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Why is the Cleanaway Waste Management Ltd (ASX:CWY) share price down after a FY24 update?

The Cleanaway Waste Management Ltd (ASX: CWY) share price is down 2% after the waste and recycling business announced an update.

Profit guidance

Cleanaway announced to the market today that it announced earnings guidance of approximately $350 million of EBIT (EBIT explained) for FY24.

It noted that depreciation and amortisation expenses are expected to be $370 million to $390 million, which is $10 million lower than the guidance given at the FY23 full year result, because of “anticipated continuing softening of landfill volumes.”

Assuming no further rate rises, net finance costs are expected to be approximately $110 million.

The company’s management noted that further operational efficiency improvements were helping to expand margins. That includes “simplification” of the ‘Solids’ operating structure by consolidating a number of business units, and Cleanaway’s data and analytics and fleet optimisation blueprints. Improving profit margins is normally a helpful thing for the Cleanaway share price.

The health services business unit is seeing performance improvement initiatives gain traction with financial performance also supported by price increases. The newly commissioned autoclaves in Victoria are “performing well” and now it’s focused on lifting productivity at the site.

Management commentary

The Cleanaway CEO and Managing Director Mark Schubert said:

I am pleased to report a strong start to the new financial year. The actions that we have taken to address the headwinds in FY23 are now delivering results. We have also continued to make progress on our strategic priorities to deliver our
midterm ambition.

The Queensland solids business unit is benefitting from higher volumes, improving labour productivity
and lower disposal and fleet costs. Service delivery metrics are strong with the focus shifting to include delivery
of the mid-term ambition, and longer-term strategic growth.”

Final thoughts on the Cleanaway share price

Cleanaway seems like the sort of business that has useful tailwinds – population growth and an increasing amount of recycling should be helpful for earnings. Yet the Cleanaway share price has dropped 16% from 11 August, which could mean this is an opportunistic time to invest, though there could be more volatility ahead.

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