Questor share tip: Shanks is not a wasted investment The company is highly exposed to the Benelux region, which generated 74pc of its revenue last year. The eurozone crisis has hit the house-building industry particularly hard, with new housing starts in the Netherlands current at their lowest level since 1953. Such macro pressures are expected to continue. Operations in the Low Countries have now been reorganised into a combined Benelux solid waste business, with ongoing implementation of a shared service model. The business was built up by acquisition and there should be some scope to tidy up and centralise certain functions to reduce costs. This could also open up opportunities for generating additional revenues. Full details of further reorganisation will be announced at Shanks's first-half results statement on November 8. Analysts are now likely to cut current-year profit forecasts to around £30m. However, the rest of the business is performing "robustly." Shanks's hazardous waste operation, which makes up about 38pc of profit, is trading strongly. The unit processes contaminated soils, waste water and petrochemicals. It has a "solid" order book and a good pipeline of future orders. We can also hope for some margins expansion from cost cuts. The organics division, which uses food and other organic waste to produce energy, generates about 8pc of profit. In the first half of the year Shanks" anaerobic digestion facility in Amsterdam produced a record amount of electricity. In the UK, its municipal operation collects domestic waste for local councils and is responsible for 14pc of profit. It is likely that its margins of 9pc to 10pc could be hit this year - which is impressive since the unit was loss-making a few years ago. The company is also planning to invest £250m in UK business. Although the difficult macro backdrop has caused problems this year, the medium-term outlook is sound, supported by increasing environmental regulation. European landfill tax is expected to increase to £80 a tonne in April 2014 from £64 a tonne - a trend that is set to continue. This means that companies and local authorities need to come up with more intelligent ways of dealing with their waste. A good example of this is Shanks" recent success with dealing with waste from Glasgow's Silverburn Shopping Centre. Shanks helped the retail emporium increase its recycling rate from 9pc to 97pc in just six weeks - and cut Sliverburn's waste disposal costs in half in a month. The core of the company's business is performing well and the solid waste operations have cyclical upside once a recovery returns, although this may take some time. Shanks shares were named as a tip of the year and have been on a roller-coaster ride. They are currently 13pc below the initial tip price in January, but 4pc down on the level at which Questor last said buy on July 20. Trading on a current-year earnings multiple of 12.3 times falling to 10.3 and yielding 4.1pc, Questor says buy for the medium-term growth drivers and operational leverage to a recovery.