Waste removal giant Cleanaway cashes in as workforce stabilises

A stable workforce and falling labour costs have bolstered waste removal company Cleanaway’s efficiency drive and ambitions to reach a $450m earnings target over the next two years.

Cleanaway reported an 18.9 per cent increase in underlying earnings before interest and tax in the 12 months to June. Picture: Mal Dodt

A softening jobs market has proven a blessing for Australia’s biggest rubbish collector, with a more stable workforce and falling labour costs supporting the company’s efficiency drive and ambitions to reach a $450m earnings target over the next two years.

Job vacancies at Cleanaway Waste Management are back down to pre-Covid levels, according to managing director Mark Schubert, while annual employee turnover is back down to about 17 per cent, from 21 per cent at the same time last year.

They’re important metrics for a company that employs close to 8000 workers, in an industry that’s historically found it difficult to attract and retain garbage truck drivers and depot workers when the jobs market is firing.

Speaking after handing down a solid set of full-year results, Mr Schubert said vacancies across the company’s workforce were down to below 200, compared to a peak of around 1000 during the labour shortages of 2022-23.

“Less than 200 is probably the best we’ve ever been at in terms of vacancy levels,” he said. “Turnover is also declining – we’re trying to get it down below 15 per cent.

“So that’s a good story that lower vacancies, lower turnover, is leading to increased productivity, which then of course allows us to reduce costs in terms of overall cost of labour.

“There’s a higher availability of people in the workforce looking for jobs. The easiest example of that is back at the peak we’d be very short mechanics in WA. We now have a full suite of mechanics in WA, and we’ve actually got mechanics coming back from the mine sites looking for jobs. So there’s definitely increased labour availability – that’s the macro theme.”

Mr Schubert said Cleanaway had also negotiated a backlog of expired enterprise agreements, leading to a reduction in industrial action across its sites. Around 5000 of the company’s 7900 employees are unionised, with the largest representation from the Transport Workers’ Union.

Cleanaway reported an 18.9 per cent increase in underlying earnings before interest and tax (EBIT) in the 12 months to June, to $359.2m, slightly above consensus estimates of $354m.

The company is forecasting another year of double-digit growth in 2024-25, with underlying EBIT expected be in the range of $395m to $425m, while it also expects to hit its earnings target of more than $450m in 2025-26.

Mr Schubert said cost reductions and productivity improvements resulting from a more stable and experienced workforce, supported by the company’s investment in culture and training at its 330-odd sites across the country, was one of three key areas where earnings growth would be delivered in the year ahead. Another growth driver is expected to come from its Victorian container deposit scheme which launched last November.

Cleanaway’s slice of Victoria’s container deposit scheme – comprising Melbourne’s west and western Victoria – is about a third of the size of the container deposit scheme it operates in NSW, which generates about $20m in EBIT each year.

Mr Schubert said volumes in Victoria were tracking in line with expectations, and backed a push from environmentalists to include wine and spirit bottles in container deposit schemes, both in Victoria and other parts of the country. Container deposit schemes, which operate across most states and territories, encourage recycling by offering refunds for certain types of bottles, cans and cartons.

Last November Queensland became the first state to include spirit and wine glass bottles in its container deposit scheme.

“We saw a significant volume increase through the Queensland scheme when the government introduced wine and spirit bottles through the scheme,” Mr Schubert said. “And we think, hopefully, similar will happen in NSW, and ultimately similar in Victoria.”

Cleanaway’s revenue rose 5.6 per cent to $3.75bn in 2023-24.

The company is currently awaiting ACCC approval for its $110m acquisition of Citywide Service Solutions’ waste and recycling business.

Cleanaway’s statutory net profit after tax of $158.2m was up from $23.5m in the previous year.

The group will pay a 2.55c per share dividend on October 7. Cleanaway shares rose 1.7 per cent to $2.95.

Originally published as Waste removal giant Cleanaway cashes in as workforce stabilises