Renewi PLC: A Deep Dive into the Waste-to-Product Business

Renewi PLC, a leading European waste-to-product business, has recently announced its unaudited results for the year ended 31 March 2023. Despite facing challenges such as lower recyclate prices and high inflation, the company managed to maintain revenue and underlying EBIT similar to the prior year. Renewi's strategic initiatives, including Renewi 2.0 and Mineralz & Water recovery, have delivered €20m of additional EBIT so far, with a target of €60m by FY26. The company's recycling rate increased to 63.6%, resulting in 7mT of secondary materials being put back into reuse. Looking ahead, Renewi expects recycled metal, paper, and plastics prices to remain stable, with price increases and investments covering cost inflation. The company aims to accelerate revenue growth, targeting €3bn in five years at high single-digit margins, driven by market share gains, advanced recycling, and targeted acquisitions.



Renewi PLC's debt-to-EBITDA ratio has evolved significantly over time, reflecting the company's strategic decisions and market conditions. In 2022, the ratio stood at 1.8x, up from 1.4x in 2021, primarily due to the acquisition of Renewi Westpoort (Paro) during the year. This acquisition increased core net debt to €370.6m, contributing to the rise in the debt-to-EBITDA ratio. However, Renewi has been actively working to reduce its debt levels, targeting a deleveraging of 0.4-0.5x per annum to reach a 2x ratio. The company's focus on cost control, customer price increases, and strategic initiatives to deliver additional EBIT by FY26 will be crucial in achieving this goal.



Renewi PLC's interest expense and debt repayment obligations have significantly impacted its cash flow and profitability. In 2024, Renewi's core net debt increased to €370.6m, up from €303.0m in 2022, primarily due to the acquisition of Renewi Westpoort (Paro). This increase in debt led to a rise in net debt to EBITDA ratio to 1.8x, up from 1.4x in 2022. Despite this, Renewi managed to maintain its underlying EBIT margin at 7.0% in 2023, similar to the prior year. However, the company's statutory profit after tax decreased by 12% to €66.6m in 2023, reflecting the impact of higher interest expenses and debt repayment obligations. To mitigate these effects, Renewi has been focusing on cost control and customer price increases, as well as strategic initiatives to deliver €60m of additional EBIT by FY26.

Renewi PLC's current P/E ratio is 137.91, significantly higher than its historical average of 10.95 (as of 2024). This high valuation may be due to the company's recent strategic progress and strong performance, but it also indicates potential overvaluation compared to its historical trends. In comparison, the industry average P/E ratio is 18.5, suggesting that Renewi PLC is currently more expensive than its peers.



In conclusion, Renewi PLC's waste-to-product business has shown resilience in the face of market challenges, with strategic initiatives driving growth and improved profitability. The company's debt-to-EBITDA ratio evolution reflects its strategic decisions, and its high P/E ratio suggests potential overvaluation compared to historical trends. As Renewi continues to focus on cost control, customer price increases, and strategic initiatives, investors should monitor the company's progress towards its debt reduction targets and evaluate its valuation in the context of its peers and historical trends.