Solid Waste & Recycling

Feature

WASTE STOCK WATCH (April 01, 2000)

February and March were volatile and mixed months for stock markets. The Dow, which is more sensitive to traditional economic sectors, declined through most of the period in reaction to interest rate ...


February and March were volatile and mixed months for stock markets. The Dow, which is more sensitive to traditional economic sectors, declined through most of the period in reaction to interest rate increases in the United States. At the same time, indices more sensitive to technology related companies showed very strong gains as the Nasdaq Composite rallied over the 5,000 level and the TSE 300 Index rallied over 10,000 for the first time. This trend reversed in the last two weeks of March when capital returned to traditional sectors such as financial services, transportation and manufacturing.

The Solid Waste Index declined 8.8 per cent during the period, underperforming both the TSE 300 (which increased 12.78 per cent) and the Dow (which increased 1.7 per cent), primarily on a strong rally in late March. The underperformance can be traced to two major factors: investors were focused more on high growth technology related sectors, while the solid waste industry is seen as more mature and several companies in the industry continued to experience difficulties that led to earnings announcements below market expectations.

The index was led by Vivendi SA, which increased 14.62 per cent. Waste Connections also increased 5.4 per cent. Many companies also showed large declines: Safety-Kleen fell 79 per cent, Casella Waste declined 52.6 per cent and Waste Management declined 22.6 per cent.

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 hazardous 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.

Hot Sector News

Many companies in the solid waste industry reported earnings during February and March. However, Waste Management Inc. lost US$114-million in the fourth quarter on revenues of $3.3-billion. This loss was primarily due to $360-million in expenses related to improving accounting systems. Before unusual and one-time items, the company earned $200-million or 32 cents per share.

Casella Waste Systems Inc., announced earnings of 14 cents per share on revenues of $93-million, slightly higher than the 11 to13 cents announced in an earnings warning in late February. The company has experienced a number of difficulties integrating the acquisition of KTI Inc.

While many of the larger companies in the industry experienced difficulties, newer companies reported encouraging news. CDNX-listed International Bio-Recovery announced plans to construct a new organic waste recycling facility on Vancouver Island. This facility is designed to convert industrial and agricultural organic waste and bio-solids into organic fertilizer products.

Toronto, Ontario-based Marsulex Inc. announced several major environmental compliance and outsourcing agreements. Contracts with Shell Canada and Petro-Canada for sulfur extraction were extended for 10 years for a total of $100-million. Letters of intent were signed with three new U.S. customers to build new emissions reduction and other facilities for a total of US$175-million.

Solid Waste Index Symbol Exchange $Jan98 $Jan00 $Mar00 %index %change Shares $OrigValu $CurValu
Allied Waste Industries Inc. AW N.Y 20.38 6.50 6.56 10 0.92 37 750 241
Capital Environmental Res CERI NASDAQ 11.00 4.75 4 10 -15.79 68 750 272
Casella Waste Systems Inc. CWST NASDAQ 24.75 15.31 7.25 10 -52.65 30 750 219
Imco Recycling Inc. IMR N.Y 16.75 11.38 11.06 5 -2.81 22 375 247
Kafus Industries Ltd. KS AMEX 3.32 6.63 6.06 10 -8.60 226 750 1370
Marsulex Inc. MLX T.O 6.00 3.00 2.75 5 -8.33 63 375 171
Republic Services Inc. RSG N.Y 24 11.75 10.94 10 -6.89 31 750 341
Safety-Kleen Corp. SK N.Y 15.75 6.25 1.31 10 -79.04 48 750 62.5
Vivendi SA-ADRs WDIY NASDAQ 9.67 19.63 22.5 10 14.62 78 750 1745
Waste Connections Inc. WCNX NASDAQ 12 11.5 12.13 10 5.48 63 750 757
Waste Management Inc. WMI N.Y 23.75 17.69 13.69 10 -22.61 32 750 432
Total 100 $7,500 $5,857.50
(Note: numbers rounded, * denotes weighting change)
Statistics
Starting Point Jan 98 Jan 00 Mar 00 Percentage Return
TSE Composite 6700 8390 9462 12.78%
DOW 7322 10738 10921 1.70%
Solid Waste Index 7500 6431 5863 -8.83%
Technical analysis: The 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 March 31. 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.

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