The Sims Ltd (ASX: SGM) share price is up 13% after the metal business gave a promising trading update.
Sims describes itself as a global leader of metal recycling and the provision of circular solutions for technology.
FY24 trading update
Despite ongoing market challenges across all regions, the Sims metal businesses are projected to deliver an estimated EBIT of approximately $55 million in the first quarter of FY25.
North America
The ASX share said all the metals businesses are on track to contribute to the good start to FY25, particularly North American Metal (NAM), which is estimated to deliver $29 million of EBIT with a trading margin of 22%.
Sims pointed out that NAM’s performance “builds on the improvement” seen toward the end of FY24 where it delivered an EBIT of $12 million in Q4 after a loss of $15 million in the third quarter of FY24.
The ASX share said the recent performance is “encouraging”, driven by its efforts to focus on margin, including buying more unprocessed material and targeting “the most favourable markets”. Sims said these actions have delivered “tangible results”.
SA Recycling’s performance has been “robust”. Sims’ 50% share is expected to deliver EBIT of $24 million in the first quarter of FY25, which is a stronger pace than the FY24 second half run rate. and at a trading margin of 29%.
ANZ
Australia and New Zealand Metal continues to face challenging market conditions. It has been impacted by increased Chinese exports into Asia and a slowdown in the domestic market. The estimated EBIT for this division in FY25 is expected to be $13 million, with an expected trading margin of 27% for the quarter.
Management commentary
The Sims Managing Director and CEO Stephen Mikkelsen said:
It is encouraging to see the improved performance of our Metal businesses despite the challenging market conditions, particularly as we refocused our portfolio. I am especially pleased with the strong results in NAM, which highlight the successful execution of our strategy in a difficult market and the team’s commitment to organisational adjustments.
Final thoughts on the Sims share price
As always, rising profit can lead to a higher share price. At the right times, I’d say Sims can be a cyclical opportunity to buy, but it seems to be exiting the most difficult time now.
