Sims Limited reported a consolidated loss for H1 2020—the period ended Dec 31, 2019.
The Australia-based global scrap recycling company is hopeful of a turnaround during the second half of the fiscal, and maintained its EBIT outlook for the year at $40-60mn (US$26.7-40mn).
However, the steady outlook depends on many factors, including a stable market, sustained improvement in Turkey’s economy, and softening buy indications from competition. It sees the coronavirus’s impact on ferrous and non-ferrous demand as a potential risk that could impact its earnings guidance for the rest of the year.
In the first half of the fiscal, Sims restructured its operations and undertook cost reduction initiatives to parry challenging market conditions, which have affected recycling companies across the globe, said Alistair Field, Sims’ group chief executive officer and managing director.
The recycler’s consolidated revenue from sales decreased by $624.5mn, or 18.7pc, to $2.709bn in H1 2020 from the prior year, due to lower volumes and pricing. The company’s profitability was also impacted by significantly low ferrous prices in September 2019, along with low prices for zorba and tight margins.
The total sales volume in H1 2020 was 4.5mn mt, driven by stable non-ferrous sales volumes and an 11pc decrease in ferrous sales volumes.
The company’s North American segment broke even during the period, as strong competition in the ferrous market induced by low supplies put pressure on margins. On the non-ferrous side, weak zorba prices were offset by better cost management and higher recovery rates, resulting in the company’s earnings in the region remaining unchanged at $55.3mn in H1 2020 compared with H1 2019.
However, the company’s profitability declined across its Australia/New Zealand and UK operations. Sims reported an EBIT of $22.3mn in Australia and New Zealand in H1 2020 compared with $51.8mn during prior year, and posted a $28.4mn loss in its UK operations during in H1 2020, compared to a profit of $6.8mn in H1 2019.
Sims reported a consolidated loss of $23.2mn in H1 2020 compared with an EBIT of $109.6mn during the same period in the previous fiscal.
($1=A$1.497)