Weakness in recycling prices and landfill revenue continues to hit Viridor profits

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An interim statement from Viridor’s owner Pennon Group has said that first half earnings have been hit by falling value from recyclate prices.

Pennon Group flagged in its preliminary results that Viridor’s first half EBITDA for the 2014/15 financial year would be materially lower than in H1 2013/14.

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In the statement, Pennon Group said: “Year to date performance has primarily been impacted by the expected continuation of the decline in the landfill business. Also, as expected, landfill gas generation has declined from peak and the recycling business has been moderately affected by near term weakness in recycling prices.”

In order to improve this situation, Viridor has been investing to improve the productivity of its assets and quality of its recyclate products.

Its Rochester plastics plant is expected to come on stream in the next month and its Scottish glass separation plant shortly after.

A strategic focus on improving the productivity of recycling assets and recyclate quality is expected to enhance future margins.

However, Pennon Group expects Viridor’s earnings in the second half of the financial year to be boosted by five energy recovery facilities coming on stream during this period.

This is expected to lift earnings for the entire year above those of 2013/14.

Pennon Group also owns South West Water and for the entire group it expects overall financial performance since 31 March 2014 to be in line with management expectations when it reveals its H1 results at the end of November.