The Bingo Industries Ltd (ASX: BIN) share price is down over 14% today as the waste management company withdrew its full-year guidance.
Bingo advised that its Q3 FY20 performance is in line with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) guidance provided in February. Due to deteriorating economic conditions, however, and resultant market uncertainty caused by COVID-19, Bingo has withdrawn its FY20 earnings guidance.
Waste volumes impacted
Measures by Federal and State governments to close non-essential social gatherings and services, together with the decentralisation of workforces, mean waste volumes are likely to be impacted. The greatest impact is expected to be in the commercial, retail, leisure, hospitality, and shopping centre end markets.
These markets make up a proportion of revenue in Bingo's Commercial and Industrial waste volumes. The Commercial and Industrial collections represent less than 15% of Bingo's total Group revenue in 1HFY20.
Delays to projects
Bingo reports that it has seen minimal disruption to existing construction projects. Disruptions to the supply chain arising from coronavirus as well as economic dislocation are, however, expected to result in some delays to the commencement of new projects. This is expected to continue in the short term and will likely impact volumes and market pricing in the Building and Demolition sector.
Government stimulus
Bingo expects to benefit from government stimulus packages aimed at fast-tracking infrastructure and construction activity as and when activity recovers. In the meantime, it is taking proactive measures to preserve cash flow and ensure the business is in the best position possible. Initiatives have been enacted to lower capital expenditure and a comprehensive review of operational expenditure is being undertaken.
Balance sheet
Bingo emphasised it has a strong balance sheet, backed by significant property assets. The company has sufficient headroom within its existing debt facility and is confident it can meet all future cash requirements. Bingo advises that it has adequate contingency in place in place for further economic deterioration.
Managing Director and CEO Daniel Tartak said, "we have had a strong first three quarters of FY20 and is in a solid financial position going into an uncertain requirement."
Bingo reported it has not yet seen a deterioration in earnings from coronavirus, but expects to see a near term impact on its Commercial and Industrial business from the measures implemented by the Federal Government. Several near term proactive measures have been enacted immediately which include the deferral of all non-essential capital expenditure and a reduction in operating costs.
