Hazardous waste slowdown depresses profits at Shanks

Shanks, the waste disposal group, blamed the depressed state of the hazardous waste market in Britain and one-off problems in Belgium for a fall in first-half profits.

The group made a trading loss in its chemical services division and said intense competition and low prices had squeezed margins.

Michael Averill, the chief executive, said that it would take until late next year before the hazardous waste market improved. He is counting on the introduction of a European directive that would phase out landfill sites.

However, analysts cautioned that the situation was likely to get worse before it got better as competitors slashed prices to maximise returns before the directive becomes law.

Mr Averill said problems in Belgium, where trading profit fell 23 per cent to £6.5m, were "one-off and overwhelmingly behind us". He added: "We have learnt our lesson and got a better handle on cost control."

Shanks, which disposed of thousands of carcasses of cattle killed after the foot-and-mouth epidemic, yesterday reported an 18 per cent fall in pre-tax profits to £17.7m from £21.5m on sales up 8 per cent to £271m.

The company said that barring unforeseen circumstances, which analysts said had a tendency to appear in Shanks's results, it was "confident of progress in the current year as a whole". Mr Averill said he was "encouraged" by the opportunities for the company from the Government's private finance initiatives. Shanks had recently started a 25-year disposal contract from Argyll and Bute and was chasing at least two others, including a contract for the East London Waste Authority.

Shanks is also developing its capacity to generate electricity from methane. This contributes around 15 per cent of the group's UK profits and said "progressive increases" were expected during the next two years. Its shares gained 3p to 167.5p.