Why Did Cleanaway Cut Executive Pay Despite Strong FY25 Earnings?

Financial Performance and Dividend

Cleanaway Waste Management Limited (ASX, CWY) reported solid financial results for the full year ended 30 June 2025. Revenue increased by 2.5% to $3.85 billion, while underlying earnings before interest and tax (EBIT) rose 14.6% to $411.8 million. This growth was primarily driven by the strong performance of the Solid Waste Services segment, which saw disciplined pricing and operational excellence initiatives contribute to margin expansion.

The company declared a fully franked final dividend of 3.20 cents per share, bringing total dividends for the year to 6.00 cents per share, a 20% increase from FY24. The Dividend Reinvestment Plan remains in operation for the final dividend, offering shareholders the option to reinvest at a 1.5% discount.

Strategic Progress and Acquisitions

FY25 marked continued progress against Cleanaway’s Blueprint 2030 strategy, focusing on operational excellence, strategic infrastructure growth, and sustainable customer solutions. Key infrastructure investments included commissioning the Western Sydney Material Recovery Facility and expanding container deposit scheme operations into Tasmania and Queensland.

Significant acquisitions were completed post-year end, including Contract Resources Group Pty Ltd for $377 million and Citywide Waste for $110 million. Contract Resources enhances Cleanaway’s capabilities in decommissioning, decontamination, and remediation (DD&R) services, positioning the company to capture a growing $43 billion offshore oil and gas decommissioning market. Citywide Waste expands Cleanaway’s footprint in Melbourne, including plans to redevelop the Dynon Road transfer station.

Operational Challenges and Safety Focus

Despite strong financial results, Cleanaway faced operational challenges, notably a significant fire at its liquid waste processing facility in St Marys, NSW, which incurred $23.2 million in costs. More critically, the company experienced three fatalities within its operational control during the year, prompting the Board to exercise discretion and reduce short-term incentive (STI) awards for the CEO and Executive Team by 30%. This decision reflects the Board’s commitment to balancing financial performance with health and safety outcomes.

Health and safety metrics, including Total Recordable Injury Frequency Rate (TRIFR) and Serious Injury Frequency Rate (SIFR), fell below target levels, leading to increased weighting of safety measures in FY26 STI plans. The Board emphasized ongoing investment in safety resources and culture as a strategic priority.

Sustainability and Future Outlook

Cleanaway continues to advance its sustainability agenda, including emissions reduction targets aligned with its Blueprint 2030 strategy. The FY23 Long-Term Incentive (LTI) plan vested at 41%, with full vesting on emissions reduction targets but no vesting on relative total shareholder return (TSR). The company is investing in landfill gas capture, renewable fuels trials, and energy-from-waste projects, though the timing of some initiatives depends on government policy decisions.

Financially, Cleanaway maintains a strong liquidity position with $1.2 billion in unutilised committed debt facilities and a gearing ratio of 36.3%. The company remains on track to meet its mid-term financial ambition of delivering over $450 million EBIT in FY26.

Governance and Risk Management

The Board and management continue to focus on risk oversight, including regulatory compliance, operational continuity, and climate change adaptation. The company faces ongoing legal and regulatory proceedings, including landfill levy disputes and industrial relations reviews, but maintains confidence in its risk management frameworks and financial resilience.