Hazardous

Business model

The Hazardous Waste Division is made up of two businesses: Reym and ATM. Reym is a leading industrial cleaning company in the Netherlands, also taking the leading role in promoting the Shanks Total Care solution (cleaning, transport and waste management) for heavy industry, petrochemical sites, oil and gas production (both on and offshore) and the food industry. ATM is one of Europe’s largest sites for the treatment of contaminated soil and water, as well as for the disposal of a broad range of hazardous waste such as waste paints and solvents. The business model is shown in the graphic below.

Reym’s highly experienced and trained cleaning teams use specialist equipment to deliver a reliable and safe cleaning process in a market where the cost of safety and quality is of paramount importance. ATM is a leader in water and soil treatment because of: the cost advantages provided by its fully integrated plant processes; its waterside location for the cleaning of ships; and its excellent record of compliance with the many environmental controls and permits required in the hazardous waste market.

Market overview

The core market drivers for the Hazardous Waste Division are industrial activity in the Benelux, particularly in the oil and gas sectors and in the Rotterdam region, coupled with construction and site remediation activity across Europe.

The oil and gas sector represents over half of the revenues of the Hazardous Waste Division. As reported in the Chief Executive’s review, the slump in oil price has had significant second order impacts on the productivity and profitability of the Reym cleaning division, on profitable sludge volumes into ATM and on the value of waste oils produced during treatment. This has been exacerbated by reductions in gas production in the northern Netherlands.

We believe that these impacts are all short to medium term in nature and will reverse in due course, possibly with pent up demand. On a longer-term basis, activity in the Benelux has stabilised in the last year and Rotterdam has continued to remain busy with growth in waterside waste volumes during the year.

The volume of contaminated soil available for treatment in Europe has continued to be affected by the budgetary constraints of governments. This results in a continued downward pressure on volumes available and hence on pricing. However, the long-term pipeline remains sound, with many sites earmarked for brownfield redevelopment. Short-term decreases in the volume of soil available are offset by increased volumes of tar containing asphalt grit as a result of a successful industry lobbying campaign to have this material, produced during road surface replacement, treated within the Netherlands, albeit at lower pricing. We have also opened up new market opportunities and technologies, such as the use of ultrasonic cleaning.

HAZARDOUS WASTE BUSINESS MODEL

Products and technologies

The Reym business operates bespoke and specialised cleaning equipment in order to serve its clients. These include trucks for onshore work and specialist transportable units for offshore work. Our solutions use ultrasonic cleaning, high pressure cleaning, vacuum cleaning, chemical cleaning and decontamination. Liquid waste streams (including those created by the cleaning process) can be collected and transported to one of our waste treatment facilities. Reym operates a fleet of over 150 vehicles and units from sites across the Netherlands. Most of these sites are also equipped and licensed for treating hazardous waste.

Contaminated soil can be cleaned by washing or treated thermally (depending on contamination levels). We operate a thermal treatment facility with over one million tonnes of capacity. The ATM unit passes contaminated soil through a kiln in order to produce clean and reusable soil, with the effluent gases being carefully scrubbed of all contaminants.

Contaminated water is removed from ships at our jetty at ATM or delivered by from trucks, which can themselves then be cleaned on site. The water is put through a decanter to remove solids and oils; it is then treated in five biological treatment tanks in which bacteria cleans the contaminants and produces clean water.

Paint and solvent waste, along with sludges removed from the contaminated water, is treated in a gasification process to produce largely inert ash.

Strategy

The strategy of the Hazardous Waste Division is to continue to grow in target markets through capacity expansion, particularly in water treatment. Specifically, the strategy is to:

  • Invest in environmental excellence and increasing treatment capacity;
  • Expand the range of inputs requiring thermal treatment;
  • Broaden commercial coverage and geographic footprint; and
  • Drive further synergies and productivity gains.

Financial performance

HAZARDOUS Data

Hazardous Waste delivered a robust performance in 2015/16 given the challenges in its core end markets. Revenues increased by 6% to €186m and trading profit by 1% to €21.2m. Margins were 11.4%, reflecting the change in mix and productivity pressures, and the return on assets remained attractive at 22.7% despite the addition of new assets during the year.

Reym saw revenues increase by 1% during the year, primarily reflecting additional activity under its Total Care contracts that is less profitable than the core cleaning revenues, which came under significant price pressure. As a result, capacity was somewhat reduced in the second half to match lower expected demand during 2016/17. Revenues at ATM increased by nearly 10% as capacity installed over the past two years allowed record throughput of soil and water treatment. These high volumes drove encouraging profit growth but the total performance was impacted by a 15% fall in intake of high value industrial sludges and an 80% fall in the value of waste oil.

Operational review

ATM, our hazardous waste treatment site, has an advantaged location and cost position with regard to its soil and water treatment processes, which have therefore been the focus of investment to increase capacity and capability. End markets were challenged throughout the year, as reported above.

ATM had a strong operational performance during the year, processing record throughput of both soil and water. This was notwithstanding two operational challenges experienced in the first half. In July the waterside operations were contaminated by large quantities of molybdenum delivered by a customer under a wrong waste code. In September we reported that the operating system had been over-reporting soil volumes processed in the last quarter of 2014/15 and the first quarter of 2015/16. The process issue was resolved and additional equipment and processes added through the year to ensure more accurate weighing of soil into the process and measurement of soil stocks in the warehouses. The ability of the plant to operate towards its permitted capacity has been driven by our investment in significant additional environmental and emissions control equipment in the prior year, and the commissioning of extra storage and handling capacity in the current year. This included the completion of our new 30,000m3 water storage tanks, enhanced cooling equipment for the bio-reactors, a second ship degassing line and a 40% extension to our jetty for ship cleaning and unloading. In addition to physical investment in assets, we have been investing heavily in developing our staff capabilities in order to apply for Seveso III classification, which was granted just after year end. Seveso III is the highest level of qualification and is required for plants that handle dangerous and flammable materials in large quantities. The award of the Seveso III permit, subject to final audits this year, is the culmination of over two years’ work and preparation.

Reym, our high end industrial cleaning business, continued to focus on expanding its range of services in order to offset price and volume declines in industrial cleaning activities. This has included further roll-out of the Shanks Total Care solution in which industrial cleaning and the transport and treatment of both hazardous and nonhazardous waste can be managed under a single contract. The flagship initiative has been the investment of our €10m Shanks Total Care centre at Theemsweg in the heart of the Europoort at Rotterdam. This has been built and commissioned on time and on budget. Waste is now being delivered to Theemsweg and the first ship containing batched waste was sent to ATM in December 2015. In addition, the new ultrasonic cleaning unit has been transferred to Theemsweg where it is already gaining traction with its efficient means of deep cleaning heat exchangers. Business conditions remained challenging in serving offshore exploration, which has seen material reduction in activity and in the north east which serves the reduced onshore gas market.