Lower recyclate prices and reduced volumes lead to £20 million cost cutting at Shanks


Recycling and waste management company Shanks is making £20 million of cost cuts by 2015/16 as falling prices and lower volumes of materials have hit its revenue.

This has already led to some redundancies in the UK, Netherlands and Belgium as well as closure of some facilities in the Benelux countries.


Shanks reported that revenue was down eight per cent to £339.6 million with underlying profit before tax lower by 22 per cent at £14.3 million in its interim results for the six months ended 30 September 2012.

The company  has also been restructured into four divisions: solid waste, UK municipal, organic waste and hazardous waste.

Shanks Group chief executive Peter Dilnot said: “While solid waste markets have deteriorated sharply, our hazardous waste, organics and UK municipal businesses have continued to perform well. We have launched programme that will deliver significant cost savings over the next three years. We have accelerated the implementation of our growth strategy by reorganising the business into market facing segments.

“With strong market positions, a clear strategy, robust balance sheet and our ongoing investment programme we remain confident in the group’s medium term growth prospects.

“Reflecting this confidence, the board is maintaining the interim dividend level and we are on track to deliver our revised expectations for the full year.”

In the results, Shanks explained why its UK solid waste business has suffered in the past six months. It said: “Market conditions in UK solid waste deteriorated sharply over six months to 30 September 2012. Collection and recycling tonnages were down by 12 per cent and 11 per cent respectively.

“The Scottish market was particularly challenging, with pressure on both volume and gate fees.

“Recyclate prices, which play a larger part in UK profitability than in the Benelux, fell sharply in the second quarter, reducing income by £2 million. A combination of adverse recyclate price and mix meant that, in September, recyclate revenues were down by 60 per cent on the prior period last year. While gate fees should over time adjust both for lower recyclate prices and increasing costs to landfill, the uplift may not be experienced in the short term.”