MORRISTOWN, N.J. – Covanta Holding Corporation (NYSE: CVA) (“Covanta” or the “Company”), a world leader in sustainable waste and energy solutions, reported financial results today for the three and six months ended June 30, 2021.
Key Highlights
- Adjusted EBITDA up $14 million (15%) year-over-year
- 8.0% year-over-year waste-to-energy tip fee price growth
- Metals markets remain strong and energy markets improving
- UK construction and commissioning activities on track
“We are seeing broad-based momentum in the business, as waste markets have recovered strongly and commodity prices continue to firm,” said Michael Ranger, President and CEO. “Operationally, we are executing on plan, with the fleet running at high levels of availability and production following a successful spring outage season. With the announced transaction with EQT, we remain focused on our mission to provide sustainable waste and energy solutions for our customers and communities, and are excited about the opportunities for growth in the company’s next chapter.”
Fiscal Year 2021 Guidance and Upcoming Investor Communication
In light of the announcement of a definitive agreement with EQT to purchase Covanta at $20.25 per share, the Company will no longer update forward looking guidance and will discontinue quarterly earnings conference calls. The transaction is expected to close during the fourth quarter of 2021, subject to customary closing conditions including approval by the majority of the holders of Covanta’s outstanding common shares.
Discussion of Second Quarter 2021 Results
Total revenue for the three months ended June 30, 2021 was $506 million, up $52 million as compared to the prior year period, driven by the following:
- Waste revenue improved by $27 million, with growth in nearly all areas, including:
- Tip fees up $11 million (7%) on higher prices;
- Service fees up $8 million (7%) primarily due to higher plant throughput; and
- Material processing and recycling revenue up $8 million with the strong recovery in demand in our environmental services business;
- Energy revenue increased by $8 million due to higher market prices, increased electricity sales volumes and increased revenue from renewable energy credits; and
- Materials sales increased by $18 million, with a $13 million increase in ferrous revenue on higher market prices and a $6 million increase in non-ferrous revenue due to both market prices and higher sales volume.
Total operating expenses were $481 million in the quarter, up $45 million over the prior year period, driven by the following:
- Wages and benefits rose by $17 million, with normalized compensation costs compared to
COVID-related cost mitigation actions taken in the second quarter of 2020 and higher accruals for incentive compensation based on financial performance; - Maintenance expense increased by $8 million due to the timing of planned outage activity;
- Other operating costs increased by $14 million primarily related to higher waste volumes in the quarter, including higher costs for hauling, disposal, chemicals and reagents; and
- General and administrative expense rose by $6 million, with the cost mitigation actions taken in the prior year period impacting the comparison.
Adjusted EBITDA increased by $14 million to $110 million, driven primarily by higher waste and commodity prices, partially offset by higher costs compared to the prior year cost mitigation program and heavier planned maintenance expense.
Free Cash Flow was $62 million in the quarter, effectively unchanged compared to the prior year, as higher Adjusted EBITDA was offset primarily by higher planned maintenance capital expenditures.
The Company ended the quarter with $2.5 billion of net debt outstanding and a leverage ratio of 5.8x.
