Why is the Cleanaway share price heading south today?

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The Cleanaway Waste Management Ltd (ASX: CWY) share price has been in the red all day following news of a disruption to the company’s operations in Victoria.

The waste management’s shares are trading 2.60% lower at $2.82 at the time of writing.

The drop coincides with bearish sentiment on the S&P/ASX 200 Industrials Index (ASX: XNJ) and the S&P/ASX 200 Index (ASX: XJO), which are down 1.23% and 0.85%, respectively.

Let’s take a look at the news out of Cleanaway on Thursday.

Cleanaway suffers another setback

Investors are offloading Cleanaway shares following the company’s announcement that its operations have been disrupted.

In today’s release, Cleanaway advised that a fire broke out yesterday at its medical waste processing facility in Dandenong, Victoria.

While no Cleanaway staff or contractors were hurt, the fire “caused significant damage to the equipment at the site”. As a result, the company said the Health Services business unit would be disrupted for an unspecified period of time.

Management is looking at ways to treat and dispose of medical waste that would usually be handled at the site. This includes temporary licence approvals to process medical waste at other Cleanaway facilities as well as disposal with third parties.

Cleanaway estimates the disruption will impact earnings before interest, tax, depreciation, and amortisation (EBITDA) by roughly $2 million to $3 million each month. While this is a preliminary forecast, the company expects to provide a clearer picture of the financial toll when available.

Unfortunately, this will further dampen Cleanaway’s balance sheet after the company provided a disappointing trading update in early May.

Previously, Cleanaway stated that EBITDA would already be $15 million to $20 million lower than its prior guidance. This is due to higher fuel and labour costs, and the recent east coast floods which caused property damage along with loss of vehicles and equipment.

About the Cleanaway share price

Since the start of the year, the Cleanaway share price has moved in circles to register a loss of 10%.

The company’s shares touched a 52-week high of $3.31 in April before reversing its year-to-date gains.

Cleanaway commands a market capitalisation of around $5.8 billion, with approximately 2 billion shares outstanding.

The post Why is the Cleanaway share price heading south today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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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