Cleanaway well-positioned for a low carbon future and high circularity environment

• Operational scale, geographical coverage, and proximity to waste infrastructure support earnings growth in a decarbonised world.

Cleanaway Waste Management Limited (‘Cleanaway’ or the ‘Company’) is Australia’s largest waste management business. It owns and operates a network of 125 infrastructure assets that manage post-collection waste and operates a waste collection fleet of 5300 vehicles.

The business comprises three operating segments:

• Solid Waste Services – the largest solid waste and recycling services fleet in Australia, supported by the most extensive resource recovery and post collection facilities network across the country.

• Liquids and Health Services – the largest hydrocarbons recycling business in Australia and a major player in the liquids market, collecting and processing mineral oil, hazardous liquids and healthcare generated waste streams.

• Industrial and Waste Services – a wide range of plant and asset management services that provide solutions to reduce production down time, the risk of unscheduled plant stoppages and the reliance on labour.

Higher fuel costs and labour constraints to reduce FY22 second half result

Cleanaway estimates that second half EBITDA will be $15-$20 million lower than original forecasts, because of rising fuel costs and labour availability constraints. These challenges are compounded by one-off operational disruptions caused by the recent East Coast floods, resulting in property damage and the loss of vehicles and equipment.

The impact of higher fuel costs is estimated at $10 million for the second half year while labour shortages related to the pandemic are negatively impacting Cleanaway’s ability to operate efficiently.Flood damage to the New Chum landfill site has resulted in its temporary closure, leading to an estimated $5-$7 million EBITDA impact in the second half year. Damage to post-collections equipment in Cleanaway’s Health Services business is likely to add temporary costs of $5-$7 million in the second half due to operational inefficiencies.

On a positive note, Cleanaway has specific rise and fall clauses in its contracts that reference fuel, labour and CPI indices. However, it is the lag affect of these cost recoveries that has impacted the second half year performance. Input prices are adjusted at least annually, resulting in the lag on cost recovery. Insurance recoveries will indemnify Cleanaway for the loss of vehicles and equipment relating to recent flooding.

The Future

Cleanaway’s earnings are diversified across 250 sites Australia-wide, and the Company delivers essential services to 130 Municipal Councils and 150,000 business customers, from more than 125 prized infrastructure assets. Its vertical integration through the waste value chain comprising collection, recovery, treatment, and disposal, provides a resilient and defensive earnings stream and recurrent cashflows from a strong credit-quality client base.

Importantly, Cleanaway has embraced a low carbon future and has invested strategically in infrastructure assets and services platforms that transition the economy to a low carbon and high circularity environment. This irreversible trend is creating increasing demand for recycled content,improved land fill diversion and new waste streams. Cleanaway has the operational scale, geographical coverage, and proximity to key infrastructure to play a commanding role in a decarbonised world.

This unique market position is likely to underpin consistent earnings growth post FY22 as Cleanaway works through the one-off and short-term challenges currently facing the business.

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.

Money

Global stocks rise to record highs in 2025

Global stocks surge to record highs at 2025 year-end, driven by Fed rate cuts and AI optimism across markets

Published

4 days ago

December 30, 2025

Harvey Vargas

Global stocks surge to record highs at the 2025 year-end, driven by Fed rate cuts and AI optimism across markets

In Short:
– World equities are expected to reach record highs in 2025, driven by anticipated Federal Reserve rate cuts and AI gains.
– The MSCI index gained nearly 21% in 2025, while the S&P 500 achieved its 39th record close this year.

Global equity markets ended 2025 on a historic high, capping off a year of extraordinary gains. The MSCI world equity gauge recorded an almost 21% year-to-date increase, while the S&P 500 closed at 6,932.05 on Christmas Eve—its 39th record close of the year. European shares also touched intraday records, as investors bet on continued Federal Reserve interest rate cuts and strong AI-driven growth.

Asian markets led the year-end surge, with Taiwan’s benchmark index hitting a record high of 28,832.55, fueled by gains from Taiwan Semiconductor Manufacturing. South Korea’s Kospi rose 2.2%, marking its best year since 1999. Across the region, investors placed big bets on artificial intelligence, overshadowing concerns about trade tariffs and economic uncertainty.

