Sims' H1 Earnings to Shrink 12%, Hit by Lower Margins

SEATTLE (Scrap Monster): Global metal recycler Sims Metal Management (SMM) expects lower margins to hit the company’s earnings during the first half of the 2018-‘19 fiscal year. The company foresees the earnings during the July-December ’18 to fall by 12.2% over the previous year to A$109.8 million, despite 3.3% growth in overall sales volume.

The company expects dismal performance from its Europe Metals division. The earnings before interest and tax (EBIT) of the division are likely to see drastic fall by almost 88% year-on-year to A$ 1.4 million. The sharp fall is primarily attributed to the erosion in the Turkish deep-sea premium on account of further weakening of the Turkish Lira. The robust scrap purchase prices on account of tough competition among the U.K. exporters also led to lower margins by the Europe Metals division.

The Europe Metals division had to implement stricter quality controls on scrap purchases due to requirements for higher quality scrap by Turkish customers, which in turn impacted the intake volumes. The division also witnessed heavy fall in non-ferrous margins.

The North America Metals division reported 4.6% year-on-year decline in earnings, which totaled A$33.1 million in July-December ’18. The company’s joint venture SA Recycling reported 33% drop in EBIT to A$16.8 million. Comparatively, Sims’ Australia and New Zealand division reported much more stable performance, with EBIT falling only by 1.4% over the year to A$43.6 million.