By the numbers: Q3 2024
Revenue: $1.53B
Up 12% year over year
Net income: $115.2M
Up 26% year over year
Adjusted EBITDA: $301.8M
Up 18% year over year
- Economic picture: Clean Harbors reported positive business momentum, but co-CEO Eric Gerstenberg noted during a Wednesday earnings call that financial performance “overall was not quite as strong as we had expected.” This was largely due to softness in used motor oil and industrial services.
- Motor oil struggles: Revenue and adjusted earnings before interest, depreciation and amortization were up for the Safety-Kleen Sustainability Solutions division, but this was due in part to contributions from the recent acquisition of Noble Oil. The company did not see the usual increase in seasonal demand for its base oil and lubricant products, and co-CEO Mike Battles said pricing “significantly deteriorated” heading into Q4.
- Cost cutting: This has led to a notable buildup of inventories for SKSS. Clean Harbors idled re-refinery operations at a facility in Newark, California, and has taken other steps to “aggressively” cut costs. Gerstenberg expects the California operation to remain idle for at the least the next six months. Battles also noted that broader oil pricing was “under incredible pressure” due to a market oversupply, noting challenges reported by major petrochemical companies, and discussed plans to implement a different pricing structure as quickly as possible.
- Industrial: The company’s industrial services business, which focuses on large chemical and refinery customers, was another headwind. Gerstenberg said that while the number of maintenance jobs had been steady, the size and scope of those jobs had declined. He also described efforts to do more cross-selling of these services to existing customers and become less dependent on the seasonal turnaround cycle.
- Environmental services: Results in this overall segment were up, despite the industrial softness, due in part to contributions from the prior acquisition of HEPACO. Clean Harbors has seen success internalizing volumes into its network from that field services business, though did report a slightly delay in accounts receivable due to an issue with integrating billing systems. Overall, Gerstenberg reported record volumes of containerized waste and said the broader segment was “very strong.”
- Incinerator update: Clean Harbors plans to open a hazardous waste incinerator in Kimball, Nebraska, next month and gradually ramp up to 30,000 tons next year. The facility has capacity for 70,000 tons. Executives expect this will further boost profitability, as the North American market has relatively limited hazardous waste incineration capacity. Average pricing for its incinerators rose 6% in the quarter.
- PFAS: The company has seen ongoing interest in PFAS management services, with its pipeline growing an estimated 15-25% each quarter. Battles estimated this could represent an estimated $100 million in revenue heading into next year. Federal agencies will also be on hand for a November test to see if Clean Harbors’ incineration capabilities can meet a more stringent U.S. EPA testing standard for PFAS destruction, which Gerstenberg believes it will.
- Updated guidance: Clean Harbors revised its adjusted EBITDA guidance slightly to a midpoint of $1.11 billion, down from $1.145 billion. It also lowered adjusted free cash flow guidance to a midpoint of $300 million, down from $370 million, due to the SKSS and temporary HEPACO billing factors.
