Sims looks for more China opportunities

23 Aug 2012, 12:24 pm   -   Source: AAP

Sims says it is evaluating more expansionary opportunities in the emerging Chinese metals recycling market.

The world's biggest scrap metal recycler, Sims Metal Management, says it is looking for more opportunities to expand into the big Chinese market.

Sims made its first investment in mainland China in fiscal 2012, taking a minority 16 per cent stake in the Chiho-Tiande Group (CTG).

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

"We continue to evaluate other expansionary opportunities in this emerging recycling market, Mr Dienst said during a market briefing on Thursday.

Sims on Thursday booked an annual net loss of $521.4 million for the 2011/12 financial year as it struggled with falling scrap metal prices and writedowns on assets acquired in "headier times".

Sims had flagged the loss on August 15, saying it had endured a horror year.

The net loss for the year to June 30, 2012 compared to a net profit of $192.1 million in 2010/11.

The bottom-line result included $615.1 million in impairments on goodwill, mainly on assets in North America, which were announced in the first half.

Underlying profit, which excludes one-off items, fell 57.7 per cent to $77.0 million, from $182.0 million.

Mr Dienst said a "prolonged global economic malaise" had adversely affected Sims and continued to linger.

He said economic contraction in Europe, slowing economic growth in China and anaemic economic growth in the US had resulted in slow generation of scrap.

Extreme volatility in product pricing and demand, decreased commodity selling prices, a constricted supply of feedstock, tepid ferrous trading, and reduced metal spreads had hurt the company's financial performance.

Sims declined to provide earnings guidance for 2012/13 given the levels of macro-economic uncertainty around the globe.

"While we are not where we would like to be in terms of profit, we have taken our medicine in fiscal 2012 and are well positioned for current and better operating circumstances," Mr Dienst said.

Mr Dienst said that in 2012, Sims had concentrated on factors that it could control, such as operating costs and prudent employment of capital.

The company had rationalised its traditional metals business in North America in the second half of fiscal 2012 and was currently implementing a rationalisation plan in the United Kingdom.

Sims was seeking to gain more control over the source of material and was looking to improve margins.

The company continued to make acquisitions in metals and electronics recycling and had built a plastics recycling centre in the UK.

Sims' North American operations made an earnings loss in 2012 although scrap intake and shipments were in line with the prior year.

Australasian earnings increased on the back of gains from the sale of a joint-venture business.

Scrap intake rose by three per cent, and shipments were in line with the prior corresponding period.

Earnings in Europe fell 92 per cent, affected by a goodwill impairment on the UK metals recycling business.

Scrap intake in Europe rose by 12 per cent, and shipments lifted by 13 per cent.

"Our European business had a disappointing performance during fiscal 2012 as our UK metals business struggled with weak scrap generation and tight margins," Mr Dienst said.

Shares in Sims were 53 cents higher at $9.72 at 1200 AEST on Thursday.

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