Waste company cleans up by aggressively cleaning up
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Propelled by RCRA rules, revenues at WMI's Chemical Waste Management unit have skyrocketed to $85 million and are growing at a 50 percent annual rate.Skip to next paragraph
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"Waste Management has greater resources in chemical waste than anyone else," admits Walter E. Skowronski, investor relations director at SCA Services Inc., a competing chemical and municipal waste disposal operation.
"In terms of expansion of capabilities, they have expanded more rapidly by acquisition of other companies," adds Browning-Ferris Industries vice-president Robert Johnson, the second largest disposal firm in the nation.
It's WMI's strong hold on the international market which allows it to outstrip such successful residential and chemical waste disposal businesses as Browning-Ferris and SCA Services in revenues, profits, and shareholder equity, admits a Browning-Ferris financial spokesman.
From the time WMI went public in 1971, revenues have soared at a 24.9 percent annual rate to $560 million in 1980. Profits have risen at an even faster 32.3 percent annual clip to $54.9 million in 1980. And while SCA sported a 15.2 percent return on shareholder equity in 1980, WMI returned 22 percent to its investors.
"We have not had the problems operationally and in management the competition has experienced," Buntrock says when asked to explain his firm's fatter financial ratios.
Still WMI finds some clouds on its corporate horizon. One reason its business has been so profitable is that in some areas of the country chemical waste disposal sites are in very tight supply. If new sites can be brought on line by competitors, WMI's margins may slip.
"I would expect that to happen in the next two to five years," says Thomas M. Corkill, a Chicago-based securities analyst with Blunt Ellis & Loewi Inc. "But it is gravy until then."
But along with the gravy comes considerable risk. For example, the Supreme Court of Illinois recently affirmed a lower court decision requiring SCA to remove all the wastes which had been buried at its Wilsonville site. The process could cost millions of dollars even in the unlikely event the firm could find another dump site willing to take the wastes.
"Anyone who owns a hazardous landfill could be subject to the same kind of suit SCA is involved in at Wilsonville," notes Rolland Williams, an analyst with E. F. Hutton & Co.
Still, opportunities for Waste Management seem to develop faster than risks. For example, the Reagan administration's plans to cut federal funding for cities make it likely some municipalities will seek ways to cut garbage pick-up costs. One way is to to have WMI rather than a municipal work force handle the chore. "Absolutely that will happen," Buntrock predicts.
"They are moving faster than anyone else in all directions -- foreign contracts, incineration, chemical treatment, landfills," concludes Hutton analyst Williams. "When you move fast, chances are you will make mistakes. So far they haven't made any."