Sims plans more Chinese recycling investment opportunities


Metal recycling giant Sims Group is looking to develop more business in China, it has revealed in its annual results.

During the company’s current financial year, it bought a 16 per cent stake in Chiho-Tiande Group (CTG) in China, which marked its first investment in the country.


Sims Group chief executive Daniel W. Dienst said: “After years of diligent evaluation of opportunities to enter the physical recycling arena in the People’s Republic of China, we identified CTG as among the most exciting and attractive companies that will define and shape the nascent Chinese recycling landscape.

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

On revenue of $9 billion, Sims made a net loss after tax of $521 million. However, this was mainly due to non-cash goodwill impairment charges required under Australian law that represented $614 million. Underlying net profit was $77 million.

On its European business, which saw sales increase 20 per cent to $1.8 billion, Daniel W. Dienst said: “Our European business has a disappointing performance during Fiscal 2012 as our UK metals business struggled with weak scrap generation and tight margins. At the end of Fiscal 2012, our UK 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 towards the end of the first half of Fiscal 2013. Despite challenging results from the scrap metal business, the European region remained profitable due to earnings contributions from Sims Recycling Solutions in continental Europe, though earnings for SRS in Europe were lower than the prior corresponding period.

“This is a result primarily of lower commodity price realisations and macro factors.”

On the metal markets globally, he added: “May and June were very difficult months in which ferrous prices declined by circa $130 per tonne. Intake also slowed precipitously, particularly in June, as we aggressively lowered our buy prices.

“We were however able to maintain a steady position with sales against inventories, but we could not drop buy prices fast enough relative to falling ferrous selling prices such that average inventory costs remained too high relative to the market at the time.

“In July, ferrous markets seemed to find a floor and have recently increased significantly. We expect ferrous prices to trade in a range around current levels over the near term and we expect adequate trading liquidity in the deep sea ferrous markets in the coming weeks. Intake currently remains challenged, though some margin improvement is noted as the market has recently become more disciplined.

“Non ferrous markets, while trading at lower levels, have been and remain liquid.”