Clean Harbors reported a challenging third quarter for its Safety-Kleen segment – which includes waste oil collection and rerefining and finished lubricants – saying plant problems played a role in decreases in revenue and waste oil collection.
Third-party revenues totaled $230.3 million for the quarter ending Sept. 30, down 19% from the same period last year. The $282.7 million revenue for the 2022 quarter was a record high on the back of high base oil demand and the acquisition of a Georgia rerefining facility in June of that year.
Safety-Kleen collected 59 million gallons of base oil in this year’s third quarter, a 5% decrease.
“While underlying business conditions remain favorable, our third-quarter results fell short of expectations primarily due to plant challenges within both our incinerators and rerefineries,” Clean Harbors Co-CEO Mike Battles said in an earnings release. “Within our Safety-Kleen Sustainability Solutions segment, we had lower-than-expected production, which led to lower sales volumes of base oil and higher costs.”.
“Within our [Safety-Kleen Sustainability Solutions] segment, revenue and profitability fell short of expectations as a result of reduced sales volume and increased costs related to plant challenges in the back half of the quarter, which included a delayed start-up at our California plant,” he continued.
“The SKSS team collected 59 million gallons of waste oil in the third quarter at a charge-for-oil level that exceeded the second quarter and compares with a pay-for-oil model in the prior year period. Overall base oil pricing began to improve late in the quarter as rising crude pricing and healthy demand drove up the value of base oil in September and into early Q4.”
Battles noted the company’s rerefineries are now operating at full production rates in the fourth quarter.
“Given where base oil and lubricant markets are today, we expect to post a large sequential increase in profitability in this segment in Q4 and should enter 2024 with positive momentum,” he said. “On the front end of the spread, we continue to control costs on the collection side while ensuring we have enough supply to maximize output at our rerefineries.”