Sims (SGM) H2 2024 earnings summary

Executive summary

• FY 2024 was challenging, with second half results exceeding expectations as underlying EBIT reached AUD 43 million, above guidance, despite an 83% year-over-year decline to $42.9m due to higher costs, asset reviews, and divestments.

• Sales revenue increased 6.2% to $8,562.7m, driven by acquisitions and non-ferrous price gains, despite a 1.7% decline in sales volumes.

• Strategic focus shifted to margin over volume, with deliberate volume reduction, cost discipline, and business simplification.

• SLS segment delivered over 100% EBIT growth year-over-year, expanding its customer base and circular centre footprint.

• Cost reduction initiatives delivered $46m in annualised savings, with 206 roles removed and further cost-out measures underway.

Financial highlights

• Underlying EBITDA declined 35.8% to $304.8m, with EBITDA margin at 3.6%; operating cash flow was AUD 202 million, reflecting lower earnings and higher interest.

• Dividend per share reduced to 10.0 cents, down 71.4% year-over-year; no interim dividend paid, but a fully franked final dividend approved.

• Net debt at year-end was approximately AUD 400 million, with net cash position declining to $(411.9)m due to acquisitions and capex.

• Return on Productive Assets fell to 1.8% from 11.4% in FY23.

• Non-ferrous sales increased by over 30% year-over-year, with average selling prices up 11%.

Outlook and guidance

• NAM's recovery is expected to continue, supported by agile sales and data-driven strategies, despite intense competition for scrap supply.

• SLS is positioned for further growth, leveraging AI-driven data center demand and positive market momentum.

• Global steel demand remains muted, with persistent inflation and Chinese steel exports weighing on the market.

• Further cost reduction efforts are planned to address inflationary pressures.

• Proceeds from asset sales to strengthen balance sheet and support targeted growth and shareholder returns.