Sidney, Australia – In the 2015 financial year, Sims Metal Management achieved an underlying net profit after tax of $102 million, which was a 17 percent increase over the prior year. It is important to note that this improved result was achieved while still facing challenging conditions across the metals recycling industry. The Company’s ability to deliver earnings growth in an environment of falling commodity prices and contracting volume demonstrates that the five-year strategic plan put in place in 2013, is delivering improved performance, Sims Metal Management chairman Geoff Brunsdon balanced at the Annual General Meeting 2015.
Revenue from continuing operations for the 2015 financial year was $6.3 billion, which was 10 percent below the previous year. Lower revenue was due to a sharp decline in ferrous and non- ferrous metals prices, as well as the associated decline in Metals Recycling sales volumes across all geographies. This was partially offset by stronger revenues generated by the Global Electronics Recycling business.
Europe Metals improved by 49 percent
Overall, however, the Australia & New Zealand Metals business continued to be the largest driver of group earnings, delivering $59 million of underlying EBIT. Europe Metals improved by a significant 49 percent to $25 million of underlying EBIT, while underlying EBIT from North America Metals was steady at $12 million.
A highlight of the divisional performances for the year was the substantial earnings turnaround in the restructured Global Electronics Recycling business, which more than doubled earnings from continuing operations to $44 million of underlying EBIT. The improved result was achieved through strong recovery in the Continental Europe and US based operations, stronger metallic yields, and attention to operational cost reductions.
Closure of underperforming facilities
FY15 marked the second year of the Company’s five-year strategic turnaround plan. The strategic roadmap to Streamline, Optimise, and Grow the business is progressing. Over the first two years of the plan, underlying EBIT has more than doubled, from $67 million in FY13, to $142 million in FY15.
The improvement in underlying EBIT in FY15 in a contracting market was achieved through a number of strategic initiatives that lowered the Group’s fixed cost base and improved operating margin performance. This included the closure of underperforming Electronics Recycling facilities in the UK and Canada, the roll‐out of enhanced supply chain analytic systems, and investments in downstream non-ferrous recovery technology.
According to Sims` CEO Galdino Claro, ferrous prices during the first half of FY16 collapsed by 42 percent ($114/tonne), including a 30 percent drop ($66/tonne) since the financial results in August were reported.
Lower ferrous scrap prices have jeopardised the economic appeal of collection of more marginal material by Sims` suppliers. In turn, the metals recycling industry globally has experienced a further drop of intake volumes since the end of FY15.
The sharp deterioration in market conditions experienced in 1H FY16 has placed significant downward pressure on underlying EBIT. Based on results to the end of October, 1H FY16 underlying EBIT is currently expected to be around break-even.
The Chairman’s Address to Shareholders can be found under corporate-ir.ne.
Source: Sims Metal Management Limited (Company)