Sims Metal Management Earnings to Nosedive as Commodity Prices Fall

It expects the results to remain materially lower when compared with the previous fiscal.

SEATTLE (Scrap Monster): Sims Metal Management has warned investors that depressed commodity prices are likely to take a heavy toll on H1 FY 20 financial results of the company. The trading update released by the company states that recent significant declines in ferrous and non-ferrous prices are likely to have a negative impact on half-yearly fiscal financial results. It expects the results to remain materially lower when compared with the previous fiscal.

Alistair Field, CEO and Managing Director noted that the escalating trade wars have resulted in reduced demand for steel and aluminium. Also, in early-September this year, the steel companies have announced sizable reduction to scrap purchases, in addition to lowering their outlook on future scrap purchases. The reduced demand has led to steep decline in scrap prices, he said. The profitability is likely to be impacted by consistent rise in deep sea freight prices, Field added.

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Sims Metal Management expects that the low prices and poor liquidity situation is likely to recover over the medium term. However, these will have definite impact on its first half result. It is too early to predict the impacts on the second half results. Meantime, the company noted that the business is well-positioned to deliver good returns through the commodity cycle. Also, it will continue to remain cautious on fresh capital expenditure during this market downturn.

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