Waste warning over profits

Waste Management International, the environmental services group, yesterday reported a rise in annual profits but warned that growth this year would be held back due to difficult markets in Europe.

Edwin Falkman, chief executive, said shareholders should not expect more than 5 per cent growth in earnings. "Our focus for the year ahead will be on organic growth, cost control and improving the return on investment in our existing capital base and ourpeople."

Pre-tax profits in the three months to 31 December were down from £40.5m to £39.7m. Turnover was 283m, compared with £250m in the same quarter last year. Profits for the year were £165.2m, against £150.9m on turnover up 18.5 per cent from £941.4m to £1.1bn.

Waste Management, the London-quoted arm of WMX of the US, said France remains a problem, economically and competitively.

Mr Falkman said volumes at landfills were hit by the weak economy and delays in opening new sites.

And in Italy, Mr Falkman said the group had "struggled in a politically uncertain environment''. The signing of less profitable contracts for municipal business and rising labour costs had hit the business. But an agreement with the unions on staff cuts and productivity improvements should ease the situation, Mr Falkman said. The Italian division was also adding recycling and sorting facilities to its operations which should broaden the business. "Our Italian management team is addressing these issues,"he said.

He said the group's businesses in other markets performed in line with expectations last year, but performance this year depended on resolving difficulties in France and Italy.

Approved capital expenditure this year of £120m will generate positive cash flow of around £50m, he said. "We believe this strategy will improve shareholder value in the long term and enable Waste Management International to consolidate its position for future expansion." Waste Management's earnings for the quarter were up from 6.9p to 7p.