Cleanaway Waste Management (ASX:CWY) used its first-half FY26 results briefing to outline improved safety metrics, “robust” financial performance and an upgraded full-year earnings outlook, while also detailing cost reduction actions and the early performance of recent acquisitions.
Safety review, incidents and risk reduction programs
Managing Director and CEO Mark Schubert began by addressing health and safety, noting the company reported two fatal incidents at sites it owns in the first half of FY26. Schubert said the incidents occurred in different operational contexts, including one at MRL in which “a commercial customer was struck by one of their colleagues’ vehicles in a park-up area.”
A board-commissioned independent safety review completed over three months found no systemic safety issues or failures, and said Cleanaway’s HSE strategy was fit for purpose and aligned with key risks. The review identified an opportunity to improve consistency and feedback loops closer to the frontline due to variable translation at branch level.
Schubert said Cleanaway is progressing risk-reduction investments, including:
- Rollout of a “yellow gear” pedestrian detection system using AI cameras to alert operators to human presence, expected to be completed by mid-calendar 2026.
- Rollout of in-vehicle monitoring systems across approximately 3,500 collection heavy vehicles by December 2026.
He said these initiatives are included in FY26 CapEx guidance, with about AUD 21 million of capital spent on risk reduction in the first half. On environmental performance, Schubert reported zero major or significant incidents.
First-half FY26 financial performance and dividend
Schubert said the company delivered 13% net revenue growth in the half, driven by “disciplined pricing and strategic acquisitions,” and pointed to margin expansion from better rostering, workforce planning, and more efficient fleet repair and maintenance. He said Group ROCE improved 80 basis points to 9.4% and EPSA increased 18.2%.
The board declared a fully franked interim dividend of AUD 0.0335 per share, up 19.6%, which Schubert said reflected confidence in trading outlook and cash generation while maintaining balance sheet strength.
CFO Paul Binfield reported first-half net revenue of “almost AUD 1.9 billion,” up 13%, and EBIT of AUD 228 million, up 16.9%. EBIT margin improved 40 basis points to 12.2%. Binfield said EBITA rose 17.4% to AUD 239 million, while NPATA increased 18.5% to AUD 117.3 million and EPSA rose to AUD 0.052. Free cash flow was AUD 74.2 million, about AUD 20 million lower than the prior period.
Binfield said finance costs rose to AUD 73.4 million due to higher debt following the Contract Resources acquisition, with leverage at 2.3x and “well within” targets and covenants.
Cash flow bridge, adjustments and capital expenditure
Management attributed the free cash flow decline to several items, including catch-up tax payments, acquisition integration costs and spending related to a strategic indirect cost program. Binfield said tax paid was AUD 16.5 million higher, reflecting higher taxable earnings and a “final” AUD 58.7 million catch-up tax payment. He also said maintenance CapEx was AUD 22.7 million higher due mainly to timing.
On underlying adjustments, Binfield outlined four categories of cash costs, including legacy waste treatment and remediation of a legacy enterprise agreement, one-off strategy refresh costs, non-capitalizable IT modernization costs, and integration costs for acquisitions such as Contract Resources and Citywide. He said the company expects about AUD 5 million of further integration costs in the second half.
Schubert provided additional context on the legacy issues, saying the original legacy waste provision dated to a 2018 acquisition, and that the adequacy “wasn’t checked because of manual systems.” He said after the Christie Street situation, Cleanaway reviewed waste inventory at one site and found treatment and disposal costs would be higher than expected, then validated findings with third parties and audited the broader network.
Total FY26 CapEx guidance was unchanged at about AUD 415 million, including AUD 15 million allocated to Contract Resources. Binfield said Cleanaway’s investment in energy-from-waste remains “modest” under an originator model, and highlighted a joint development agreement for the Parkes Special Activation Precinct in New South Wales, where Cleanaway has a 35% minority interest with no material upfront outlay or binding capital commitment.
Segment results: solids strength, health headwinds, industrial outperformance
Solid Waste Services net revenue rose 7.5% to AUD 1.25 billion and EBIT increased 11% to AUD 196.7 million. EBIT margin expanded 50 basis points to 15.7%. Schubert said collections benefited from price increases, regional volume growth and the Citywide acquisition, while municipal collections improved through efficiency and contract management. The company also secured a Cairns Municipal Collections contract (7.5 years starting December 2026) expected to contribute more than AUD 100 million in revenue over the life of the contract.
