By the numbers
Q2 revenue: $1.55B
Up 11% year over year, led by Field Services achieving 64% growth through HEPACO acquisition
Q2 net income: $133.3M
Up 15.1% year over year
Adjusted Q2 EBITDA: $327.8M
Up 14% year over year
- Economic picture: Clean Harbors is stabilizing its oil rerefining business while seeing substantial growth in its environmental services driven in part by its acquisition of HEPACO earlier this year.
- Safety-Kleen: After several quarters of revenue declines due to low base oil prices, several internal initiatives improved the outlook for Clean Harbors’ oil and lubricants business. The segment saw revenues improve compared to the first quarter of this year, though they are still down year over year. Battles said Clean Harbors is taking a “conservative view” on base oil pricing through the remainder of the year, but projected SKSS to grow 3% to 5% overall.
- Oils: To address the slump, Clean Harbors ran a pilot to process Group III base oils at one of its rerefineries in the second quarter. Co-CEO Mike Battles said that ran well, and the company plans to expand the pilot to a second facility. He also said the company’s partnership with Castrol is beginning to ramp up. Meanwhile, the company’s acquisition of Noble Oil in the first quarter contributed to SKSS’ largest ever waste oil collection volume, 67 million volumes, or 5% higher than Q2 2023. “We're continuing to procure the feedstock we need for our nine rerefineries at the best possible price,” Battles said.
- M&A: While the company had an aggressive start to the year on M&A, it’s still open to more deals, Battles said. In particular, Clean Harbors executives continue to take a look at deals in the environmental services sector, and Battles said in response to an analyst that they were open to a “transformational deal” on that front despite growing interest in the sector pushing up deal prices.
- Environmental Services: Adjusted earnings before income, taxes, depreciation and amortization in environmental services has now increased for 11 straight quarters at Clean Harbors. The segment reported $1.3 billion in revenues for the second quarter, up 11.7% year over year. That strength was led by HEPACO, but the segment also saw growing volumes and pricing in excess of inflation, executives said on the call.
- HEPACO integration: Clean Harbors is seeing stronger than expected returns from HEPACO in the first half of the year. The company revised up its expected contributions from HEPACO by roughly $5 million for 2024 to $35 million. That’s due to a strong amount of emergency response work in the second quarter which totaled about $24 million. CFO Eric Dugas also said the integration of HEPACO was progressing ahead of schedule, and said its team worked closely with Clean Harbors’ core Field Services team to tackle that emergency work.
- Capital expenditures: Clean Harbors continues to spend on its Kimball, Nebraska, incinerator expansion, contributing $20 million in capex to the project in the second quarter out of $65 million of expected spend this year. Total spend is now at about $175 million. The company also reported spending about $20 million on a facility in Baltimore. There, it plans to perform non-hazardous waste activities like container manufacturing, document shredding and e-waste processing, plus maintenance work. Battles said the two projects are key to driving organic growth in Clean Harbors’ core businesses.
- Updated guidance: The company raised its full-year guidance as a result of the strong quarter. The midpoint of its new adjusted EBITDA is up from its previous guidance by about $65 million, and the company is now targeting a range of $1.125 billion to $1.165 billion. “We expect the favorable market conditions that drove our 2023 success, including U.S. manufacturing and regulatory trends, to continue to support our profitable growth plans in 2024,” co-CEO Eric Gerstenberg said in the earnings release.
