Cleanaway share price slides amid revised costs from flood damages

Cleanaway’s having to clean up its Ipswich site after the floods.

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Legs and feet of two people wearing green gumboots standing in a flooded room ready to clean up.

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Key points

  • Cleanaway provided an update on expected costs from flood damage earlier this year
  • It expects closures throughout FY23 as a result of the damage and work required for remediation
  • In the last 12 months, the Cleanaway share price has fallen more than 4%

The Cleanaway Waste Management Ltd (ASX: CWY) share price has started lower on Wednesday, currently 3% down at $2.60.

The company today released an update in relation to its New Chum inert landfill in Ipswich, Queensland.

In wider market moves, the S&P/ASX 200 Index (ASX: XJO) has lifted 43 basis points from the open to 6,551.5.

What did Cleanaway announce?

The company provided an update on the New Chum site following damage caused by the flood
events this year.

As a quick recap, the company said:

In February 2022, a significant rain event resulted in inundation of a new cell that was under construction at New Chum. Shortly thereafter the site was closed and related remediation activities commenced, including tankering water offsite for treatment and disposal. Towards the end of May 2022 more rain events added to the body of water, further impacting remediation.

As a result, Cleanaway says the site is likely to remain closed throughout FY23 due to the extensive work required.

The company also provided a clear update on its expected costs for the remediation. It may recover some costs through insurance – but this won’t appear in FY22 financial statements.

In FY22, $30-$40 million of costs are expected to be incurred relating to rectification and remediation at New Chum. These include $11 million of costs expected to be incurred through to 30 June 2022 with the balance relating to a rectification provision to cover further works to be undertaken in FY23.

A further $6 million of net costs will be incurred in FY22 relating to property damage and rectification
and remediation at other sites because of the floods.

The company also mentioned it was awaiting the outcome of a Queensland Planning and Environment Court (2021) decision regarding the “application for a height rise extension”.

Cleanaway share price snapshot

In the last 12 months, the Cleanaway share price has fallen 4.76%, and nearly 17% this year to date.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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