Aluminum rolling and recycling company Novelis Inc., Atlanta, a part of the Mumbai-based Aditya Birla Group, has reported net income attributable to its common shareholder of $107 million for the third quarter of its 2020 fiscal year. In the prior-year period, that figure was $78 million. Excluding tax-effected special items in both years, the company reported net income of $132 million in the third quarter of fiscal 2020 compared with $101 million in the prior-year period. This 31 percent increase is primarily because of higher adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), according to the company.

Adjusted EBITDA increased 7 percent to $343 million in the third quarter of fiscal 2020 compared with $322 million in the prior year’s third quarter, primarily driven by portfolio optimization efforts, operating cost efficiencies and favorable foreign exchange, Novelis says, which was partially offset by less favorable recycling benefits because of lower aluminum prices. Adjusted EBITDA per ton reached $430 in the quarter as compared with $403 in the third quarter of fiscal 2019.

The company says its net sales decreased 10 percent from the third quarter of 2019 to $2.7 billion for the third quarter of fiscal 2020, driven by lower average London Metal Exchange (LME) aluminum prices and local market premiums. Flat-rolled product shipments were in line with the prior year, at 797,000 metric tons.

"Novelis continues to perform very well both operationally and financially, delivering another set of strong results in the third quarter," says Steve Fisher, the company’s president and CEO. "At the same time, we have made excellent progress advancing our major organic expansion projects in the U.S., China and Brazil, allowing us to continue to grow with our customers and better compete against steel and other materials."

Each of these projects continues to progress on time and on budget, according to the company. Notably, its greenfield automotive finishing plant in Guthrie, Kentucky, is in the commissioning process, with commercial shipments to customers expected to begin in the coming months.

Fiscal year-to-date free cash flow before capital expenditures improved 43 percent over the prior year to $483 million, driven primarily by higher adjusted EBITDA and favorable working capital combined with lower aluminum prices. Capital expenditures doubled year over year to $422 million for the first nine months of fiscal 2020, mainly to support strategic investments in incremental rolling, recycling and automotive finishing capacity. As a result of this increased capital spending, fiscal 2020 free cash flow of $61 million compares with $127 million in fiscal 2019, Novelis says.

"Our recent successful bond issuance in January is a reflection of the consistently strong financial performance Novelis has delivered quarter after quarter, as well as our ability to maintain disciplined net leverage levels despite a significant increase in capital expenditures to fuel future growth," says Devinder Ahuja, senior vice president and chief financial officer, Novelis.

As of Dec. 31, 2019, the company says its total liquidity position of $1.9 billion was strong while it also reduced its net leverage ratio to 2.3x as compared to 2.8x in the prior-year period.

Update on Aleris acquisition

On July 26, 2018, Novelis announced it signed a definitive agreement to acquire Aleris Corp., Cleveland. The company initially had said it expected to close the transaction by Jan. 20 of this year. While Novelis has received approval from antitrust regulators in China, the U.S., and the European Commission (EC) to close the transaction, the company must divest some operations to appease regulators. In the U.S., Novelis says its ability to acquire Aleris' automotive plant in Lewisport, Kentucky, will be resolved through an arbitration proceeding in the fourth quarter. The EC's approval is conditioned on Novelis agreeing to divest Aleris' Duffel plant to a buyer approved by the EC. The EC is currently reviewing the proposed buyer of the plant, Liberty House Group, a UK-based industrial conglomerate. Novelis says it remains fully committed to completing the transaction and continues to work with all relevant parties to do so as quickly as possible.

The Culver City, California-based Container Recycling Institute (CRI) is predicting an 80 percent global beverage container recycling rate if the recently proposed Break Free From Plastic Pollution Act of 2020 was to be signed into law in the United States.

CRI says the legislation would, if passed, “likely increase the U.S. recycling rate for bottles and cans from the current 33 percent to 80 percent.” Globally, it could mean “that more than 190 billion of the 250 billion bottles and cans sold annually would be captured – almost 2.5 times the 80 billion recycled in 2017,” writes the group.

CRI says it provided input to legislators who authored the bill, which CRI says has been designed to “enable consumers to return empty bottles and cans to a recycling location and get back the 5-cent, 10-cent or 15-cent deposits they paid upon purchase.”

Currently, 10 U.S. states have bottle bills. The average recycling rate for bottles and cans on deposit in those states is 66 percent, which CRI calls “a stark contrast to the average 23 percent recycling rate for beverage containers without deposits.” (The CRI includes plastic and glass bottles in these figures, along with the aluminum cans known in the scrap industry as used beverage containers, or UBCs.)

