Sims announce a 25 percent decrease in revenue for its fiscal year 2020.
Sims Limited a global leader in metal and electronics recycling, and an emerging leader in the municipal recycling and the renewable energy industries. announced an underlying earnings before interest and taxes loss of $57.9 million (£43.99 million) in FY20 compared to an underlying EBIT profit of $230.3 million (£175 million) in FY19. Tough market conditions prevailed throughout FY20 and the rapid collapse of ferrous scrap prices in September 2019, combined with historically low zorba prices, severely compressed margins in the first half.
Following this sharp fall there were tentative signs of a recovery in prices and volumes. However, in early 2020 the historic world-wide response to slow the spread of COVID-19 materially reduced intake volumes and sales prices in the second half, especially in the United Kingdom, North America and New Zealand. Sales revenue of $4,908.5 million in FY20 was 26% lower compared to the previous year due to lower volumes and pricing.
Group CEO & Managing Director, Alistair Field, on the FY20 results said, “Our rapid response to protect employees and the community limited the disruption of this essential service. However, severe COVID-19 lockdowns across the UK, North East US and New Zealand materially reduced intake volumes and sales prices. Management has responded to the tough market conditions with an extensive restructuring and cost reduction programme that will achieve its full run rate of $70 million in FY21.” Furthermore, and on the progress of strategic initiatives, Mr Field said, “I’m pleased with the progress made in advancing our growth strategy during FY20. This provides a strong foundation to make further headway in FY21 and in future years.
In April 2019, the Company announced a significant growth strategy for its current lines of business and an expansion into new environmental adjacencies. China’s new regulations classifying high quality non-ferrous scrap as a “renewable metal” rather than “waste” validates the strategic push into increasing non-ferrous volumes. Good progress was made across three of the strategic growth areas: ▪ commenced community consultation for the first resource renewal facility planned in Campbellfield, Victoria, using InEnTec technology. InEnTec technology has been in operation since 1997, with a number of facilities across the USA and Asia; ▪ secured a further three significant "recycling the cloud" customers for FY21 and targeting a 34% increase in FY21 to 33,000 tonnes; and ▪ won an additional municipal recycling contract in Florida with contract terms mitigating commodity risk. The Company is in a strong position to further advance the strategy in FY21 and going forward, including maintaining a strong balance sheet, focus on cash flow and substantially improved costs across all businesses.
The Company has been re-structured to handle global market volatility through:
▪ cost reductions;
▪ structurally combining buy and sell functions; and
▪ commencing the implementation of an ERP system
to provide real time global trading and inventory positions and retain cost reductions. The Company is well positioned to take advantage of anticipated government infrastructure stimuli around the world. Despite the very difficult trading conditions that prevailed for the majority of FY20, the Company, including all Metal divisions, returned to profit for the month of July 2020.