Sims shares slide after profit warning
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More news: Shares in Sims tumbled more than 9% to $10.74 in early trading on the ASX after the metals recycling firm said it expected lower underlying earnings for the second half of the fiscal year amid challenging export scrap metal markets.
RBC Capital Markets analyst Owen Birrell said today's guidance revealed just how challenging the operating conditions remain, putting the FY24 net profit result into loss-making territory.
What they said: "At the 1H24 result, we highlighted the challenging operating environment that has been created by the elevated level of Chinese exports... Until these exports contract, we believe a meaningful scrap market recovery is some way off," he said in a note.
Sims flags lower second half earnings
The news: Metals recycling firm Sims says it expects lower underlying earnings for the second half of the fiscal year amid challenging export scrap metal markets.
The numbers: The company expects underlying earnings before interest and taxes for the second half to be "marginally lower" than the first-half result of $13.4 million, which itself was an 85.6% decline compared to a year earlier.
The context: Sims CEO Stephen Mikkelsen said ongoing market challenges have continued across the industry. Its SA Recycling and ANZ Metal businesses, in particular, have faced increased challenges compared to the first half while the company anticipates improved second-half performance at the North America Metal unit.
Sims' substantial sales revenue, market dynamics associated with the timing of revenue recognition, freight costs, and the competitive environment for scrap metal purchases over the next two months, pose upside opportunities and downside risks to the guidance, he said.
The group said it remained confident in the medium to long-term fundamentals, driven by global decarbonisation efforts, despite negative sentiment surrounding global steel markets that continue to soften export scrap markets.
The sources: ASX announcement, RBC Capital Markets research
