Global metals recycler Sims started its financial year with higher profitability in its North America Metal (NAM) division, following the execution of a revised business strategy.
The Australia-based company expects its metals business — comprised of the North America Metal (NAM), SA Recycling, and Australia and New Zealand Metal (ANZ) divisions — to generate earnings before interest and taxes (EBIT) of $55mn in the first quarter of its fiscal year, ended 30 September.
Profitability was driven by its NAM division, which overhauled its business strategy last year to focus on growing and maintaining margin by buying more unprocessed material and targeting the most favorable markets. This included the sale of its UK business last month to Unimetals Group for $249mn. The NAM division is expected to register $29mn in EBIT with a 22pc trading margin for the period.
A limited regional dealer yard network in the US increased the recycler's dependence on third-party dealer scrap and reduced its access to higher margin unprocessed scrap.
Sims also expects to see robust profitability from SA Recycling — a 50-50 joint venture between Sims and Adams Steel — with EBIT of $24mn and a trading margin of 29pc.
The company's Australia and New Zealand (ANZ) division continued to face challenging market conditions, impacted by increased Chinese exports into Asia and a slowdown in the domestic market.
ANZ is expected to register $13mn in EBIT for the period with a trading margin of 27pc.
There has been heavy downward pressure on global steel prices amid a surge in Chinese exports, which reached record levels this year.
Australian investment firm Allan Gray, a 19pc shareholder of Sims, told Argus in August that it was pushing for the sale of Sims' North America business to SA Recycling.
Sims posted a A$66mn ($43mn) profit in the second half of 2023, down 35pc compared with the same period in 2022.
