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Covanta's Earnings Plunge Nearly 92%

Falling prices for recycled metal, energy, and waste contributed to the drop in first quarter earnings.

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On April 22, 2009,

Covanta Holding


reported that its Q1 FY09 earnings plummeted 91.8%, due to a decline in recycled metal, energy, and waste disposal prices, loss at the company's Indian facilities, and loss at the recently acquired facilities due to transition and integration items. Net income plunged to $1.14 million, or $0.01 per share, from $13.92 million, or $0.09 per share. The quarterly earnings missed the most recent consensus estimate of $0.08 per share.

Total operating revenue decreased 7.7% to $358.76 million from $388.77 million. Reviewing its businesses, revenue from waste and services and electricity and steam segments dropped 5.2% and 7.3% to $206.27 million and $141.87 million, respectively. Additionally, other operating revenues slumped 41.2% to $10.62 million. Geographically, domestic waste and service revenue dipped by $11.00 million due to lower recycled metal revenue and debt service revenue. Domestic electricity revenue was up $10.00 million, driven by business acquisitions and contract transitions. International segment revenue decreased 34.0%, or $21.00 million, pulled down by the negative impact of foreign exchange and also due to the company's Indian facilities, where falling fuel prices reduced the pass through component of the total revenue.

During Q1 FY09, CVA authorized the repurchase of up to $30.00 million of its common stock. Additionally, it plans to build a plant worth $575.00 million at Welsh coalmining district to convert waste to energy.

Looking forward to FY09, Covanta Holdings reaffirmed its earnings guidance to be in the range of $117.00 million, or $0.75 per share, to $141.00 million, or $0.90 per share. Furthermore, CVA anticipates its adjusted EBITDA to range between $500.00 and $540.00 million, and an operating cash flow of $325.00 to $375.00 million.