Sims Metal Management expects tight ferrous scrap flows and US scrap processing overcapacity, two major headwinds impacting margins, to improve in its current fiscal year that ends June 30, 2014.
The global scrap firm notes an improvement in key scrap generation markets, including US light vehicles and household appliances, sales of which increased 10% and 7%, respectively, thus far in 2013 compared with 2012. Sims estimates automotive and appliance sales alone can account for 50-70% of feedstock for US metal shredders. Sims also notes that US consumer confidence hit a five-year high in June.
"While these signs are encouraging, due to the severity of the 2009 US recession and consistently high unemployment rates, auto scrapping rates are expected to lag new auto sales," Sims Chairman Geoffrey Brunsdon said during an earnings conference call.
Regarding increased capacity, which has impacted recyclers' margins over the past few years, Brunsdon said, "Some signals of industry rationalization of installed scrap processing capacity are beginning to emerge. A trend has begun as we've seen amongst metal recycling firms, both in the US and other markets, to address industry overcapacity through cost reductions and operational rationalization. While these developments are promising at present, the challenges of excess capacity persist."
Sims announced a net loss of Australian $466.1 million ($420.8 million) for the full 2013 fiscal year ended June 30 and revenue of A$7.19 billion ($6.49 billion). Revenue was down 20% compared with fiscal 2012 due to lower average scrap prices and volumes.
Sims also announced that its directors have created a global leadership team during a search for a new CEO. Former Sims CEO Daniel Dienst retired effective June 30 and the board expects to announce a new CEO by the end of September.
