Houston City Council is considering a proposal by Mayor Sylvester Turner’s administration to introduce a $1.14 monthly lease charge for residential garbage and recycling bins, a fee the city says is needed to keep enough containers in stock.

The Houston Chronicle reports the council will consider the proposal April 29, and at least one member has already come out against the fee, which would start appearing on monthly water bills in July if approved.

The proposed fee would bring in about $421,200 per month, or about $5 million per year, for the Solid Waste Management Department.

The proposal to charge a lease for bins comes as Houston leaders prepare to confront a ballooning budget gap in the fiscal year that begins July 1 caused by the coronavirus pandemic and tanking oil prices. Turner has estimated the deficit will be between $170 million and $200 million. 

Council member Amy Peck said the worsening economic picture “is not the right time to add fees.”

“I realize $1.14 per month is not a lot of money for most homeowners, but it is the principle and it is a slippery slope,” Peck says in a news release. “Unemployment is skyrocketing. People are struggling right now with money, health and uncertainty.”

The Solid Waste Management Department says funding for maintaining and replacing bins has not been able to keep up since the city implemented single-source recycling between 2010 and 2015, effectively doubling the number of bins it has throughout the city.

The department serves about 390,000 customers with a total of about 780,000 containers. It says it has devoted about $1 million per year to replacing the containers since 2006.

Arconic Corp., the Pittsburgh-based aluminum sheet, plate and extrusion provider, has released its preliminary earnings report for the first quarter ended March 31 and provided a business update regarding the impact of the COVID-19 pandemic on its business and operations.

April 14, Arconic’s parent company prior to the April 1 separation, Howmet Aerospace Inc., reported preliminary unaudited financial results for the quarter ended March 31, including certain financial information related to its former Global Rolled Products (GRP) segment, the underlying businesses that now comprise Arconic.

On the basis of that information, for the quarter ended March 31, Arconic says it expects to report revenue of approximately $1.6 billion, which is down approximately 12 percent year over year, with organic revenue expected to be down approximately 7 percent in light of disruptions in the automotive, commercial transportation and aerospace markets driven by COVID-19 and Boeing’s 737 Max production declines somewhat offset by growth in the industrial market. Segment operating profit is expected to be approximately $170 million, which is up approximately 26 percent year over year, driven by net cost reductions and favorable aluminum prices, partially offset by volume declines. The company says its segment operating profit margin is expected to increase approximately 310 basis points year over year to approximately 10.7 percent. Depreciation and amortization is thought to be approximately $55 million in the first quarter of 2020.

Separately, as previously disclosed, Arconic says it expects its corporate costs to be in the range of $75 million to $85 million on an annual run-rate basis beginning April 1, the date of the separation, which includes approximately $20 million of depreciation and amortization.

COVID-19 updates

Arconic Chief Executive Officer Tim Myers says, “In the few short weeks since Arconic’s launch as a standalone company, market conditions have been changing rapidly and unpredictably. Notwithstanding that, we believe that Arconic’s diverse end markets and geographic composition mitigate the impact on the company from any singular area of decline. Furthermore, despite the challenges that we currently face in North America and Europe, we are seeing positive momentum at our Chinese facilities that felt the full brunt of the COVID-19 pandemic in early 2020 and are now back to essentially normal production.”

He says the company’s Russian packaging facility is running fully, noting strong end-market demand.

“Moreover, our operating footprint benefits from a highly variable cost structure, and we are actively managing operations to effectively flex activity to respond to changing automotive and aerospace market conditions,” Myers says.

“As previously announced, in response to market conditions, we took a series of proactive actions to mitigate the impacts of the pandemic on our business. By our current estimates, we expect these cost savings to improve our financial profile by approximately $200 million,” he says.

Arconic resumed operations at its New York facility April 20, Myers says, adding that the company expects to ramp-up its operations at its Tennessee facility this week. He says the company remains “excited by the opportunities for growth and the enhanced capabilities that are nearing completion.”

Myers adds, “We are pleased with the recent announcement on April 22nd by the ITC initiating antidumping and countervailing duties trade case against 18 countries on common alloy sheet products and we expect this will benefit our operations and others in industrial aluminum processing.”

Chief Financial Officer Erick Asmussen says, “Our liquidity and financial position remains strong despite the pandemic’s impact to our business. We have in excess of a billion dollars of available liquidity today (inclusive of approximately $500 million of cash on the balance sheet at the time of our separation) and our current capital structure maturities are well into the future.”

He continues, “Our business is flexible and cash requirements are countercyclical, and we expect working capital will be a source of cash in the near team and, together with the benefit of the recent management actions to reduce costs, we believe we have adequate liquidity to operate the company in spite of ongoing uncertainties.”

Arconic is a provider of aluminum sheet, plate, extrusions and architectural products for the ground transportation, aerospace, industrial, packaging and building and construction markets.

Constellium SE, the aluminum products company that is headquartered in Paris, has reported results for its first quarter, ended March 31, indicating that its shipments declined by 5 percent to 393,000 metric tons compared with the first quarter of 2019 and revenue declined 6 percent to 1.4 billion euros. The company reports a net loss of 31 million euros for the first quarter of this year compared with net income of 24 million euros Q1 2019. Its adjusted earnings before interest, taxes, depreciation and amortization was 147 million euros for the recently completed quarter, a 9 percent increase compared with Q1 2019.

