Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enviri Corp (NVRI, Financial) reported a strong start to 2024 with each of its three segments performing above expectations in terms of cash flow and adjusted EBITDA.
- Consolidated EBITDA increased by approximately 20% compared to Q1 of the previous year, with EBITDA margin improving nearly 150 basis points to 13%.
- Enviri Corp (NVRI) updated its full-year guidance to reflect about a 5% improvement in the underlying performance of the Clean Earth and Harsco Environmental segments.
- The company's cash earnings are at the highest level in the last decade, indicating strong financial performance.
- Enviri Corp (NVRI) is actively working on reducing leverage, with a target to generate $50 million to $75 million of cash from asset disposals this year.
Negative Points
- The degree of financial leverage is higher than desired in the current economic and interest rate environment, posing a risk.
- Currency headwinds impacted the performance and are expected to pose more of a challenge over the remainder of the year.
- Free cash flow for the quarter was negative $17 million compared to a positive $16 million in the prior year quarter.
- The divestiture process for Harsco Rail has been paused due to risks associated with large European contracts, delaying potential strategic and financial benefits.
- The company's Rail business includes loss-making engineered-to-order contracts, which have required forward loss charges and continue to pose financial risks.
Q & A Highlights
Q: Can you discuss the volume trends in Clean Earth and how they might evolve over the next 12 to 18 months?
A: (F. Nicholas Grasberger - Chairman, President & CEO) The volume outlook for Clean Earth varies by end market, with no significant volume growth expected this year due to various challenges. The focus will be on price/cost efficiency and mix improvements, particularly in hazardous waste and soil/dredge businesses. The manufacturing/industrial and health care segments might perform slightly better in volume compared to retail.
Q: Regarding the Rail business, how much longer will the ETO contracts last, and when can we expect them to conclude?
A: (F. Nicholas Grasberger - Chairman, President & CEO) Most ETO contracts will be delivered this year with cash received later. Two major contracts in Europe will continue for a couple more years. Negotiations with the German customer may lead to a price increase to offset previous charges, and the company anticipates reduced risks associated with these contracts soon.
Q: What are the long-term prospects for the Rail business once the ETO contracts are resolved?
A: (F. Nicholas Grasberger - Chairman, President & CEO) Excluding ETO contracts, the base Rail business could generate $35 million to $40 million in EBITDA. The company expects these contracts to conclude in the next few years, returning to pre-COVID profitability levels. The upcoming Investor Day will provide a more detailed long-term outlook.
Q: Can you provide an update on the internal deleveraging efforts, especially with the Rail sale on pause?
A: (F. Nicholas Grasberger - Chairman, President & CEO) The focus has increased on disposing of smaller businesses and assets, aiming to generate $50 million to $75 million in cash this year. This includes the sale of planes and a small business within the Harsco Environmental segment.
Q: How did the January weather impact Clean Earth's performance in the quarter?
A: (F. Nicholas Grasberger - Chairman, President & CEO) The weather slightly affected the soil and dredge business as well as hazardous materials, but it wasn't significantly material to the overall better-than-expected performance for the quarter.
Q: What is the current outlook for global steel production and its impact on Harsco Environmental?
A: (F. Nicholas Grasberger - Chairman, President & CEO) The outlook for global steel production remains unchanged from previous guidance, with expected volume growth of 6% to 7% in the mill services business, driven by market conditions and new contracts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
