Sims Ltd. loses money in fiscal year 2020
Global metals recycler Sims Ltd. was unable to turn a profit in its fiscal year 2020.
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Sims Ltd. loses money in fiscal year 2020

Global metals recycler reports decline in volumes and margins.

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August 19, 2020

Australia-based Sims Ltd., which also has recycling operations in North America and the United Kingdom, has reported a more than 25 percent decrease in revenue for its fiscal year 2020, which ended June 30 of this year. The firm also has reported an underlying loss of nearly A$58 million ($42 million) for the 2020 fiscal year.

“Severe COVID-19 lockdowns across the U.K., northeastern United States and New Zealand materially reduced intake volumes and sales prices,” says Sims Group CEO and Managing Director Alistair Field. He adds, “Management has responded to the tough market conditions with an extensive restructuring and cost reduction program that will achieve its full run rate of A$70 million ($50.7 million) in fiscal year 2021.”

In the notes accompanying its results, Sims states, “Tough market conditions prevailed throughout fiscal year 2020. The rapid collapse in ferrous scrap prices in September 2019, combined with historically low zorba [mixed nonferrous metal] prices, severely compressed margins in the first half.” (Sims’s fiscal year first half coincides with the second half of the 2019 calendar year.)

The company says industry conditions seems to be rebounding in the first two months of 2020. “However, in early 2020 the historic worldwide response to slow the spread of COVID-19 materially reduced intake volumes and sales prices in the second half, especially in North America, the U.K. and New Zealand.”

“Sales revenue of A$4.9 billion ($3.55 billion) in fiscal year 2020 was 26 percent lower compared to fiscal year 2019 due to lower volumes and pricing,” states Sims. “Nonferrous proprietary sales volumes declined 10 percent, and ferrous proprietary sales volumes declined 19 percent, contributing to a total sales volume of 8.2 million metric tons.”

Sims says A$39 million ($28.2 million) of its annual loss was attributable to its North American Metals business unit. That compares with a A$99.7 million ($72.2 million) profit in that unit in the previous fiscal year. In addition to COVID-19-related restrictions, Sims says its “metal margin declined due to intense competition, lower scrap inflow, and lower ferrous prices and weak zorba prices” in North America.

Sims Ltd. did clear a A$12 million ($8.7 million) profit from its share of the SA Recycling joint venture. That profit figure, though, was approximately half of what it was the previous fiscal year.

The company lost nearly A$32 million ($23.2 million) in the U.K., during fiscal year 2020, but it retained profitability in its Australia and New Zealand operating region.

Looking ahead, Sims Ltd. says a combination of cost reductions, “structurally combining buy and sell functions,” and implementing new enterprise software has it “well-positioned to take advantage of anticipated government infrastructure stimuli around the world.” The company says it sees a return to profits, including in the month of July 2020, the first month of its new fiscal year.

In presentation slides accompanying its results, Sims expresses optimism for greater involvement in the Chinese scrap market in the upcoming fiscal year.

The company points to the Chinese government’s plan to reclassify some higher grade nonferrous metals as a “renewable metal” rather than “waste.”

Despite delays to this new system and additional paperwork called for in mid-August, Sims says it expects to export under the new category “without quotas in 2020.” The company also estimates approximately 90 percent of its nonferrous material meets the new standards to become a resource.

Sims also expresses optimism that China “is looking to introduce a high-grade ferrous import category in 2021 that enables the import of these materials without quotas.”