Jean-Marc Germain, the company’s chief executive officer, says, “The COVID-19 pandemic has introduced a new set of challenges for Constellium, but we remain confident in our ability to navigate through the crisis. Our first priority is the health and safety of our employees and their families. To this end, we have implemented a number of initiatives at our manufacturing sites to protect our employees. We also remain highly focused on meeting the demand of our customers in critical industries, such as beverage, food, health care, national defense and transportation."

Germain says Constellium’s increase in adjusted EBITDA was driven by strong performance in its Packaging and Automotive Rolled Products (P&ARP) and Aerospace and Transportation (A&T) segments as well as improved performance in Automotive Structures and Industry (AS&I).

"Constellium took swift actions in response to the COVID-19 pandemic,” he says. “We are aggressively reducing costs, optimizing our working capital, further reducing our capital spending and significantly augmenting our liquidity position. I am confident that we are well-positioned to weather this storm and emerge as a stronger company. Given the uncertainty around the extent and duration of the effects of the pandemic, we are withdrawing our guidance until our visibility improves."

The company says it has increased cleaning, sanitation, workspace protection and social distancing at its manufacturing sites and other facilities as well as enacting business travel bans, strict policies for visitors and suppliers and a work-from-home policy for employees, where possible. 

Constellium says its shipments were down in during the first quarter across all three segments of its business. Revenue also decreased because of lower shipments and lower metal prices, though they were partially offset by improved price and mix across all three segments. Its net loss of 31 million euros primarily was related to a noncash unfavorable change in unrealized gains and losses on derivatives related to Constellium’s commodity hedging positions. The company attributes its increase in adjusted EBITDA relative to the first quarter of last year to improved results in the P&ARP and AS&I segments.

In its P&ARP segment, adjusted EBITDA increased 12 percent for the quarter compared with the first quarter of 2019 owing to good cost control and improved price and mix, partially offset by lower shipments from its European plants because of COVID-19-related weakness late in the quarter, Constellium says.

For the first quarter of 2020, shipments of 269,000 metric tons decreased 4 percent compared with the first quarter of last year because of lower shipments across automotive, packaging and specialty products. Revenue of 752 million euros decreased 9 percent compared with the first quarter of 2019 primarily because of lower metal prices and lower shipments.

In its A&T segment, first-quarter adjusted EBITDA was comparable to the first quarter of 2019 as improved price and mix were offset by lower shipments and higher raw material costs, the company says. For the first quarter of 2020, shipments of 59,000 metric tons decreased 10 percent compared with the first quarter of 2019 on lower transportation, industry and other rolled product shipments owning to continued demand weakness in Europe and North America. Revenue of 359 million euros decreased 5 percent compared with the first quarter of 2019 on lower shipments and lower metal prices, partially offset by improved price and mix, Constellium says.

In its AS&I segment, first-quarter adjusted EBITDA increased 17 percent compared with the first quarter of 2019 on improved price and mix and solid cost control, the company reports. Shipments of 65,000 metric tons were down slightly compared with the first quarter of last year. Revenue of 342 million euros was comparable to the first quarter of 2019 as improved price and mix were offset by lower metal prices.

COVID-19 operations update

The outbreak of COVID-19 and measures to prevent its spread began to impact customer demand in Europe and in North America during March and continued into April, Constellium says. Automotive original equipment manufacturers (OEMs) began curtailing operations in mid-March, and such operations remain largely curtailed in North America and Europe. The company reports that it is preparing for restarts in May at its automotive plants.

Aerospace OEMs also have announced reductions or curtailments to their operations, the company notes.

However, demand from Constellium’s packaging customers has remained strong.

The company says it has adjusted operating levels at the relevant manufacturing sites in line with changes in its customers’ operations. “With the exception of our automotive-specific plants, all of our plants continue to operate and produce for critical end-markets, such as beverage, food, health care, national defense and transportation,” Constellium says.

While the situation remains fluid, the company says it will continue to monitor the impact of the pandemic and anticipate continued temporary reductions in operating levels at many of its manufacturing facilities.

Constellium says it has taken a number of actions to offset the financial impacts of the COVID-19 pandemic. This includes reducing input purchases, all discretionary spending and labor costs; managing trade working capital; targeting capital spending of 175 million euros in 2020 (down 96 million euros compared with 2019); and building liquidity, including through the delayed draw term loan; potentially loans under government-sponsored borrowing programs in France, Germany and Switzerland; and other available governmental aid programs.

Outlook

Given the continuously evolving nature of the COVID-19 pandemic, Constellium says it cannot forecast with reasonable accuracy the implications of the crisis or the environment that will follow, making it prudent to withdraw all financial guidance until visibility improves.

Capstone Headwaters, a Boston-based independent investment banking firm, released its Q1 Waste & Recycling Executive Summary April 27. The executive summary reports that merger and acquisition (M&A) activity in the waste and recycling industry increased 48 percent in the first quarter, with nearly 35 percent of deals in the environmental services (consulting, waste technologies, and equipment) segment. Private equity firms accounted for 46.5 percent of total announced or completed deal volume. 

While many recycling programs are halted and commercial waste volumes have declined as the COVID-19 pandemic has shuttered businesses across the country, the report predicts that operators that serve residential and medical waste markets are poised to weather the storm without any significant disruptions to cash flows. However, Capstone says that the uncertainty in the global marketplace has prompted active buyers to increase deal selectiveness, while maintaining an appetite for businesses that generate steady cash flows, display recessionary resilience and sustain strong balance sheets.

The report shows that there were 15 completed M&A deals in the environmental services sector in the first quarter, nine in the liquid waste sector, seven in traditional collection, five in recycling, five vertically integrated deals and two in hazardous waste.

The full Q1 Waste & Recycling Executive Summary is available online.