Photo by easylocum 2.0/ Flickr
Today, the shares of Biffa plunged by more than 10 percent after the waste management company warned regarding a Chinese ban on importing recycled trash.
While the trading in the second half of the year was set to be in line with the expectations, Biffa said that it suffered “price headwinds arising from the recent changes in Chinese regulations for the import of recycled commodities.”
The firm stated: “In the near term, we expect these headwinds to persist, impacting divisional performance. Nevertheless, Biffa remains strongly positioned over the medium and long term due to its investment in recycling operations and focus on high-quality products.”
In response, analysts from Numis downgraded reduced its target price by 30 percent.
Meanwhile, Andrew Shepherd-Barron, a Peel Hunt analyst, said that he “had taken the view that this would be temporary as in the case of many previous such actions, but this looks to have been too optimistic.”
He added: “The ban now increasingly looks permanent and will have an effect in 2019. Whilst 50 percent of the loss of income can be passed through in a higher collection price under risk-sharing arrangements with municipalities; the other 50 percent has to be borne by Biffa. This is being mitigated as far as possible through better sorting and the finding of alternative outlets, but these can have only a partial effect.”
The firm made a comeback to the stock market with an initial public offering in 2016.
Biffa has expanded both organically and by acquisition, acquiring two new businesses since November.