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Sims upgrades earnings forecast for 2020/21

Alistair Field, CEO of Sims Limited
Sims CEO Alistair Field is pleased to be forecasting the
fourth quarter to be "as strong as the third quarter".
16.06.2021 − 

Metals recycler Sims Ltd has increased its full-year earnings forecast due to "excellent third quarter results" and high expectations for the fourth quarter, due in part to soaring scrap metal prices. In a trading update released on Tuesday, the US-Australian concern said it now expected to book underlying earnings before interest and tax of AUD360-380m for its 2020/21 financial year ending on 30 June, equivalent to about €229-241m. Sims had previously forecast underlying Ebit in the range of AUD260-310m. The updated forecast assumes no changes to Sims' shipping schedule for June.

The company reported that proprietary intake volumes had remained good in the current half, at around 95 per cent of those in the 2018/19 pre-pandemic business year. This was an improvement even over the recovery seen in the first half of the financial year, when intake volumes stood at 85 per cent of pre-Covid levels.

Higher scrap prices had also resulted in both a general improvement in gross margin and "a significant contribution from SA Recycling", the company said. SA Recycling, a joint venture with Adams Steel active in the Southwest and South of the US, had benefitted in particular from improved prices for zorba-linked products, good intake volumes, and good margin management, according to Sims.

CEO Alistair Field explained that Sims' previous forecast issued in April had "factored in justifiable concerns that the rapid rise in prices commencing in December 2020 contributed to exceptional Ebit that would not be sustained in the fourth quarter". He was pleased that this had not been the case and that Sims was now expecting a fourth quarter as strong as the third. Sims posted underlying Ebit of AUD230m in its 2018/19 financial year and an underlying loss before interest and tax of AUD58m in 2019/20.

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