Sims Sees Surge in Profits for Quarter

Sims Group Ltd. recorded a record profit after tax for the first quarter of fiscal 2005 of $57.1 million, up 244 percent from the previous corresponding period. Revenue was $615 million, up 52 percent.

Commenting on the result, Jeremy Sutcliffe, Sims’ chief executive, said, “although this is an extraordinary result compared to the prior corresponding period, what is particularly encouraging is that we exceeded the last quarter’s result by 40 percent and also exceeded our previous record quarter by 33 percent.

“Our reported earnings of over $57 million, in fact, exceeded that figure by approximately 14 percent as the Group successfully expanded margin on the back of strong, albeit at times volatile, selling prices. In addition to these healthy margins, strong volumes contributed to the result in all operating regions”.

In respect of ferrous markets, Sutcliffe noted that “our average selling price into Asian markets in the quarter was $267per metric ton, slightly below our year end forecast. Looking ahead to the second quarter, we are anticipating an average Asian selling price of over $295 per metric ton, up approximately $30 per metric ton, but offset in part, by higher ocean freight rates.

Chinese demand has been encouraging, as increased electrical power availability triggers renewed demand and although Chinese long product steel prices have not moved significantly upwards, flat steel prices throughout Asia are now at levels which are likely to sustain current ferrous prices. This is consistent with the general expectation that iron ore and coking coal demand and pricing are likely to increase yet further, well into 2005”.

The acquisition of Mirec, Europe’s leading IT electronics recycler earlier this month consolidated Sims’ strategy in its emerging Recycling Solutions division. The company also noted that Mirec has had recent success in acquiring an enhanced allocation of Dutch household waste electrical products under the NVMP take-back scheme. Mirec has reached an agreement to recycle all of Lexmark’s European spent toner cartridges .

“We expect that following the Mirec acquisition, our global strategy for end-of-life consumer products will continue to develop, reflecting the Group’s broader perspective to recyclables outside of our traditional metal recycling business,” Sutcliffe added.

The company remains confident of a robust second quarter given that sales contracts for the bulk of its ferrous export program for the quarter have been completed. Sutcliffe said, “added to this is the onset of the Northern Hemisphere’s winter which traditionally leads to a tightening of supply and hence a firming in ferrous prices. We are confident, therefore, that first half earnings will exceed $100 million. Looking further ahead, market conditions point to a strong third quarter, but as no sales for the period have yet been made and, given the volatility experienced over the last 9 months, it would be inappropriate to forecast specific earnings.”