GFL credits price increases for profitable Q2

Vaughan, Ontario-based GFL Environmental Inc. has issued second quarter 2023 results that have the firm and its CEO optimistic its divestiture and merger and acquisition (M&A) activities have placed it on sound financial footing.

“Our exceptional start to the year continued into the second quarter thanks to the hard work and commitment of our [more than] 20,000 employees,” GFL founder and CEO Patrick Dovigi says.

“During the second quarter, we successfully completed our portfolio rationalization initiative that we committed to earlier this year. We realized $1.65 billion of gross proceeds from these noncore divestitures, $150 million more than our original expectation, and completed the process one quarter ahead of plan.”

Dovigi says the move has put the firm on a low-leverage financial footing. “The resulting enhanced strength of our balance sheet, coupled with our margin expansion and accelerated free cash flow, sets us on a path to ending the year with net Leverage1 of less than [a multiple of] 4.0x [and] mid 3.0x by the end of 2024 and a pathway to investment grade in the medium term," he says.

He also says GFL will remain in the acquisition game, adding, “We have completed 16 acquisitions year to date, the majority of which were smaller tuck-in acquisitions, which have continued to densify our existing footprint.”

Recycling and sustainability-related investments also appear to be in the offing. “With the success of the divestiture transactions, we intend to allocate a portion of the proceeds to a number of incremental sustainability related capital projects, primarily related to opportunities arising from extended producer responsibility [EPR] legislation and renewable natural gas [RNG], in keeping with our highest and best capital use strategy,” Dovigi says.

In the second quarter, GFL grew its adjusted EBITDA figure by 19.3 percent and Dovigi says the firm “demonstrated the effectiveness of our pricing and efficiency initiatives, resulting in industry leading adjusted EBITDA margin expansion of 130 basis points.”

“This top line growth and margin expansion, both of which exceeded our expectations, demonstrate the strength in our best-in-class asset base and the ability of our exceptional team to execute on our proven value creation strategies," he says.

Setting aside the effects of GFL’s considerable divestiture and M&A activities on its past and present earnings reports, the firm says its net income from continuing operations in this year’s second quarter was CAD$293.8 million ($222.2 million), an increase of 255 percent compared with 2022 second quarter net income from continuing operations of CAD$82.6 million ($62.5 million).

“Our strong performance for the first half of the year, coupled with our expectation for the balance of the year, the resilience of our business model and the effectiveness of our growth strategies, are leading us to increase our already industry leading full year guidance for this year," Dovigi says of GFL's expected revenue and EBITDA figures for the rest of the year.

“We continue to see upside opportunities from our robust M&A pipeline and any incremental contribution from further M&A completed in the second half of the year would be upside to our updated guidance.”