Clean Harbors Navigates Growth Amid Challenges in Q1 2025
15min read Clean Harbors Inc. (NYSE: CLH) delivered a resilient first quarter of 2025, balancing strategic investments with operational discipline to achieve modest revenue growth despite headwinds. The environmental services giant reported a 4% year-over-year revenue increase to $1.43 billion, driven by cross-segment contributions and recent acquisitions. Yet, net income dipped to $58.7 million, underscoring the costs of expansion. Below is a deep dive into the numbers, risks, and opportunities shaping this critical quarter.
Ask Aime: How did Clean Harbors Inc. navigate first-quarter headwinds?
Core Performance: A Story of Divergence
The Environmental Services (ES) segment, which accounts for 85% of revenue, grew 3% to $1.21 billion, fueled by HEPACO’s Field Services unit (up 32% post-acquisition) and strong incineration utilization. The Kimball incinerator—completed in late 2024—boosted incineration capacity, with utilization hitting 88% (excluding Kimball) and pricing rising 5% due to improved volume mix. This contrasts with a 10% decline in Industrial Services, as refinery maintenance delays hurt demand.
Ask Aime: What's the outlook for Clean Harbors after Q1 2025?
Meanwhile, Safety-Kleen Sustainability Solutions (SKSS) surged 9% to $222.7 million, benefiting from the Noble Oil acquisition and a strategic pivot to higher-margin charge-for-oil (CFO) pricing models. Cost-cutting in SKSS, including reduced used-oil collection expenses, offset weak base oil prices, a trend management expects to reverse in coming quarters.
Profitability Pressures and Balance Sheet Trends
While Adjusted EBITDA rose 2.1% to $234.9 million, margins dipped to 16.4% due to elevated depreciation from acquisitions and the Kimball project. Cash reserves fell to $489 million from $687 million at year-end, reflecting $55 million in share repurchases and $119 million in capital expenditures. Total debt remained stable at $2.77 billion, suggesting disciplined financial management.
The company reaffirmed its full-year 2025 guidance, projecting $1.15–$1.21 billion in Adjusted EBITDA (a 6% increase over 2024) and $460 million in adjusted free cash flow—a 29% year-over-year jump. This optimism hinges on Kimball’s full utilization, HEPACO synergies, and emerging PFAS remediation demand.
Risks and Resilience
Key risks include macroeconomic softness in industrial sectors and trade policy uncertainty. While SKSS faces headwinds from depressed base oil prices, management highlighted cost discipline and partnerships like the Castrol Group III oil expansion as stabilizers. The ES segment’s diversification—spanning incineration, industrial waste, and PFAS services—buffers against single-sector downturns.
Safety metrics also shone, with a record-low TRIR of 0.46, underscoring operational excellence. This stability is critical for a company handling hazardous materials, where accidents can trigger costly liabilities.
Conclusion: A Steady Hand in Volatile Markets
Clean Harbors’ Q1 results reflect a company executing on long-term strategies while navigating short-term challenges. The Kimball incinerator and HEPACO integration are clear growth levers, with SKSS demonstrating resilience through pricing and cost controls.
With free cash flow expected to rise 29% in 2025—supported by lower capex ($370–$400 million) and higher operating cash—Clean Harbors is positioned to deleverage its balance sheet or return capital to shareholders. The stock, trading at ~11x 2025E EBITDA, appears undervalued relative to its 5-year average of 12.5x.
However, investors must monitor SKSS’s exposure to commodity prices and the pace of PFAS regulatory adoption. Despite these risks, Clean Harbors’ diversified revenue streams, strong safety culture, and disciplined capital allocation make it a compelling play on the $363 billion global environmental services market. For now, the first quarter sets a solid foundation for the year ahead.
