DOW JONES NEWSWIRES 
 

Waste Management Inc. (WMI) posted a 31% decline in first-quarter net income as the nation's largest garbage hauler and landfill operator continued to suffer from high commodity costs that hurt margins and demand.

Chief Executive David Steiner said the deteriorating recycling commodities markets hurt first-quarter earnings by 9 cents.

Waste Management said net income slid to $170 million, or 31 cents a share, from $248 million, or 48 cents a share, a year earlier. Excluding restructuring and other items, earnings fell to 42 cents from 47 cents.

Revenue fell 14% to $2.81 billion, partly owing to the stronger dollar.

Analysts polled by Thomson Reuters projected earnings of 41 cents a share on revenue of $2.97 billion.

Operating margin decreased to 13.2% from 15.6% amid higher commodity costs.

Revenue from collections, the company's largest business fell 8.7%, while the much smaller recycling business slumped 55% and landfill revenue fell 12%.

Steiner said conditions have stabilized and prices are "trending upward" from their January lows, but the company still expects a negative year-over-year impact from recycling operations of 15 cents to 20 cents a share, most of which is expected in the first half of the year.

While industry fundamentals are expected to remain strong on lower gas prices, the waste-management sector has experienced a sharp decline in demand, leading to reduced volumes and recycling-commodities price declines. The industry has turned to acquisitions to expand amid modest industry growth, but some companies, like Waste Management, have had to cut staff and freeze salaries to weather the recession.

Shares closed Tuesday at $26.98 and were flat in premarket trading.

-By Katherine E. Wegert, Dow Jones Newswires; 201-938-5294; katherine.wegert@dowjones.com