Why Bingo Industries Plummeted 45% Today

Almost half of Bingo Industries Limited’s [ASX:BIN] share price has been wiped out this morning with the company currently trading 46% lower, down to $1.24 per share.

BIN is a waste management and recycling company operating predominantly in New South Wales. It is a vertically integrated waste management operator, having capabilities across the waste collection, processing, separation and recycling components of the waste value chain.

Cooling housing market hits bottom line

In a market update made this morning, Bingo announced it had revised its FY19 earnings guidance. Having originally provided a guidance for this financial year of $108–112 million, the company today updated the guidance to $92–96 million.

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The cause for the $16 million drop in forecasted earnings is likely due to several key areas where Bingo has over estimated the rate of growth.

Volumes in Bingo’s building and demolition (B&D) business haven’t grown as much as the company originally forecast.

Despite the B&D volumes being above the previous corresponding period, residential construction activity in key markets like NSW and Victoria have cooled faster than the company anticipated.

Compounded with growing competition in the B&D collection market, Bingo will likely feel greater pressure on pricing, potentially impacting margins.

Further complicating matters for the waste management company, Bingo has decided to forego a price rise this financial year due to a delay in the introduction of Queensland’s new waste levy.

Together with the softening residential market, Bingo said they had decided not to implement a price increase until FY20. As a result, the company will absorb increased costs for the whole of FY19, including tipping and transport, that would ordinarily be covered in the price rise.

What’s next for Bingo Industries?

In spite of the obvious headwinds in some of Bingo’s key markets, the company expects their underling profit for FY19 to be broadly in line with the previous year.

Due to new regulatory requirements and the proposed acquisition of Dial A Dump Industries, Bingo announced it would need to reconfigure several of its development projects.

A number of its facilities have been offline for redevelopment as part of its network expansion program. According to the company, the reconfiguration will deliver enhanced operational efficiencies and lower the overall capital program by $25–30 million, a saving of 15–20% on the original budget.

In order to achieve this, Bingo has been forced to reopen or review a number of its facilities, impacting the timing of the development projects.

Bingo’s Managing Director and Chief Executive Officer, Daniel Tartak, said that while the revised guidance is disappointing, the outlook for the Company remains positive.

While we have seen headwinds in some of our key markets in FY19 we expect the construction market to remain strong, with overall volumes of construction activity in NSW and Victoria of over $130 billion.

FY20 will be a transformational year for BINGO as we achieve several key milestones in our redevelopment program, including the commencement of operations at our new recycling and landfill asset, Patons Lane.’

Regards,

Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is one of Money Morning’s junior analysts. Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects. Ryan’s primary focus is assisting Sam Volkering with background research and insight for readers by dissecting the latest events affecting the world. Working closely with Sam, they explore the latest in small-cap and technology stocks as well as cryptocurrency opportunities. You can find Ryan’s contributing research, developments, and supporting information across several e-letters, including:


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