Sims Group Ltd. recorded a 5 percent increase in profit after tax for the half year through Dec. 31, 2003 of 34.2 million, up from $32.5 million in the same time the previous year.
Jeremy Sutcliffe, Sims’ CEO, commented: “This is a pleasing result and one which is more favorable than our outlook statements anticipating that we expected to match or marginally exceed last year’s first half.
“The improvement is largely as a result of an exceptionally strong performance from our U.S. operations and higher volumes across the group. Intake was increased by 6 percent to 2.6 million metric tons.”
During his presentation Sutcliffe noted that markets should remain favorable for the foreseeable future.
“What will be of real interest to investors, is the company’s prospects for the full year in the context of the current unprecedented surge in ferrous prices globally, which has seen December 2003 selling prices of $216 per metric ton delivered to Korea, leap to over $300 per metric ton, today.”
In breaking out the results from various operating regions, the company noted that shredding and other ferrous operations factors influencing the regional results were the following
Australia - A good operational performance, volume growth and strong non-ferrous shredder recoveries were offset by a higher Australian dollar and an increase in freight rates.
North America – Strong result for the U.S. business was helped by the absence of its divested Southern Californian operation and improved volumes and margin at both its West and East Coast divisions and in Canada. The impact of the weaker US dollar was only felt on translation of US earnings into Australian dollars.
United Kingdom – The UK performance was disappointing and below budget. This was attributable to increased competition restricting margin enhancement, largely due to the strong re-emergence of buying by the UK domestic steel sector.
New Zealand – The Group’s New Zealand joint venture produced a sound result, despite increased domestic competition.
In nonferrous, manufacturing and joint ventures, the group enjoyed a sound improvement in non-ferrous trading, with volumes increasing.
Sims’ new central nonferrous marketing entity contributed to this improvement and also increased international non-ferrous brokerage.
The performance of Sims Manufacturing, including Sims Aluminium, was encouraging with the division delivering a return equivalent to the Group’s cost of capital.
The Group’s two joint ventures, ARA (lead) and CONEX (copper and bronze extrusion) enjoyed mixed fortunes with the former ahead of, and the latter well behind, budget. The future of CONEX, which is managed by our joint venture partner, Crane Group, is currently under review.
Recycling Solutions Sims UK commissioned its second fridge recycling plant in the UK and continued to successfully process its backlog of accumulated refrigerators.
Although the price per unit that Sims can charge declined over the period, the result was satisfactory. Sims UK’s IT electronic scrap recycling unit continued to expand and the refurbishment of its tire recycling plant was completed ready for full production in the second half.
Further progress was also made in plastics and other related R & D as a precursor to the opportunities that will arise from legislative change in Europe. Similar initiatives are being explored in the US and Australia.
Despite an changing dynamics, the company expressed confidence that demand for ferrous raw material will continue to outstrip supply, even allowing for increased material flows at the end of the Northern Hemisphere winter.
China, the main driver behind the growth in steel demand in 2003, is likely to remain so this year, and increases in raw material costs appear to be reflected in steel prices in many important markets.
Although a large portion of the most recent C & F price increases reflect a significant uplift in Atlantic Ocean freight rates, similar freight rate increases have not yet been experienced in the Pacific.