Waste Management Review talks to some of Australia’s largest waste management companies about the role of scalability in the future of the waste sector.
This article is the first in a three part series featuring Bingo Industries, Cleanaway, Corio Waste Management and SUEZ.
Over the past few years, Australia’s waste management giants have looked to becoming vertically integrated businesses. One of Australia’s largest waste management companies, Cleanaway acquired health and waste disposal giant Toxfree in 2018.
Most recently, building and demolition (B&D) market leader Bingo Industries acquired Dial A Dump Industries (DADI) and set its sights on building a resource recovery park as part of the acquisition.
Cleanaway has also looked to potentially take on SKM Recycling after acquiring its debt for $60 million.
Waste Management Review explores the role of scalability and vertically integrated business models in the waste sector’s future.
BINGO TAKES IT TO THE NEXT LEVEL
Daniel Tartak, Bingo Industries Managing Director, believes that further market consolidation will support the waste industry during a challenging phase.
“The industry is still very fragmented. We’ve seen consolidation in the last few years, but there still needs to be some more consolidation over the sector across the country,” Daniel tells Waste Management Review.
“It still remains very competitive, even following these acquisitions [DADI and Toxfree]. I don’t think much is changing in the industry.”
Daniel says Bingo’s DADI acquisition allows the company to compete with the multinationals on a greater scale with vertically integrated assets. He says it comes at a critical time for the sector where recycling infrastructure investment is needed at a greater level.
“There’s many small players who don’t invest into their business and the sector, and right now we need that,” he says.
“We’ve done it to a large extent over the last few years. We’ve poured almost $1 billion into acquisitions and key infrastructure so as some of the smaller players start getting amalgamated or consolidated you will see more investment.”
Bingo Industries agreed to divest its recycling facility in Banksmeadow, NSW to ease ACCC competition concerns regarding its $578 million acquisition of DADI. The ACCC required Bingo to divest the facility to maintain competition for B&D processing in Sydney’s eastern suburbs.
Following this, the ACCC announced it would not oppose the acquisition after accepting a court-enforceable undertaking from Bingo to divest its Banksmeadow processing facility. CPE Capital was announced as the buyer for $50 million in September.
In announcing the company’s full-year results in August, Daniel noted that the asset base secured through the acquisition would transform the business for many years to come. Some of its most recent redevelopments include Bingo’s first recycling centre in West Melbourne, Victoria, having first entered the market in 2017 through several strategic acquisitions.
Its total network capacity, including contribution from the DADI acquisition, increased from 2.2 million tonnes in financial year 2017-18 to 3.8 million tonnes in 2018-19. It will be closer to 4.4 million tonnes by the end of 2019-20 allowing for Patons Lane and Mortdale redevelopments.
In 2019, Bingo reconfigured its NSW network as part of the DADI integration by rationalising some sites and converting others into transfer stations in a move to attract and aggregate waste volumes for processing at its advanced recycling centres.
Bingo expects solid growth in 2019-20 underpinned by a full-year contribution from its Patons Lane Recycling Centre and Landfill, West Melbourne Recycling Centre and DADI. The business also expects to benefit from the Queensland waste levy and associated pricing increases.
Through Eastern Creek, Bingo is turning its attentions to building an 82-hectare Recycling Ecology Park in the middle of western Sydney to accept putrescible and non-putrescible waste at a large scale.
Strategically positioned near the Western Sydney Airport and the Sydney CBD, it currently can handle two million tonnes per annum and in the future will comprise a new C&I processing facility, refuse-derived fuel, alternative waste treatment facility and new recycled product manufacturing facility.
Daniel says that the new $60 million C&I processing facility at Eastern Creek, comprising the most sophisticated equipment in the world, should be operational in about 12 months’ time.
He points to the importance of a vertically integrated business model to maintaining a chain of custody on the movement of waste. Likewise, he notes a vertically integrated company allows for scalability.
“When you become a large business, the fact that you have a large quantity of waste can sometimes work to your detriment, so controlling access to collections, transfers, recycling and landfill gives you control over your business,” he says.
On questions of whether one company owning multiple assets is reducing choice for customers, Daniel says that this would only potentially be the case in a duopoly structure.
“You have six large players so there is plenty of choice even if companies control those assets. Even with consolidation over the last few years, the market is very fragmented. There’s still six big players and hundreds of small players.
“Every time you tender, you are facing five big opponents and a heap of different small private companies.”
Daniel says that through Bingo’s five-year plan, the company plans to build multiple recycling facilities. He says these will be able to handle all waste streams in the market from putrescible MSW, C&I waste to non-putrescible, C&I and B&D waste, separating them and then turning most of those individual waste streams into products to sell back to market.
“It’s [Eastern Creek] a master integrated asset able to handle all waste streams, with a focus on landfill diversion. It will be one of Sydney’s key infrastructure assets, which the market will rely on to meet state recycling targets going forward,” he says.
As Bingo continues to grow, Daniel says the company intends to maintain its leading position in the B&D sector while at the same time expanding its C&I business.
“We’re five years old in the C&I sector and a relatively small player in NSW and Victoria, so we really want to grow that business in both states, but also geographically around the east coast of Australia,” Daniel says.
“We’ve (the waste sector) been out of sight, out of mind for too long and now is the time for industry to change and improve.”
Next week’s instalment features an interview with Cleanaway CEO Vik Bansal.