Solid Waste & Recycling

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WASTE STOCK WATCH (February 01, 2000)

The holiday period proved to be very mixed for stock markets. The Dow generally firmed through December and rallied in early January, following a familiar seasonal pattern. The market rally was led pr...


The holiday period proved to be very mixed for stock markets. The Dow generally firmed through December and rallied in early January, following a familiar seasonal pattern. The market rally was led primarily by technology companies and sectors, while traditional industries remained generally flat or in decline. In the last week of January, the Dow and other major U.S. indices declined on anticipation of a U.S. interest rate increase following strong economic growth news and fears that inflation may pick up following another rally in oil prices. This led the Dow to decrease from a high of 11,723 on January 14 to 10,738 on January 31, a 2.2 per cent decline from November.

The Solid Waste Index declined 4.7 per cent during the period as many of the companies continued to experience difficulties following the mergers of the last several years. Safety-Kleen declined 43.4 per cent as its revenues and earnings declined, and the interest of Laidlaw Inc. remains for sale. Imco Recycling also reported earnings below expectations, causing an 11 per cent decline in its share price. Other issues such as Allied Waste (down 21 per cent), Capital Environmental (down 13 per cent), and Waste Connections (down 8 per cent) reacted with the industry as a whole following last year’s disappointments. The best performance was achieved by Vivendi SA, which increased 18 per cent. Waste Management increased 4 per cent during the period as new management sold offshore businesses to improve operating results.

It’s important for investors to remember that the index is a basket of companies that are selected to reflect the market performance of the waste industry as a whole. While some companies may have solid investment potential, many companies are included due to their size or importance in the industry. Investors should consult with an investment advisor before selecting specific companies for investment.

Solid Waste Index

Solid Waste Index Symbol Exchange $Jan98 $Nov99 $Jan00 %index %change Shares $OrigValu $CurValu
Allied Waste Industries Inc. AW N.Y 20.38 8.25 6.50 10 -21.21 37 750 239
Capital Environmental Res CERI NASDAQ 11.00 5.50 4.75 10 -13.64 68 750 323
Casella Waste Systems Inc. CWST NASDAQ 24.75 16.65 15.31 10 -5.78 30 750 464
Imco Recycling Inc. IMR N.Y 16.75 12.88 11.38 5 -11.65 22 375 254
Kafus Industries Ltd. KS AMEX 3.32 7.06 6.63 10 -6.09 226 750 1497
Marsulex Inc. MLX T.O 6.00 2.9 3 5 3.45 63 375 187.5
Republic Services Inc. RSG N.Y 24 12 11.75 10 -2.08 31 750 367
Safety-Kleen Corp. SK N.Y 15.75 11.06 6.25 10 -43.49 48 750 297
Vivendi SA-ADRs WDIY NASDAQ 9.67 16.63 19.63 10 18.04 78 750 1522
Waste Connections Inc. WCNX NASDAQ 12 12.56 11.5 10 -8.44 63 750 718
Waste Management Inc. WMI N.Y 23.75 16.94 17.69 10 4.43 32 750 558
Total 100 $7,500 $6,431
(Note: numbers rounded, * denotes weighting change)
Statistics
Starting Point Jan 98 Nov 99 Jan 00 Percentage Return
TSE Composite 6700 7889 8390 6.35%
DOW 7322 10988 10738 -2.28%
Solid Waste Index 7500 6748 6431 -4.70%
Technical analysis: The Solid Waste Index is calculated on a bimonthly basis. In order to maintain consistency and to meet the publishing deadline, it’s calculated on the last Friday of the second month of the given time period. The graph is plotted on a biweekly basis and the final point on the graph represents the closing values for the three indices Friday, January 28. The index was started at a value of 7500 points so that its magnitude is in the same range as the DOW and the TSE. It’s made up of a proportional representation of the firms listed, broken down by the itemized percentages. Share quotes ignore currency.

Hot Sector News

Overall, there was not a lot of news over the holiday period and earnings of most companies are expected shortly after press time. However, Republic Services Inc. of Fort Lauderdale, Florida, did release fourth quarter results in late January.

Revenues for the quarter increased 30 per cent to $488-million while net income increased 11 per cent to $52.5-million. The company achieved internal growth of 8 per cent, indicating strong growth before including acquisitions. It also announced that it expects to complete the previously announced acquisition of assets from Allied Waste Industries within five months, and to acquire businesses in 2000 that would add $80-million to revenues.

While the larger companies in the industries continue to consolidate following their large mergers last year, some of the smaller players continue to pursue growth through acquisition. Casella Waste Systems of Rutland, Vermont, a solid waste services company based primarily in the northeast U.S., announced the completion of the acquisition of KTI Inc. for $355-million in stock and assumed debt. Waste Connections Inc. of Folsom, California recently announced the purchase of 11 companies in the fourth quarter of 1999, adding $21-million in annualized revenues.


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