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Highlights

  • SIMS offers metal recycling and innovative recycling solutions globally
  • In 1HFY24, the company recorded 7.4% YoY increase in sales revenue to AUD 4,114.4 million
  • The company expects to see improvement in underlying EBIT in 2HFY24, compared the previous half

Australia-based SIMS Limited (ASX: SGM) offers recycling and circular solutions for technology. The core activities of SIMS include purchasing, processing and selling of non-ferrous and ferrous recycled metals. In the first half of the current financial year, the company registered a 7.4% YoY increase in sales revenue to AUD 4,114.4 million, driven by acquisition volumes, which assisted in offsetting the negative impact of challenging export markets.

During the reported period, statutory NPAT stood at AUD 65.8 million, compared to AUD 101 million in previous corresponding period. NPAT was impacted by lower trading margins, interest expenses and inflationary pressure on costs.

Constructive indicators for mining industry

Data released by the Australian Bureau of statistics (ABS) indicated that private net capital expenditure (CAPEX) in Australia has increased by 0.8% in the December 2023 quarter and 7.9% annually. During the reported period, both non-mining and mining industries witnessed capex growth. The capex growth was higher in the mining industry.

The data released by ABS on 4 March 2024 indicated that the gross operating profits of the mining industry surged by 17.3% sequentially in the December 2023 quarter, while salaries and wages increased at a lower rate of 2%.

Key risks in mining industry

The profitability of the mining industry can be affected by factors like volatility in commodity prices influenced by supply-demand dynamics, global economic conditions and geopolitical factors. The demand for traditional fuels like coal is likely to be affected because of the transition towards renewable energy sources and decarbonization efforts across the globe.

Recent business update

Through an ASX filing dated 23 February 2024, the company shared that Thomas Gorman, one of the directors of SGM, acquired 2,000 shares in the company for AUD 24,551.90 on 21 February 2024. With this development, total shareholding of Thomas Gorman reached 6,500 shares.

Outlook

In 2HFY24, the company expects to see improvement in its underlying EBIT, compared to the 1HFY24, including AUD 25 million from cost reduction initiatives.

The company is optimistic about its medium and long-term fundamentals. The company said its initiatives have started to boost domestic sales channels and unprocessed material in the USA.

In the USA, demand for scrap is expected to remain robust, supporting prices.

Share performance of SGM

SGM shares closed 1.78% lower at AUD 12.16 apiece on 4 March 2024. With this, in the past one year, SGM’s share price has dropped by almost 24.47%, and in the last six months, it has decreased by 22.70%.

The 52-week high of SGM is AUD 17.08, recorded on 12 April 2023, while the 52-week low is AUD 11.97, recorded on 24 October 2023.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 4 March 2024. The reference data in this report has been partly sourced from REFINITIV.