Sorpa expects rising costs to push annual results below plan

Waste management company Sorpa expects its full-year results to fall below budget as inflation, higher wages and increased operating costs put pressure on its finances, mbl.is reports.

Sorpa recorded a positive result of 239 million Icelandic krónur in the first six months of the year, exceeding its budget. However, management believes the company will finish the year below plan.

Minutes from Sorpa’s board meeting state that the company is facing “significant cost pressure” this year.

“The effects of inflation have become quite substantial and are affecting operations,” chief executive Jón Viggó Gunnarsson said.

He said the first half of the year had gone reasonably well, but that several factors had worked in Sorpa’s favour. The effects of inflation on the second half of the year remained uncertain, he said. Wages had risen, while overtime linked to the seasonal workload at recycling stations had been higher than expected.

Gunnarsson added that costs had increased significantly following the Iran war, after a special oil fee was imposed on exports. Suppliers had also increased the prices in their contracts with Sorpa.

“There are signs of trouble, as several million [krónur] are now being added to our accounts,” he said.

The board also discussed the assumptions behind Sorpa’s five-year budget at a meeting in late August. They are based on Reykjavík City’s budget assumptions, which forecast 4.5% inflation next year and a 6.5% increase in wages.

The board has instructed management to exercise restraint and prudence in order to keep increases to Sorpa’s fee schedule to a minimum.

The meeting was the first held by Sorpa’s new board, appointed after the municipal elections in the spring. Hrannar Bragi Eyjólfsson, representing Garðabær, was elected chair, while Sigrún Ásta Einarsdóttir, representing Reykjavík, was elected deputy chair.