Australian Firms Report Strong Numbers for Quarter

Sims Group, the largest scrap metal recycler in the world has reported strong numbers for its annual report. Jeremy Sutcliffe, Sims’ CEO, noted that the company reported end of year profits of $187.9 million, a 67 percent increase from last fiscal year.

Further, the company reported overall sales revenue increased by 37 percent to $2.57 billion. The company cited high metal prices and strong ferrous sales as the key reasons for the increase.

In looking forward, Sutcliffe noted, that When the company announced its merger with Hugo Neu, he advised that we expected ferrous prices to rebound from the lows experienced in June, but that these lower prices would result in next year’s first quarter earnings to be significantly lower than this year’s fiscal first quarter.

“Encouragingly, we were correct in our prediction of higher ferrous prices, with group sales as high as $270 C&F having been achieved in some markets for September. Turkish and Spanish markets are particularly strong, closely followed by the Indian sub-continent.

“The U.S. domestic market has also strengthened, with prices up by over $70 per metric ton since June.

“Asian markets, although slower to respond, are now recognizing the need to match international price levels. This leads us to anticipate a stronger second quarter and, if ferrous prices remain with the current range into the second half, a strong performance for the full year.”

Smorgon Steel, another large Australian scrap recycler, also reported sharply higher numbers for the year. The company announced a 76.9 percent increase in net profits for the year. The company reported a profit of $137.5 million.

Revenue for the company’s core businesses was 14.5 percent higher at $2.982.1 billion.

Ray Horsburgh, Managing Director and CEO of Smorgon Steel, said, “During the year, we funded the acquisition of the assets of American Grinding Systems Inc., the purchase of the 50 percent of the Smorgon Hartwell Recycling joint venture we did not previously own and we repurchased and cancelled half of the Reset Preference Shares  we had on issue”, he said. As a result of these major initiatives, capital expenditure in excess of depreciation and increases in working capital, Smorgon Steel’s net debt at 30 June 2005 was $669.1 million, $195.8 million higher than 12 months earlier.

As for other highlights for the company over the year, Smorgon noted that the company’s new mega-shredder at Hexham, NSW, was commissioned earlier this year and is now producing high quality shredded feedstock for the company’s Waratah steel mill.

Relocation of the two smaller NSW shredders to South Australia and Western Australia is underway and it is expected that processing of the accumulated shredded scrap inventories in those states will have commenced by this October.

Looking forward, Horsburgh commented “We have not seen any material weakness in demand for our products and, in particular, we expect activity levels in engineering and non-residential construction and mining production (which together accounted for 46 percent of our revenues in 2004/5 to continue to be healthy in 2005/6. “Imports of steel into Australia are higher than was the case several years ago, but we believe this is a consequence of strong domestic demand rather than excess supply. “Nonetheless, we remain vigilant to the threat of dumped imports. The three Australian pipe and tube makers have successfully appealed the early termination of our long-running anti-dumping case and we will continue to do all that is necessary to ensure that our employees and shareholders are not threatened by unfair competition and our customers will continue to be able to choose between domestically produced and fairly imported product. “Ferrous scrap prices continue to exhibit volatility but are generally lower than in 2003/4, and hot rolled coil prices appear to have ended their upwards spiral of recent years, providing greater margin certainty for our tube making business. “

We currently see continuing healthy levels of demand and a positive operating environment for 2005/6.”