WM Waste Management

By Nina Trentmann 

Devina Rankin wants to charge cities and towns more to pick up their trash and recyclables, since Americans working from home are producing more waste -- and it costs more to get rid of it.

"We need to have conversations about the level of service we are required to provide because it is different than what we signed up for," the Waste Management Inc. finance chief said. The weight of residential waste has increased 15% to 25% since the beginning of widespread lockdown orders in the U.S., she said.

Meanwhile, Ms. Rankin said volumes in its higher-margin commercial and industrial business were down 16% in the first quarter compared with a year earlier.

The Houston-based company has about 18.3 million residential customers across the U.S. and Canada. The drop in commercial and industrial trash reduced Waste Management's revenue by about $40 million in the first quarter, hurting its profit margin.

Waste Management and other haulers typically have multiyear contracts with municipalities for removal of trash and recyclables. The price paid stays the same, even if there's more waste produced.

Waste Management's trucks now make more trips to pick up residential trash and bring it to a landfill or sorting facility. Disposal costs are rising because of the increased volumes, and Ms. Rankin said she expects those higher costs to continue even as businesses and offices reopen.

A 2018 ban by China on waste imports, which sent global prices for recyclable materials lower, affected some of the company's margins. The decline in prices for paper, plastic, cardboard and metal hurt waste-collection companies, which previously recouped a large chunk of their recycling costs by selling the materials.

However, there is now greater U.S. demand for recycled paper and cardboard to produce things such as toilet paper and packaging, Ms. Rankin said. Waste Management is selling 80% to 85% of its recycled materials domestically, compared with about 70% before the coronavirus pandemic.

The company has been able to charge higher fees for some municipalities since the 2018 China ban, and Ms. Rankin said she is optimistic it will be able to do more of that. "The fundamental shift in residential waste is well understood and will make the conversations with municipalities increasingly effective," Ms. Rankin said.

Waste Management might be successful in asking for price increases in negotiations with municipalities, assuming more Americans continue to work from home once the pandemic has ended, said Noah Kaye, a research analyst at Oppenheimer & Co., an investment bank.

"The contracts were not set up to reflect a 20% increase in waste by households. These are extra costs for waste haulers," Mr. Kaye said.

Waste Management employs around 17,000 drivers in the U.S. and Canada. Ms. Rankin slashed costs by cutting overtime for hourly employees in response to the decline in commercial waste.

Other waste haulage companies have reduced additional services, for example yard collections, to bring down costs, said Jeff Silber, a managing director at BMO Capital Markets. "Higher residential volumes will not go away for a while," he said.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

(END) Dow Jones Newswires

May 10, 2020 09:14 ET (13:14 GMT)

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