Waste Management segment

Economic environment for the waste management sector

In the 2018/2019 fiscal year, the waste management industry continued to benefit from a favourable economic environment, thus continuing the positive trend of the previous years. The import ban on various recyclable material fractions declared by the Chinese Ministry of the Environment on 1 January 2018 continues to exert a major influence on the entire industry, as a result of which global volume flows have shifted. In the meantime, other Asian countries have adopted an import ban based on the Chinese model. For the European waste disposal management market, this resulted, inter alia, in an increase in the volumes of low-quality non-recyclable plastic waste that require thermal treatment. This ensured a high level of utilisation for all waste incineration plants throughout Europe during the reporting period.

Both nationally and internationally, the issue of responsible materials management continues to be at the centre of attention. In order to close the gap between waste management and production, mandatory requirements for reusable or recyclable product designs, including the use of secondary raw materials for which new collection and sorting paths are to be created, are being discussed. Corresponding targets defined at European level in the form of the closed substance cycle package pose major challenges for the actors involved. In Austria and other European countries, this is particularly true for plastics, as higher collection and recycling quotas have been defined for the period as of 2025. In addition, the Disposable Plastics Directive was adopted in December 2018; it introduces a ban on defined disposable plastic products throughout the EU as of 2021.

The Waste Timber Ordinance, which came into force in Austria on 1 January 2019, led, among other things, to price agreements for waste timber being concluded at far shorter intervals than previously and in doing so exposing prices to more extreme short-term fluctuations. The material qualities sorted out in the course of implementing the ordinance can be reused in the chipboard industry, while material that is no longer recyclable will continue to be thermally treated.

In the case of recycling materials, a negative trend – partly due to the import restrictions explained above – was observed for both metal and recovered paper/cardboard in the year under review. The price of steel scrap fell sharply, especially as of January 2019, and dropped considerably below the previous year's level in the course of the fiscal year. The recovered paper index, which had already lost value in the second quarter of the previous year 2017/2018, fell again significantly in the third quarter of the 2018/2019 fiscal year.

Business development in the Waste Management segment

In the 2018/2019 fiscal year, sales revenues in the Waste Management segment amounted to EUR 233.5 million, which is EUR 3.9 million or 1.7% higher than the previous year's level of EUR 229.6 million. EBIT decreased by EUR 4.0 million to EUR 13.4 million compared with the previous year (EUR 17.4 million).

Turnover development was characterised by various changes: on the one hand, favourable general conditions in the traditional waste management market with the resulting opportunities for good price developments for commercial and industrial waste, hazardous waste and services in the construction sector contributed significantly to the increase in revenue in the Waste Management segment. On the other hand, the development of the recycling materials waste metal and waste paper/cardboard negatively affected total sales. Beyond this, energy revenues resulting from thermal treatment (electricity, heat) were lower than in the previous year due to a scheduled turbine overhaul over a 10-year maintenance interval.

In addition to the reasons already explained, the decline in earnings compared with the previous year was mainly due to one-time effects. In particular, unplanned plant shutdowns at Lenzing and Wels and unscheduled maintenance work at Lenzing adversely affected the operating result of the Waste Management segment. In addition, the base interest rate, which is the basis for evaluating provisions for landfills, changed significantly in the fiscal year 2018/2019.

Higher maintenance costs for incineration plants in Austria

A throughput of about 614,400 t was achieved at the incineration plants in Wels and Lenzing. This corresponds to a decrease of approximately 27,200 t or 4.4%. Among other things, this was due to two unscheduled plant shutdowns. Both plants continued to operate at full capacity. In the course of the annual plant overhaul at Lenzing, an unscheduled maintenance measure on the plant's structure was identified; its repair led to significantly higher maintenance expenses in the fiscal year 2018/2019.

In the reporting period, the waste incineration plant in Wels distributed 186 GWh of heat (previous year: 197 GWh) to the district heating network of the town of Wels and to one other key account customer. Electricity procurement totalled 177 GWh (previous year: 206 GWh). The decline is attributable to the turbine overhaul carried out at 10-year intervals.

With the exception of the CPO plant (chemical-physical treatment plant for organic waste), which is influenced by the irregular accumulation of landfill leachate, the treatment plants for hazardous waste in Steyr were again very well utilised in the year under review. In terms of maintenance, the focus was primarily on the renovation of the ultrafiltration plant.

Compared with the previous year, the total volume handled in Austria and South Tyrol fell slightly to 1,745,000 t (fiscal year 2017/2018: 1,766,000 t). It should be mentioned that only Austria was affected by the decline. In South Tyrol, volumes increased by 4.4%.

In the 2018/2019 fiscal year, 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 further intensified, and it is above all the municipalities which continue to represent a material target group for the Waste Management segment. The activities in the reporting period also focused on the further development of the digitalisation projects.

However, the positive price trend for the thermal fraction 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.

Stable earnings development in South Tyrol

Following the completion of extensive structural optimisation measures at the Neumarkt location, regular operations commenced in the 2018/2019 fiscal year. One of the location's focuses is collecting and sorting waste paper/cardboard. Despite the more difficult market situation for these fractions, it proved possible to achieve a stable result by increasing the total quantities.

Drinking water and waste water: Termination of activities in Slovenia

The Marburg-based company Komunala ODTOK d.o.o., which had been a fully consolidated company of the Group since fiscal year 2007/2008, and had belonged to the Waste Management segment since fiscal year 2017/2018, was sold as of 30 September 2019. The reason for the sale was the difficult market environment in Slovenia, which had existed for some time. The company with some 19 employees generated sales revenues of around EUR 1.1 million in the 2017/2018 fiscal year; its main business focused on waste water management and services for several municipalities.

At WDL-WasserdienstleistungsGmbH, the focus of investment in the 2018/2019 fiscal year was on securing the supply of drinking water in the Innviertel region to ensure basic drinking water supply reliability, as well as the high daily consumption peaks that occur particularly in the summer months, can continue to be met in the long term. Services continued to develop at a good level, with an increase in the provision of technical services compared with the previous year.