“A national bottle bill would introduce the most effective beverage container recycling system available throughout the nation, while bringing much-needed modernization to the process,” states CRI President Susan Collins.

Portland-based Routeware Inc., a provider of “smart-city” fleet automation solutions for waste haulers and municipalities, has announced it has acquired Core Computing Solutions Inc. (CCS), Jacksonville, Florida. The purchase of CCS expands Routeware’s portfolio of solutions that provide integrated end-to-end automation of municipal and private waste fleet operations.

“In addition to a shared zeal for quality solutions and exceptional customer service, CCS and Routeware already share a seamless data connection between products. Unlike some companies who cannot say when or if acquired products will ever interconnect, we offer products that already work together,” says Tom Malone, CEO of Routeware.

CCS CEO Nate Piersall says, “Our team is very excited to form this union with Routeware and the portfolio of 'best-in-class' products it brings to our clients. Offering a one-stop-shop for leading-edge technologies in a single platform has always been a dream and today it has been realized for our users. This is a total win for our clients who get a much larger organization behind us plus access to leading-edge technologies like route optimization and onboard video/sensors.”

Malone will remain as CEO of Routeware Global, and Piersall will assume the role of president of CCS. CCS will continue to operate in Jacksonville as a semi-autonomous company under Routeware Global.

Municipal recycling programs have been evolving in recent years. Ever since China introduced National Sword, recycling contracts and the economics around recycling have shifted. 

Republic Services

Richard Coupland stepped into a leadership position in the waste and recycling industry only a few years before National Sword came into play. Phoenix-based Republic Services appointed him its vice president of municipal sales in 2015. He is responsible for overseeing the $3.4 billion municipal sales division of the company. He provides leadership and guidance to about 100 municipal managers at Republic who oversee about 2,400 different partnerships for the company across the country.

Before joining the waste and recycling industry, Coupland spent about 20 years in the defense industry. While at a first glance the two industries might seem different, Coupland says he realized some similarities between them in his first few months of working at Republic Services.

“There’s a much closer alignment between the defense industry and recycling than people might understand,” he says. “My whole career, I’ve been doing business with governments, whether it was international and federal all the way down to the state and local level. The ability to understand the needs of a government and then shape the services that we offer to fit their needs has always been a comfort zone for me. So, it was actually a very easy transition for me other than learning some of the lingo on what’s important in providing recycling and waste services for cities and counties around the country.”

In the interview that follows, Coupland discusses ways communication can be improved between the recycling industry and the municipalities it serves. 

Recycling Today (RT): What is it like to work for Republic Services? 

Richard Coupland (RC): Having come from working at other large Fortune 100 companies in my career, I have not seen a culture that’s as focused on its people, its drivers and its technicians that make up the majority of our workforce as I do at Republic. And that starts with leadership. Our CEO began as a driver. He’s a bit of a legend—Don Slager is known for his achievement and his leadership of the organization. When you see a company that puts so much emphasis back into the workforce, it’s a good reason why we’re rated one of the best places to work in America. 

[There is] respect for each other within the organization and a focus on training and keeping our leaders up to speed and aware of how to continue to improve in what they do every day and how they look at their responsibilities. It really comes from the top down in terms of corporate leadership and how they view the employees that they lead. 

RT: Municipal recycling is consistently changing. What was it like for you coming into a changing industry?

RC: It wasn’t an uncomfortable place for me to stand. Again, my background came from the defense industry, where every day was filled with challenges and the need to adapt. As the recycling industry began to face its headwinds and ultimately face the crisis with China exiting [the market], that created the urgency to get very clear and to move very purposefully to help our cities around the country understand what they’re facing and what they need to do. That all is a very comfortable space for me in terms of knowing my role and informing and equipping and supporting my municipal team to help their cities navigate the crisis. 

RT: What are some projects that you have helped to lead at Republic Services in recent years?

RC: I’m really proud of the partnerships that I have with my colleagues here at Republic Services to develop campaigns like Recycling Simplified. We started that a couple of years ago in terms of recognizing the need for improved education—to touch the cities and help them understand how to improve their programs and their contract; but. more importantly, we also need to improve the public education and awareness in the United States on what to recycle and how to recycle properly. 

So, the investments to create and put public education materials out through the Recycling Simplified website are really instrumental in giving a consistent message from coast to coast. That’s a project that has really given us some nice, early results as we’ve run some pilots and watched the results in terms of contamination and improvement. 

RT: What would you say are some emerging trends you have noticed with municipal recycling? 

