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Sims eyes China drive and confirms huge loss

Sims Metal Management has confirmed a full year loss of AU$521m (£348m) and outlined plans to expand in the Far East.

The world’s biggest metal and electronics recycler blamed the grim results on the global economic crisis, volatility in product pricing and demand, decreased commodity prices, diminished ferrous trading conditions and reduced metal spreads.

The firm said it was looking to further expand operations into mainland China following its acquisition of a 16% stake in Chiho-Tiande Group (CTG) this year.

Sims group chief executive Daniel Dienst said CTG was “among the most exciting and attractive companies that will define and shape the nascent Chinese recycling landscape”.

He added: “We continue to evaluate other expansionary opportunities in this fast-growing recycling market.”

The company warned investors of the bad news on 15 August causing shares in the firm to fall 9.33% to AU$8.55 on the Australian Securities Exchange (ASX).

Shares in the company are currently trading at AU$9.36, down 35% on the price 12 months ago.

Key figures from the firm’s annual financial results for the year to 30 June 2012 include:

  • Revenue: AU$9.042bn, up 2% from AU$8.853bn in 2011/12.
  • EBITDA (earnings before interest, taxes, depreciation, and amortization): AU$230m, from AU$430m in 11/12.
  • EBIT (earnings before interest and taxes – operating profit): AU$-515m, from AU$300m in 11/12.
  • Net loss: AU$-521m, from net profit of AU$192m in 11/12.
  • Underlying net profit after tax: AU77m, down 57.7% from AU$182.

The firm’s loss included AU$615.1m non-cash goodwill impairments, mostly on assets in North America, which the firm announced in the first half.

Dienst said the firm had continued to implement growth plans including the constructions of a plastics recycling facility in the UK.

In Europe, the firm reported sales revenue up 20% to AU$1.8bn, and EBIT operating profit down 92% to AU$8m. Underlying EBIT was AU$56m.

Dienst said: “Our European business had a disappointing performance during Fiscal 2012 as our U.K. Metals business struggled with weak scrap generation and tight margins. At the end of Fiscal 2012, our U.K. Metals business implemented a rationalisation plan to reduce costs and align resources with slower intake and to defend margins. We believe this rationalisation will reduce costs by circa $1.5 million per month beginning toward the end of the first half of Fiscal 2013.”

Dienst added that despite challenging results in the scrap trade, Sims’ SRS electronics recycling business kept its European region profitable.

The company said it would not provide guidance for 2013/14 because of “heightened levels of macroeconomic uncertainty around the globe”.

Sims said Dienst was in line for a AU$819,653 cash bonus in 2012 bringing his total remuneration up to AU$2.7m.

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