The U.S. Federal Reserve’s rate cuts provided further optimism for global markets. After lowering its main funds rate to 3.5%-3.75% in December, money markets are anticipating additional cuts in 2026. While gold dipped slightly, it still recorded its largest annual gain since 1979, and copper hit a new record high. Investors are balancing bullish AI exposure with safe-haven hedges, signaling cautious confidence as 2025 draws to a close.

Money

New Zealand experiences unexpected economic growth surge

New Zealand economy sees 1.1% growth in third quarter, surpassing forecasts and signalling broad recovery after earlier contraction

Published

1 week ago

December 24, 2025

Harvey Vargas

New Zealand economy sees 1.1% growth in third quarter, surpassing forecasts and signalling broad recovery after earlier contraction

In Short:
– New Zealand’s economy grew by 1.1% in Q3, exceeding expectations after a mid-year contraction.
– Fourteen industries reported gains, with business services and manufacturing leading the growth at 2.2%.

New Zealand’s economy bounced back in the third quarter, growing by 1.1% and exceeding forecasts of 0.9%. This follows a revised 1.0% contraction in Q2, signaling a clear turnaround. According to Statistics New Zealand, 14 out of 16 industries reported growth, with business services and manufacturing leading the charge. Construction also picked up, rising by 1.7%, while exports were boosted by strong dairy and meat sales.

Retail spending showed robust gains, especially in categories sensitive to interest rates, including a 9.8% increase in electrical goods and a 7.2% jump in motor vehicle parts. Despite the positive quarter-on-quarter growth, the economy was still 0.5% lower than the same period last year, with telecommunications and education the only sectors experiencing declines.

Cautiously optimistic, Reserve Bank Governor Anna Breman noted that monetary policy will continue to depend on incoming data, as financial conditions have tightened beyond earlier projections. While positive GDP numbers support current low rates, the services sector—comprising two-thirds of GDP—has contracted for 21 consecutive months, suggesting the recovery may remain uneven.

Money

US economy grows 4.3% in Q3, exceeding forecasts

US economy grows 4.3% in Q3 2025, surpassing forecasts despite inflation and shutdown challenges

Published

1 week ago

December 24, 2025

Harvey Vargas

US economy grows 4.3% in Q3 2025, surpassing forecasts despite inflation and shutdown challenges

In Short:
– The US economy grew by 4.3 percent in Q3 2025, exceeding forecasts and showing consumer resilience.
– Consumer spending rose by 3.5 percent, with increases in healthcare and recreational goods driving growth.

The US economy grew at a robust annual rate of 4.3% in Q3 2025, exceeding forecasts and marking its strongest quarterly expansion in two years. This growth comes despite lingering inflation concerns and political instability, showing that American consumers are continuing to spend and drive economic momentum.

Consumer spending, which accounts for roughly 70% of the economy, jumped 3.5% in the quarter, up from 2.5% previously. Much of this increase was fueled by healthcare expenditures, including hospital and outpatient services, along with purchases of recreational goods and vehicles. Exports surged 8.8%, while imports fell 4.7%, giving net economic activity a boost, and government spending bounced back 2.2% after a slight decline in Q2.

Remains optimistic

Despite the strong growth, inflation remains in focus. The personal consumption expenditures (PCE) price index rose 2.8%, up from 2.1%, with core PCE also climbing. Economists are closely watching the job market and tariff-related pressures. Meanwhile, the recent federal “Schumer shutdown” is expected to slow Q4 growth, potentially trimming GDP by 1 to 2 percentage points. Treasury Secretary Scott Bessent, however, remains optimistic that 2025 will still reach a 3% growth rate.

The Q3 numbers are also influencing expectations for the Federal Reserve. Analysts now see an 85% probability that interest rates will remain stable at the January 2026 meeting. Steady rates could provide a measure of certainty for investors, businesses, and consumers alike as they make decisions heading into 2026. Overall, the data paints a picture of a resilient US economy navigating both challenges and opportunities.