Waste Management Segment

General Economic Conditions of the Waste Management Sector

In the 2017/2018 fiscal year, the waste management industry continued to benefit from favourable general economic conditions, thus continuing the positive trend of the previous year. Global waste flows have shifted as a result of the Chinese Ministry of the Environment's import ban on plastic waste declared on 1 January 2018. For the European waste management market, this meant, among other things, an increase in the volumes of low-quality non-recyclable plastic waste, and thermal treatment thus necessary. In turn, this ensured a high utilisation rate for all waste incineration plants throughout Europe, although new challenges for plant operation will arise in the medium term due to recycling of input materials with a higher calorific value and the lower throughput volumes associated with it.

Both nationally and internationally, the issue of responsible recycling materials management continues to be at the centre of attention. In order to close the gap between waste management and production, mandatory requirements in the sense of a reusable or recyclable product design, including the use of secondary raw materials for which new collection and sorting paths are to be created, are being discussed. Corresponding targets formulated at European level in the form of the circular economy package pose major challenges for the actors involved. As resource protection has already played a major role in waste management at the national level in the past, Austria has been given a leading role in achieving the EU objectives.

In the case of recycling materials, the price of steel scrap continued to rise compared with the previous year, while the price of copper remained stable at a high level above that of the previous year in the course of the 2017/2018 fiscal year. Fuel prices rose, in particular in the third and fourth quarters of the reporting period, and were above the previous year's annual average. However, the use of hedging strategies has mitigated the negative developments in this area. The recovered paper index fell below the average value of the previous year from the second quarter of the past fiscal year onwards, but then remained stable at this level until the end of the fiscal year.

Business Development in the Waste Management Segment

In the 2017/2018 fiscal year, sales revenues in the Waste Management Segment amounted to EUR 229.6 million, which is EUR 14.1 million or 6.5% higher than the previous year's level of EUR 215.5 million. EBIT increased by EUR 10.4 million to EUR 17.4 million compared with the previous year (EUR 7.0 million). In the period under review, the sales revenue and EBIT items for the first time included the Group companies WDL GmbH and Komunala ODTOK d.o.o. (formerly VARINGER d.o.o.), which were previously allocated to the Water Segment.

Whereas in the previous year negative one-time effects due to asset disposals in the amount of EUR 4.8 million impacted on EBIT, the positive price developments on the waste management market, both in the waste and service sectors, and higher prices for scrap metal and scrap as well as waste wood, contributed positively to the Segment's earnings in the reporting period. Volume growth was achieved in municipal waste. This mainly related to domestic and bulky waste as well as waste from mechanical-biological plants. Due to the good economic situation, positive developments were also observed in construction waste. On the other hand, prices for recovered paper declined compared with the previous year.

Energy revenues resulting from thermal incineration (electricity, district heating) were at a similarly good level as previous year. Furthermore, higher throughput volumes at the thermal incineration facilities and positive developments in other waste management services had a favourable effect on earnings in the Waste Management Segment.

Further Growth in the Utilisation of Incineration Plants in Austria

In fiscal year 2017/2018, the availability of the incineration plants in Wels and Lenzing was further optimised by technological improvements, which, together with professional materials-flow management, ensured full utilisation and further growth compared with the previous year. A throughput of some 641,600 tonnes was achieved.

In the reporting period, the waste incineration plant in Wels distributed 197 GWh of heat (previous year: 192 GWh) to the district heating network of the town of Wels and to one other key account customer. Electricity procurement in the Waste Management Segment totalled 206 GWh (previous year: 200 GWh).

The CPA plant in Steyr (chemical-physical treatment plant for inorganic waste) was very well utilised in the past fiscal year. Following the restructuring work completed in the 2016/2017 fiscal year, a new record throughput was achieved in the past fiscal year. On the plant side, the waste water biological system was newly constructed.

In comparison with the previous year, the total volume handled in Austria and South Tyrol increased slightly to 1,766,000 metric tonnes (2016/2017 fiscal year: 1,755,000 metric tonnes).

The Waste Management Segment continued to focus its market activities in particular on long-term indexed contracts with defined delivery volumes and prices. Cooperation with the public sector was also intensified, and it is above all the municipalities which continue to represent a material target group for the company's range of services. Strategically anchored cost management was again consistently pursued, and the implementation of ongoing optimisation projects continued. The further development of digitalisation projects was another important focus.

However, the positive price trend on the waste management market led to increased competition with operators of pre-treatment plants and industrial co-incinerators, and to stronger re-municipalisation efforts by communal waste management associations that seek to establish an obligation to tender commercial waste to public waste management organisations.

Integration of Drinking Water and Waste Water Activities into the Waste Management Segment

Through the integration of the companies WDL GmbH and Komunala ODTOK d.o.o., the municipal services offered in the Waste Management Segment have now been expanded to include activities in the drinking water and waste water areas. This is intended to further intensify cooperation with local authorities and water authorities. The first steps in this direction were taken in the year under review.

WDL GmbH recorded a significant increase in the volume of drinking water supplied due to the prolonged drought. It was possible to ensure supply reliability despite high daily consumption peaks in summer. Services developed according to plan. Komunala ODTOK d.o.o. continues to be exposed to the difficult market environment in Slovenia.

Structural Optimization in South Tyrol Largely Completed

The conversion work at the new Neumarkt location was completed in the year under review. Special effects in the form of asset disposals, which were recognised in the course of structural optimisation campaigns, had a negative impact on earnings. Operating business remained largely stable.