Metal recycler European Metals Recycling (EMR) posted a more than 50% drop in pretax profits for 2012.
Pretax profits for the Warrington-based recycler declined from £116m in 2011 to £57m in 2012, a recently filed annual statement revealed.
A succession of events last year, including contagion from the Eurozone crisis, the political situation in the US and China, and the US ‘fiscal cliff’, influenced demand and pricing sentiment. This negatively impacted profitability, said EMR chief executive Christopher Sheppard.
Prices were also hit by low levels of available scrap and excess capacity in the recycling market. The price of iron fell by approximately 10%, in line with drops in iron ore and steel prices.
Sheppard said: “Despite these significant headwinds, group performance has been strong relative to the market at large and significant progress has been made in further expanding core activities and in developing new technologies.”
Revenue increased year-on-year, up from £3.5bn to £3.7bn. However, the cost of sales (the cost of producing goods) also rose, up from £2.6bn to £2.8bn, as a result of processing overcapacity, and this drove profits down.
“Processing overcapacity arose as scrap metal arisings throughout the developed world remained depresses due to lower economic activity levels and lower scrap pricing,” said Sheppard.
Recent investments by the scrap metal industry, particularly in terms of US shredder capability, also contributed to expand recycling operating capacity, he added.
Despite the modest performance for 2012, EMR said it was well positioned for future growth.
“Investment programmes in both the USA and the UK will become operational during 2013 and early 2014 and will have a clear accretive impact on group profitability.”
Among them, EMR highlighted a £100m investment in an energy-from-waste facility in Oldbury, West Midlands, made by Innovative Environmental Solutions - a joint venture between EMR and Chinook Sciences.
The plant, described as “the most advanced of its kind”, will use Chinook’s gasification process to convert waste from EMR’s shredders – including metals and plastics – into energy from late 2013 or early 2014.