Category: Financial Markets

Steel prices remain elevated as a result of robust demand from the automotive and construction sectors amid the global economic recovery from the corona virus shock of 2020. 

Both ferrous and non-ferrous scrap metal prices have improved substantially from their COVID-19-induced lows of April 2020. In turn, rising scrap prices drove continued improvement in Sims’ scrap volumes in the second half of fiscal 2021. The initial outbreak of the pandemic also weighed on scrap market volumes and prices in early fiscal 2021. 

Sims’ balance sheet remains well positioned amid the rough and tumble of scrap metal markets. Rising scrap prices and intake volumes drove working capital to its highest level in a decade. Nonetheless, Sims finished the year with an AUD8 million net cash position.

Company’s Future Outlook

With the conductive conditions expected to hold in steel and scrap metal markets into fiscal 2022, the company raise fiscal 2022 EBIT estimate by a sizable 145% to AUD 625 million. However, with appreciably lower scrap prices, and correspondingly lower operating margins anticipated longer-term, no change to AUD 11.50 per share FVE. It is expected that the scrap volumes to grow at a robust 20% in fiscal 2022 amid the current cyclical upswing. It is anticipated that Sims’ working capital balance to increase further during fiscal 2022—as a result of rising scrap volumes and buoyant scrap prices.

Company Profile

Sims Limited (ASX: SGM) was created from the 2008 merger of two leading metal-recycling companies: Australia’s Sims Group and America’s Metal Management. The company is the world’s largest publicly traded metal and electronics recycler, with roughly half of its revenue generated in North America and the balance split between Australasia and Europe.

 (Source: Morningstar)

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