NEW YORK Sims Metal
Management Ltd. anticipates a $21-million to $31-million
decline in earnings in the first half of its fiscal year.
"Market conditions remain
tough," chief executive officer Daniel W. Dienst said at the
companys annual meeting of shareholders in North Sydney,
Australia, and the company expects underlying earnings before
interest, taxes, depreciation and amortization (Ebitda) to be
in a range of $110 million to $120 million in the six months
ending Dec. 31, down from $141 million in the same period last
"In full-year fiscal 2012, we
generated underlying Ebitda of $253 million. That result
reflected tough markets characterized by weak scrap generation,
tight metal margins and significant volatility, both in terms
of ferrous pricing and periods of illiquid trading conditions
in our important deep-sea ferrous markets. Despite a very
recent significant lift in ferrous trading prices, market
conditions remain as challenging so far in fiscal 2013 as they
were in fiscal 2012," Dienst said.
"Let none of us hide from the
fact that significant challenges remain. In two of our key
scrap-generating minesthe U.S. and the
U.K.the scrap-generating consumer remains somewhat wary
and tentative. During the pre-(global financial crisis)
boom years, capacity was increased and that
capacity currently outstrips current arisings. But after
several years of pain, the strong hand of Darwin is now
eradicating and consolidating marginal and unprofitable
capacity," he said.
"We are seeing some green
shoots, if you will, in the U.S. economy as recent
reports and government statistics suggest that the U.S.
consumer has begun to return. However, uncertainty caused by
the recent presidential election in the United States, the
portended fiscal cliff also in the U.S., a
struggling European Union and the soon-to-be-completed
once-a-decade transition of power in China have combined to
create a wait-and-see attitude," Dienst said. "This
wait-and-see attitude is adding to the massive backlog for the
purchasing of new products which, when met, may unleash a
commensurate wave of supply to recyclers."
As part of the groups
strategy for its current fiscal year, Dienst said it is
targeting group-wide cost reductions of 75 basis points against
its fiscal 2012 sales and will look to advance its position in
emerging economies such as China, India and the Middle
"We will go deep into the
scrap-generating mines for material, be that in the
United States, the United Kingdom, Australia or China. We are
aggressively exploring new markets, and will prudently move
into them once proper due diligence has been completed," he
said. "We currently expect capex in fiscal 2013, excluding
acquisitions, to be circa $160 million to $180 million,
depending on the timing of projects and market conditions."
In North America, Dienst said
that the company will complete construction of its municipal
recycling plant in New York City and will continue development
of the New England and Gulf Coast markets.
The groups electronics
recycling division will continue to grow and maintain its
position "both organically and externally with significant
development plans in the U.S. and Canada," he added.