By the numbers
Adjusted Q3 EBITDA: $85M
Up 3.7% year over year, boosted by record quarter for Clean Earth in EBITDA
Q3 net loss: $13.2M
Compared with a net loss of $10.8M the previous year
- Financial picture: Enviri recorded a “challenging” quarter, due in part to macroeconomic factors affecting both its rail and steel business, Chief Financial Officer Tom Vadaketh said on the company’s earnings call Thursday. The company adjusted down the midpoint of its full-year guidance for revenue by $10 million, but CEO Nick Grasberger said there are signs for optimism. “Our well-informed view is that the best course of action is to continue executing on our operational plan outlined a few months ago,” he said. “We are confident that meaningful organic growth and margin improvement over the next two or three years will boost the value both of Harsco Environmental and CE while allowing time to stabilize the rail business and better position that business for sale.”
- Cash flow: Adjusted free cash flow was negative $34 million compared with negative $7 million in Q3 of 2023. Vadaketh said he was “disappointed” in the company’s cash flow performance for 2024. Still, Enviri’s recently announced sale of Reed Minerals for $45 million to private equity firm Speyside Equity in August enabled it to reach its goal to reach asset sales between $50 million and $75 million this year. The sale provided the company with additional cash, offsetting some of its negative free cash flow in Q3. Grasberger said the company expects free cash flow to improve once it gets further along in its rail contracts in the coming years.
- Harsco Rail: Revenues in Enviri’s rail segment were down 20% year over year. Executives blamed several factors, including supply chain issues and the impact of Hurricane Helene on the company’s business in the southeast U.S. The company’s European rail contracts have also proven more costly than previously estimated, Vadaketh said, to the tune of a $40 million drag on net cash flow this year. Grasberger said most of the division’s contracts would begin positive contributions to cash flow by the end of next year, with the exception of its two largest contracts in the United Kingdom and Germany. Beginning at the end of 2026 and into 2028, the latter two contracts could generate a combined $75 million in free cash flow, Grasberger said.
- Clean Earth: Grasberger said the company’s Clean Earth division continued to exceed expectations, delivering double-digit earnings growth in the segment. Its operating income of $27 million was up 28.6%, and its adjusted EBITDA was up 23.5%. Grasberger said the company sees continued opportunities for margin expansion and growth in this segment and is focused on increasing volume. Currently, Enviri is seeing the most growth for this segment in the healthcare space, with the retail and industrial or manufacturing segments showing some softness, Grasberger said.
- Harsco Environmental: Weak demand in the steel industry dragged on this division, which provides material processing and environmental services to the steel and metals sector. Revenue in the segment was down 2%, though Enviri attributed those results partially to poor foreign currency translation and divestitures. The company reported revenue would have been up 5% without those factors. “This business is much more stable than it has been with a higher level of cash flow than we've seen for a long time, so we are able to mitigate some of these declines with efficiency on capital spending,” Grasberger said. He said the company is looking to shift the business geographically to more favorable markets such as Turkey, India, Mexico and the United States. He noted protectionist policies against “cheap Chinese steel” could provide more favorable conditions for the sector. The division also recently secured a 10-year contract with Nucor Steel Kingman, providing its services to the company’s Arizona operations.
