PITTSBURGH Spotty demand
for ferrous scrap, anemic growth in the United States and
erratic supply-demand fundamentals worked against Sims Metal
Management Ltd. during its recent fiscal year, resulting in a
significant loss for the worlds largest recycler.
"We have taken our medicine in
2012 and are well positioned for better circumstances," Daniel
Dienst, chief executive officer, told investors during a
conference call to discuss the loss.
Sims posted a net loss of
Australian $521.4 million ($546.25 million) for the 12 months
ended June 30, a sharp contrast to earnings of A$192.1 million
the previous year, despite a 2.1-percent increase in sales to
nearly A$9.04 billion ($9.47 billion) from A$8.85 billion.
Shipments rose to 14.5 million tonnes from 14.2 million tonnes
in the same comparison.
"We were impacted most
significantly by extreme volatility in product pricing and
demand, decreased commodity prices, diminished supply of
feedstock, tepid ferrous trading conditions, particularly at
the end of the (fiscal) first and second halves, and reduced
metal spreads," Dienst said.
A hefty impairment charge pushed
its North American segment to an operating loss of A$618.9
million ($648.28 million) vs. earnings of A$114.6 million the
previous year. The recycler announced in February that it would
record a loss of A$614 million related to acquisitions made
before the financial crisis of 2008 (
amm.com, Feb. 10).
Meanwhile, sales by the segment
inched up 0.6 percent to nearly A$6.03 billion ($6.31 billion)
from A$5.99 billion on shipments that rose 1.1 percent to 11.08
million tonnes from 10.96 million tonnes.
"Our North America Metals
business faced significant headwinds and challenges again in
fiscal 2012. Scrap intake and shipments were in line with the
prior corresponding period, but a challenging set of global
economic conditions and the impact of adverse significant items
resulted in a statutory loss," Dienst said.
In an effort to streamline
operations in North America, the company embarked on a
restructuring effort in its fiscal second half that is expected
to reduce expenses by around $4 million per month, Dienst said.
"Reducing controllable expenses became a priority as a measure
to offset margin compression and to align resources with tight
scrap flows and generally weak market conditions."
Sims has also set its sights on China and is actively
exploring ways to expand in what it perceives is a fast-growing
market. It entered China this year with a minority investment
in Chiho-Tiande Group Ltd., a metals and electronics recycler
operating in China and Hong Kong (
amm.com, Jan. 18).