Sims cites challenging conditions in double-digit profit drop

Australia-based Sims Ltd., in reporting its fiscal year 2023 results, says its sales revenue fell by 13 percent in the period (which ran from July 1, 2022, to June 30 of this year) and its earnings declined by 62 percent compared with the prior fiscal year.

“We produced a resilient performance in fiscal year 2023 in the face of challenging market conditions,” says Sims Group CEO and Managing Director Alistair Field.

The company operates scrap yards, auto shredders and electronic scrap recycling facilities in the United States, the United Kingdom and Australia.

“Our strategic market and geographic diversification gave us a good foundation for navigating these challenges,” Field adds. “Cash flow was solid despite lower earnings before interest and taxes (EBIT) than the record highs of fiscal year 2022.

“Our business’ resilience was strengthened further through strategic acquisitions targeting long-term growth in the U.S. domestic scrap metal market, which demonstrated strength throughout the year, particularly compared to the export market, due to infrastructure spending and electric arc furnace [steel] demand.”

In comments accompanying its results, the company says, “In addition to lower sales volumes, average ferrous sales prices fell by 14.4 percent [during the fiscal year], and nonferrous prices fell by 7.4 percent” compared with the prior year.

Regarding its shredding operations, Sims says zorba prices and zorba volumes increased by 2.4 percent and 4.1 percent, respectively, in fiscal year 2023.

However, the firm says, “[The] metal trading margin for [the recently concluded] fiscal year fell by 15.2 percent compared to fiscal year 2022, driven by challenging trading conditions across all markets.”

Geographically, Sims' underlying EBIT, or earnings before interest and taxes, fell by 81.1 percent in its North American Metal segment, by 89.5 percent in the U.K. and by just 24 percent in Australia and New Zealand.

“The SA Recycling joint venture contributed $163.5 million to the group’s underlying EBIT compared to $298.5 million in fiscal year 2022,” Sims says of the U.S. scrap processing network.

The underlying EBIT of its electronics recycling Sims Lifecycle Services business unit was $8.2 million, cut nearly in half from the $16.3 million earned in the previous year. Sims says the sector was affected by margin compression and inflationary pressures.

“Our portfolio expansion included the acquisition of two metal recyclers in the U.S.—Baltimore Scrap Corp. and Northeast Metal Traders,” the company states.

“We divested surplus land and made good progress on the sale of Sims Municipal Recycling, LMS Energy and Sims Energy," Sims says of its fiscal year. "Additionally, we further invested in Sims Resource Renewal and completed the construction of the Rocklea [Australia] pilot facility.” The pilot facility is testing a method to convert auto shredder residue into saleable products.