In post collections, Schubert cited higher project volumes and prices, but noted New Chum landfill closed on Nov. 30, incurring an approximately AUD 3 million loss for the period. He also said transfer stations improved profitability, and resource recovery earnings were supported by growth in CDS volumes and cost efficiencies. OCC prices softened, creating a “slight headwind” in the first half but expected to be a relative tailwind in the second half due to lagged rebates.
As part of a strategy refresh, Schubert said Cleanaway decided to retire its construction and demolition (C&D) strategic business unit and rationalize its service offering, while continuing to receive C&D residuals through its post collections network. Binfield said the assessment of future profitability led to a non-cash impairment of associated assets.
Oil and Technical Services and Health Services combined net revenue fell 5.1% to AUD 342 million and EBIT fell 12.6% to AUD 36 million, with the underperformance driven by health services. Schubert said OTS delivered EBIT growth and margin expansion despite revenue headwinds from capacity constraints at Christie Street, and noted packaged waste strength and initial integration benefits from former LTS and Hydro units. In health, he said revenue declined following a tender for HealthShare Victoria work (with 85% retained), and disruption at the Yatala Health facility following Ex-Cyclone Alfred drove about AUD 2.4 million of higher logistics costs; repairs have been completed and operations normalized. Management said the health services turnaround is expected to support a stronger second half, aided by secure product destruction growth and use of analytics to reduce revenue leakage.
Industrial Services posted 74% net revenue growth to AUD 339 million and 164% EBIT growth to AUD 28.8 million, with margin up 290 basis points to 8.5%. Schubert said performance reflected Contract Resources’ outperformance. Contract Resources generated AUD 157.8 million of revenue in its first five months of ownership (up 19.5%), and delivered EBIT of AUD 17.5 million with an 11.1% margin. Management said integration is on track and delivering synergies ahead of plan, with expected benefits in shared customers, workforce planning and asset utilization.
Guidance upgrade and second-half drivers
Management upgraded full-year FY26 EBIT guidance to AUD 480 million to AUD 500 million. Schubert said second-half drivers include continued price discipline and organic growth in solids, supportive project conditions in post collections, seasonal skew from higher CDS volumes and carbon benefit timing, improved performance in environmental and technical solutions, continued OTS integration benefits, health services recovery, and initial Contract Resources synergies (AUD 3 million).
Schubert also said corporate costs were higher in the first half due to a planned HR systems upgrade and are expected to revert to a traditional run rate in the second half. He said Cleanaway expects an initial AUD 15 million in-year capture of structural efficiencies from its strategic indirect cost review in the second half, with at least AUD 35 million in annualized recurring benefit from FY27 once fully implemented. The restructure includes centralizing functions and removing duplication, reducing about 250 FTEs, with most changes already implemented.
In Q&A, Schubert described metro C&I volumes as “flat” with price up, noting the company exited “low value” work to create capacity for higher-margin customers. He also said landfill volumes were being supported by civil jobs and corrected a prior reference to Sydney tunnel works, clarifying it was the M12 rather than the M8. Binfield reiterated expectations for stronger second-half cash flow and said, looking into FY27, the company expects fewer underlying adjustments, normalized tax payments, and declining capital intensity to support further improvement.
About Cleanaway Waste Management (ASX:CWY)
Cleanaway Waste Management Limited provides waste management, industrial, and environmental services in Australia. The company operates through three segments: Solid Waste Services, Industrial & Waste Services, and Liquid Waste & Health Services. It offers commercial and industrial, municipal, and residential collection services for various types of solid waste streams, including general waste, recyclables, construction, and demolition waste, as well as medical and washroom services. In addition, the company is involved in the ownership and management of waste transfer stations, resource recovery and recycling facilities, secure product destruction, quarantine treatment operations, and landfills; sale of recovered paper, cardboard, metals, and plastics; and collection, treatment, processing, and recycling of liquid and hazardous waste, including industrial waste, grease trap waste, oily waters, and used mineral and cooking oils in packaged and bulk forms.
