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Trading statements

Shanks warns on FY

03 February 2016 07:19

Shanks Group said directors expect the group to deliver a FY result that is slightly below its previous expectations.

The group continues to deliver a strong improvement in the Commercial Division, but it has not been possible to compensate fully for the impact of the more challenging conditions in the Hazardous Waste and Municipal markets.

"Looking forward, assuming current market conditions, the Board expects that the successful increase in capacity commissioned in the current year, together with further margin improvement and cost management initiatives, will position the Group to deliver strong growth," Shanks said.

Referring to the period Oct. 1 to date, Shanks said that whilst market conditions in the second half have been broadly unchanged in the Commercial Division, the oil, gas and electricity sectors have seen further significant price declines, with consequent direct and indirect impacts on Shanks.

In addition, the sharp fall in commodity markets has had an impact on recyclate prices and offtake markets for waste recyclers.

"Despite these headwinds, the Commercial Division has continued to deliver strong profit growth, driven by our self-help initiatives. Volumes in the Netherlands construction and demolition segment have remained slightly higher than last year, and good cost control has fully offset lower recyclate prices.

"In Belgium, we have resumed wood dust shipments to the local power market and increased output of our Solid Recovered Fuel (SRF) as anticipated. We also completed the sale of our loss-making Industrial Cleaning Wallonia business unit in November 2015.

"The Hazardous Waste Division has traded robustly despite the deterioration in the oil and gas sector which makes up approximately half its revenues.

"A strong performance in soil, pyro and waterside ship treatment has not fully offset the further weakness in industrial cleaning activity and in sludge volumes for treatment. The new Theemsweg Total Care Centre was commissioned in the second half and is performing well. The Division is still expected to deliver growth in the current year.

"The market headwinds reported above have also impacted the Municipal Division. However, this has been somewhat offset by the Barnsley, Doncaster and Rotherham (BDR) and Wakefield contracts entering full service, and by continuous improvement programmes initiated in the East London (ELWA) facilities.

"We continue to manage our cost base tightly and further cost reductions are underway in the Division. The build programmes at Surrey (Canada) and Derby continue on track. Underpinned by guaranteed inputs and prices, the long term model for this Division remains robust and it is expected to deliver significant profit and cash generation."

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Related Company: SKS

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