All financial information is in Canadian dollars.
Economic reflections: During the company’s Q4 and full-year earnings call on Wednesday, CEO Patrick Dovigi called 2022 an “exceptional year” which is “even more impressive considering the economic uncertainty we experienced for most of the year.” The company continued its rapid growth trend since going public in 2020, largely driven by M&A activity. “Our plan back then was to double the size of the business in five to six years. The reality is we doubled the size of the business over two-and-a-half years,” Dovigi said.
M&A strategy: Dovigi said the M&A pipeline remains robust and more opportunities exist, but 2023 spending — an estimated $300-500 million — will be more tempered than the last few years. He said 2023 will be a maturation year for the businesses GFL recently absorbed and the company should return to traditional M&A levels in 2024. GFL identified three solid waste operations to sell for gross proceeds of about $1.5 billion, with definitive agreements anticipated in Q2 and transactions closing in Q3.
Pricing: CFO Luke Pelosi pointed to success with the company’s ramped-up fuel surcharge program, and the first phase should conclude early this year — two quarters earlier than planned. Pelosi noted competitors’ fuel surge programs are more mature, and GFL’s initiatives “are not breaking new ground; we’re simply catching up to the industry standard.”
Renewable natural gas investments: A priority this year is continued development on 21 planned RNG projects, which are expected to generate approximately $175 million of run-rate earnings before interest, taxes, depreciation and amortization by the end of fiscal year 2025. GFL is on track to bring online its first three RNG projects in the second half of 2023, with the 18 others to follow in 2024 and 2025.
Environmental services: This segment, which includes hazardous and liquid waste, experienced 27.3% growth to revenue of $328.5 million. It outperformed expectations and defied the seasonality typically present in Q4, Dovigi said, with higher industrial collection and processing activity and increased emergency response activity.
Looking ahead: GFL forecasts stronger earnings this year. Executives predict Q1 will be the most challenging but will improve throughout the year. Still, uncertain economic conditions are prompting a conservative outlook on industrial and commercial sector volumes, considering recessionary environments typically prompt a decrease in construction and demolition activity. The residential sector remains strong and is more “cycle agnostic,” Pelosi said.
