Metals recycling giant Sims is implementing decisive measures to address the “difficult” financial performance it faced in the fiscal year ending June 30, 2024. As part of its strategic efforts to streamline operations, Sims has sold off its UK business, which included 28 sites, three port facilities, and four shredders. This decision followed an internal review that deemed the UK operations “non-productive,” as disclosed during a recent earnings call.
Sims’ CEO, Stephen Mikkelsen, highlighted that tight supply conditions in the UK were a major factor contributing to the disappointing results. The limited inflows pushed Sims’ suppliers to rely on container shipping and deep-sea volumes, which impacted margins. However, a favorable exchange rate offered some relief, even though the production of premium low-copper shred added to operating costs.
The sale of the UK business brought in £195 million ($255 million), which Sims intends to use primarily to reduce its debt. The company is now concentrating on improving the efficiency of its remaining operations. Sales volumes in the UK sector fell by 8% to 1.29 million tonnes year-over-year, underscoring the difficulties that led to the divestment.
This strategic refocus will enable Sims to concentrate on its core markets in the US and Australia-New Zealand, where it aims to enhance performance following underwhelming results from its North American operations. Despite acquiring Baltimore Scrap, a US-based recycler, inflow volumes in North America declined over the year. Inflationary pressures also squeezed margins, although shredder utilization in North America improved to 68.5% in the second half of the fiscal year, up from 66.5% in the first half. Proprietary sales volumes in the region slightly decreased, totaling 5 million tonnes for the year.
The acquisition of Baltimore Scrap was intended to expand Sims’ presence in the US and capitalize on the rising demand for steel. However, some shareholders are now advocating for the sale of Sims’ North American assets to SA Recycling, a company partially owned but not managed by Sims. They express concerns about the current leadership’s ability to maximize long-term demand and revenue opportunities.
Despite subdued global steel demand, affected by cheaper Chinese steel and weak economic indicators, Sims remains optimistic about the outlook for ferrous and non-ferrous scrap. This optimism is fueled by ongoing decarbonization efforts and growing demand for data center construction.
However, the financial impact of the challenging year was evident. Sims reported an after-tax loss of A$57.8 million ($39 million) for fiscal year 2024, a stark contrast to the A$181.1 million after-tax profit recorded in 2023.
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