In a financial half that CEO Alistair Field described as "challenging for all recycling companies globally", Sims Metal Management reports a decrease in underlying earnings before interest and tax. Underlying Ebit was down by over 12 per cent to AUD110m (€69m) compared to the prior-year period, according to preliminary figures for the half ended 31 December 2018 which were released by the Australian-American group on Monday.
The sharpest decline could be found in Sims' Europe Metals operations. The business area, which houses Sims' scrap metal operations in the UK, saw underlying Ebit tumble by around 88 per cent from AUD 11.6m to AUD1.4m.
Sims attributes the marked decline to changes in the Turkish sales market as well as to a drop in margins for non-ferrous products tied to tighter quality requirements for scrap imports in China. In Turkey, economic challenges had wiped out the premium that buyers there had been willing to pay over and above prices in short sea, container, and domestic sales outlets, the company reports. Moreover, Turkish buyers were now seeking higher quality ferrous scrap. Sims had lost some volume to competitors as a result of its stricter controls.
There was also a reduction in margins in the non-ferrous metals recycling business. Buying prices for shredder feed did not yet reflect the decrease in Zorba selling prices. At the same time, Sims would have to wait until the second half of the 2018/19 financial year to see Ebit contributions from its new granulation plants for copper scrap. It was building these facilities in the US and the UK in response to restrictions on imports of insulated copper wire and electric motors to China.
The company will release its final results for the first half of 2018/19 on 20 February.