Losses on Sims Metal Management’s UK operations have contributed to the global giant failing to pay a dividend for 2013.
Chairman Geoffrey Brunsdon told the company’s annual general meeting that Sims made a pre-tax loss of AUS$537m (£312m) in its worst year since it went public.
He said goodwill impairment of AUS$292m, mainly arising in North America, contributed the bulk of the loss and “impairments associated with our inventory write down in the UK and subsequent organisational changes also contributed materially to significant items”
This followed identification of “a breakdown in our internal control environment which had led to a significant overstatement of the value of inventories at two of our UK-based facilities”, he said.
Sims would normally distribute 45-55% of profit after tax as a dividend but the loss meant the board decided against a final dividend for 2013 but “remains committed to the resumption of paying regular dividends as soon as market conditions permit”, Brunsdon said.
The low volume of post-consumer scrap has seen intense and sustained competition for the limited supply of raw materials
Sims’ chairman Geoffrey Brunsdon
Detailing a torrid period for Sims, Brunsdon said: “Fiscal year 2013 was a deeply challenging one for Sims Metal Management… perhaps the most challenging year the company has faced since it was floated over 20 years ago.
“At a macro level, the metals recycling industry continued to face weak commodity markets and falling prices for ferrous and non-ferrous scrap.
“Competition for unprocessed material remained intense across all our markets, and in particular our critical US market.”
Sales revenue across Sims was AUS$7.2bn, down from AUS$9bn in 2012, which Brunsdon attributed to a combination of lower average ferrous and non-ferrous scrap prices and a 12% yearly fall in sales volumes to12.8m tonnes.
He said: “The low volume of post-consumer scrap has seen intense and sustained competition for the limited supply of raw materials, eroding gross margin and reducing operating leverage for Sims Metal Management and our major competitors.”
Substantial progress has also been made in the implementation of the group’s standard inventory controls across the UK business
Sims had reacted by cutting costs by AUS$45m through raising availability rates on its processing equipment and metal shredders, removing under-utilised equipment and facilities, and shedding jobs.
It had also raised AUS$52m by selling various non-core businesses. Capital spending totalled AUS$149m in 2013 but would be “substantially lower” in 2014 Brunsdon said, with the exception of construction of a new shedder in Kwinana, Western Australia.
Brunsdon said a special committee of the board had investigated Sims’ UK problems, which had recommended “changes to the management structure and personnel, which have been made”.
He added: “Substantial progress has also been made in the implementation of the group’s standard inventory controls across the UK business. This includes IT infrastructure investments to close sources of potential future control breakdowns. The effectiveness of the recently strengthened control environment in the UK will be subject to detailed internal and external audit review during FY14.”
New chief executive
Sims has chosen Brazilian-born Galdino Claro, a mechanical engineer by background who spent 20 years at Alcoa, rising to be president of Alcoa China. Claro has since 2010 been chief executive of metals and minerals at the Harsco Corporation.
Sims had sought a new chief executive since Dan Dienst announced his retirement last February.
Only 10 days into the job, Claro told the meeting: “The company has the potential to better integrate its operations across geographies and business units. In total, the group operates over 270 facilities across five continents and 20 countries. In some regions our returns are best in class, while in other markets we struggle to break even.
“We need to leverage the scale of the business platform to learn from our own best-in-class operations, and show that being the largest listed metal and electronics recycler in the world has greater value than simply bragging rights.”
- SITA and the Nicollin Group have signed an agreement regarding the sale of the 36% interest that SITA held in the Nicollin Group. SITA, a SUEZ Environnement subsidiary, which had partnered the Nicollin Group’s development since 1992, said its priority focus was on waste recovery businesses. The Nicollin Group specialises in the collection and treatment of household and industrial waste, street cleaning, and industrial cleaning sectors.