RC: The most visible and the most written about is the headwinds and challenges that face the recycling industry in the country today. I’m proud of my team. I think we’ve been very transparent and very forthcoming in helping to tell the story [about recycling] in a way that’s clear and understandable so that an elected official in the middle of the United States can understand how China’s decision to exit the recycling industry as a commodity buyer about two-to-three years ago translates to them. 

Being able to connect the dots and expose the real pressures and the real issues and make some very well-thought recommendations on how to keep their programs durable and robust—those are all very regular conversations that we’re having, not just with Republic Services’ partners but with any city that’s looking for advice. 

Roughly twice a year, we have run a recycling webinar for anyone to dial into from a municipal perspective and give them an update on what’s been happening in the industry [and] where the pressure points are. We typically have between 350 and 600 participants on these webinars, which is a very good indication that it’s a critical topic and folks are hungry for information on what’s going on [with recycling] and how they should proceed.

RT: What are some things Republic is doing since National Sword came out in February 2018  to change the way it operates? What’s been your role in those changes?

RC: So, the kind of the root of the challenge that China’s decision has created is an economic one. And what I mean by that is the recycling contracts and the recycling programs in America were originally based on two simple premises. One of them was that we didn’t want to charge the resident very much to begin to recycle. So, we have contracts across the country where the average price that is paid is dramatically less than the price that the resident pays for their solid waste to be collected and properly disposed. But the economic operations are the same—it’s the same truck, it’s the same driver, it’s the same house on a different day. So, we undercharged the resident because we were able to sell the recyclables in the market for a really good return, and a lot of people think that people in the industry were making tons of money. The reality was they were making revenue, but we needed to pay back the drivers and operations. That’s kind of a myth we created for the public—that recycling was free and tons of money [could] be made doing it. 

When China stepped away, as 30 or 40 percent of the volume in the world or 30 percent in America went to China, that created a surplus in the commodity market, and the value of all that material now has dropped by 80 to 100 percent in an 18-month period. Now, we have all these long-term contracts, and the recycling is upside down because we don’t make the money on the value to pay for the trucks and the drivers and the equipment. So, that has been the most dramatic effort that I’ve been working on—to shed light on the simplicity of that fact. It’s not as much about the contamination and cleaning up of the stream; that’s a piece of the equation, but if cities don’t reset their contracts to stand on their own, then more and more small and midsized companies are going to go out of business. And as a country, we need them—we desperately need that capacity and those people to process that material. 

RT: Cleaning up contamination is a big concern for many MRFs. How is Republic Services working to clean up quality at its MRFs?

RC: It’s twofold. We are making investments and more advanced technology to yield a better product. We’re also investing in more labor and slowing down some of our processing in some facilities so that the equipment and human labor can do their job to find and remove contaminants that shouldn’t be in the stream. 

The flip side of that is all that heavy investment, millions of dollars we pumped into education and the Recycling Simplified campaign, so that we can teach the public what to recycle and how to do it better so that the quality of what comes into each of our facilities is better. 

Republic Services

RT: Would you say quality at Republic MRFs improved in 2019 compared with 2018? 

RC: I’ll say in the municipalities that have embraced the new public education best practices, we’ve seen really encouraging results. An example, we took a town in Texas that we have partnered with and we’ve seen a 10 percent improvement in contamination in as little as eight weeks by putting very targeted education materials into those communities and portions of the communities that were the worst offenders. There’s a cost to run that education, but as a best practice, we can prove now with real data that if a city wants to apply that program and then keep that fresh year over year, they can drive behavior in their community, and that drives better quality and more value for the commodity that you’re recycling.

RT: Contracts between municipalities and haulers and MRFs are also changing. What changes do you think need to be made with municipal recycling contracts?

RC: When it comes to the contracts themselves, there are four things. You need to reset the contract to be on those terms that are durable and cover the two services. Next, evaluate the materials that are in your program so that you are recycling the right material, not any material. So, the right materials would be the things that have value and also are environmentally beneficial to the planet. You want a really robust public education program that’s not just a one-time occurrence; it actually is in the contract to keep people current on what trends are evolving around them. And then, your metrics and how you measure success have got to be well thought out. 

Today, in America, we only talk about success of recycling in weight by the ton, and that’s encouraging people to recycle anything instead of the right things. That’s an element that cities need to reevaluate. There should be some guidance on a consistent measurement of success across the country if we want to move to a better place. 

Richard Coupland is the vice president of municipal sales at Phoenix-based Republic Services. More information is available at www.republicservices.com.