Sims Reports Lower Results for FY 2013

Sims Metal Management, a metals and electronics recycler headquartered in Australia, announced North American results for FY 2013 ending June 30, 2013. Underlying EBITDA for North American operations rose 30 percent year-over-year to $102.3 million. (Underlying EBITDA is a measure of the actual profits realized by a company used for business process planning, rather than the profits reported for accounting or regulatory purposes.) 

Higher sales margins and controllable cost reductions of $48.4 million offset lower ferrous scrap prices and sales volumes. Divestment of several facilities in the U.S. contributed to cost reduction. Sales of recycled metals dropped to 9.377 million tonnes from 11.080 million tonnes in 2012 accounting for sales revenue of $4,534.6 million (24.8 percent below sales in 2012). 

Sims Chairman Geoffrey Brunsdon led the Sims conference, noting the search for a new CEO has been narrowed to a few external candidates and a selection will be announced by the end of the first quarter 2014. 

Commenting on industry conditions, Brunsdon said rising automotive and appliance sales in the US are positive signs for the scrap industry and combined contribute 50-70 percent of material for metal traders. Sims is seeing higher proportions of prime scrap coming in, keeping ferrous metal the predominant product for the company. 

During the conference call a question came up regarding Sim’s U.S. capacity. 

“We won’t be complete until we start to see economic indicators that bring us scrap flows to a higher level which will positively impact all three drivers that produce our results,” said Brunsdon. “When the volume comes back, the margins in the industry also normalize. Our margins per tonne normalize to a higher level, and the operating leverage will start to follow through. Until we start to see better generation of scrap, we’re going to continue to stay focused on plant rationalization.” 

“That said, I don’t – we’re not looking to close facilities that operate – that represent a significant element of our capacity,” he added. “So our capacity isn’t in the scrap industry, I guess, the same in concept is as it relates to the steel business. Our capacity is actually quite flexible. And when the scrap generation returns and the margins normalize, we’ll be active in the market and our capacity will flex higher in that way.”