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Appliance Recycling Centers of America Inc. Message Board

  • bottomsupinvestor bottomsupinvestor Jun 25, 2012 12:05 PM Flag

    Commodity Prices

    If commodity prices trend downward, will this have an impact on earnings? I would assume they would get less money for recovered materials at the recycle centers but I don't know if it would be significant or not.

    Not bashing ... just asking for opinions.

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    • There's definitely an impact. It would affect their byproduct revenues, which is the smallest portion of their revenues but still significant and growing. You would definitely see revenues and margins affected in that area. AAP also would be impacted, and the margins have been thin enough so far that it could result in AAP being unprofitable.

      That said, one of the biggest things to watch in terms of recovery of recycled materials is carbon offset sales. These are very profitable and thus have great potential to affect earnings positively. The company didn't sell any credits in the first quarter this year, but they indicated on the conference call they had some credits they could have sold. They don't show up on the balance sheet or income statement anywhere. Presumably the company is accumulating more. My takeaway from the call was that they might wait even until next year to sell because they expect prices to increase when the cap and trade program in California is implemented. When they do sell, I think there will be a significant impact on their earnings.

 
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