Rising demand doesn't signify 'any slowdowns in the industrial economy just yet': Clean Harbors CEO
Clean Harbors CEO Michael Battles sits down with Yahoo Finance's Seana Smith at the 2023 Goldman Sachs Industrials & Materials Conference to discuss the company's Q1 earnings, the U.S. debt ceiling, and business demand.
Video Transcript
- Welcome back. It is day two of the Goldman Sachs Industrials and Materials Conference. And Yahoo Finance's Seana Smith is speaking with leaders on what the current economic climate means for their businesses. She joins us now with Clean Harbors CEO Michael Battles. Seana, take us away.
SEANA SMITH: Thanks so much, Diane. Mike, thank you so much for being with us here this afternoon. So we're wrapping up day two of Goldman Sachs's conference. And my takeaway so far is that the sentiment and the theme is very, very bullish. What's your assessment of the industrial economy right now?
MIKE BATTLES: Well, Seana, thanks for having me. And I think that it's-- certainly, our pipeline still remains very strong. We see a lot of waste in our network. And I think that our order book is still booked out kind of all summer long. So I really don't see any slowdowns in the industrial economy just yet.
SEANA SMITH: And when you talk about what is driving your business, your stock has been doing very well since the start of the year, up nearly 40% over the past year. You just released earnings, beating on both the top and bottom lines. One of the standout sectors was your environmental services segment. What's driving that growth? And how much does pricing have to do with it?
MIKE BATTLES: Pricing is a big part of it. Also, we're getting a better mix more high-hazardous waste streams into our network, which is driving a better price point. But price is important. Our costs have gone up. We've been forced to raise price. And also, as we raise price, we have to look at our cost structure. And we maintain a lean and mean cost structure to drive profitability.
SEANA SMITH: Are you seeing some of those inflationary pressures easing at all?
MIKE BATTLES: A little bit on some of our-- maybe on drums and on solvents. But certainly, our wages, they're not going backwards. Our cost of materials aren't going backwards. And so we need to-- we're still feeling that pressure. We haven't really seen a lot of that yet.
SEANA SMITH: And when we talk about your safety clean division there, I know there has been some sector-related challenges within that division. What does that outlook look like for the remainder of the year?
MIKE BATTLES: We feel good where we landed today is going to be a good-- we'll be able to deliver on that number. When oil prices do go down, it does hurt us in the short term. But, overall, we're really bullish on that business over the long term.
SEANA SMITH: And when we talk about some of the macro pressures here, of course, the slowing economy, the risk of recession, and then we have the debt ceiling debate that's going on down in Washington right now. How are you looking at that just from a CEO perspective and the potential impact a business like yours could have from that?
MIKE BATTLES: I think the important part, Seana, is to maintain a strong balance sheet. And I think that if there is kind of recessionary pressure down the road, debt ceiling, different crises, some companies may not come out of that looking so good. And I think that we'll maintain a strong balance sheet to be opportunistic to do acquisitions or things like that, if they come to pass.
SEANA SMITH: We were just talking to Joe Ritchie of Goldman Sachs. And he was talking about how when we speak about this bullish environment right now for your sector, the unprecedented investments that we are seeing, the reshoring efforts, regulatory environment right now, how do you see that playing into Clean Harbors' playbook here going forward?
MIKE BATTLES: So I'm not sure if I call it reshoring. I'd say it's shoring because what's happening is that-- and I can't explain like kind of every single customer's examples. But certainly as you think about our larger customers, their demand is picking up. And is it because the macro factors are there or because they're not doing as much internationally and more doing stuff in-- more doing production in North America because we're certainly seeing that type of volume into our network.
SEANA SMITH: Are you able to keep up with the demand that your business is seeing?
MIKE BATTLES: In certain areas, we are backed up a little bit because we are seeing an unprecedented amount of demand. In certain areas, we've been doing a great job of hiring and training our people. We're up over 1,300 direct labor headcount. And that's really been able to service our customers well.
SEANA SMITH: Speaking of that hiring count here, it was very impressive. I was reading through your latest earnings release there. In terms of your hiring efforts, are you having trouble finding some of those workers, given the fact that you have such a need to fill that headcount?
MIKE BATTLES: The answer is we've had trouble. Our turnover, it's not just hiring people, it's retaining the people that we have. And we're lowering our turnover rate down to pre-COVID levels, which has been terrific. So in my mind, I think it's as important to keep our own employees and provide a good career path for them as it is to hire more capable bodies.
SEANA SMITH: What are you doing in order to improve that retention rate?
MIKE BATTLES: It's everything, Seana. It is improving more holidays, better health care costs, providing a career path for our employees because we are 20,000 strong. And you can move up in the company. My co-CEO started as a driver. And so he moved his way all the way up to this chair.
SEANA SMITH: He started as a driver?
MIKE BATTLES: He did. He did. And so it just shows you that we do believe, we give people a chances, and it does provide a great career path for our employees.
SEANA SMITH: Another big theme coming from this conference is technology investment, the role that AI is going to play in your industry specifically going forward. What does your technological investment look like? And are you guys incorporating AI at all?
MIKE BATTLES: So we consistently make efforts into our technology. We have one ERP system that runs the entire company. And we continue to make continuous investments, whether that's RPA, whether that's AI to do things smarter is certainly part of the story. But we've been making investments kind of all along into technology. And that continues.
SEANA SMITH: Mike Battles, we really appreciate you taking the time to join us here, your first time on Yahoo Finance, co-CEO of Clean Harbors. Thanks so much.
MIKE BATTLES: Thanks for having me.
