UPDATE 2-Shanks builds UK recycling plants to meet growing demand

Thu May 15, 2014 9:55am EDT

Related Topics

* Investing 200 mln stg to build two UK plants to process landfill waste

* Full-year revenue excluding discontinued operations up 4 pct

* Full-year underlying pretax profit up 14 pct

* CEO - profit to be flat in current financial year (Adds CEO comment, details, updates share movement)

By Esha Vaish

May 15 (Reuters) - British waste management company Shanks Group Plc is investing 200 million pounds ($336 million) in construction of two plants in northern England to meet growing demand from local authorities to process landfill waste.

Shanks aims to double profit over the next five years at its UK Municipal business, which processes waste for city and county councils in Britain, Chief Executive Peter Dilnot told Reuters.

The new plants - Wakefield and BDR, or Barnsley, Doncaster and Rotherham - are scheduled to be in operation in time to meet demand for new contracts from 2015.

Dilnot said that Shanks, which reported full-year results on Thursday, was investing a further 50 million pounds in the expansion of its existing hazardous waste plants.

In percentage terms, the company forecast its hazardous waste business would report a double-digit increase in earnings next year.

Sales in the hazardous waste unit accounted for 23 percent of Shanks's continuing operations revenue in the full year ended March 31. The UK Municipal business brought in about 22 percent.

Growth in these two businesses helped Shanks to report full-year revenue, excluding discontinued operations, of 636.4 million pounds ($1.1 billion), up 4 percent from a year earlier.

Underlying pretax profit jumped 14 percent to 30.2 million pounds.

Analysts on average had expected a pretax profit of 27.44 million pounds on revenue of 626.46 million pounds, according to Thomson Reuters I/B/E/S.

Profit rose for the first time in five years at its Solid Waste Benelux unit - the company's biggest division, accounting for slightly more than half of total revenue - as cost cuts made up for depressed volumes and lower prices.

But Dilnot said he expected profit in the current financial year to be flat, mainly due to weakness in the solid waste business in Belgium and the Netherlands, and overcapacity in the company's smaller organics business.

Shanks, one of the largest solid waste companies in the Netherlands, is still feeling the effects of a long-running slump in the Dutch construction market.

"Construction (in the Netherlands) is forecast to be flat this year," Dilnot said. "Both volume and price will remain under pressure."

Shares in the Milton Keynes-based company were down 0.5 percent at 100 pence at 1355 GMT. ($1 = 0.5960 British Pounds) (Editing by Sunil Nair and Robin Paxton)

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