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Consolidation can boost Sims’ position: Claro

Keywords: Tags  Sims Metal Management, Galdino Claro, consolidation, ferrous scrap, Sean Davidson


NEW YORK — Sims Metal Management Ltd. can better integrate its operations across geographies and business units, new chief executive officer and managing director Galdino Claro said at the company’s annual general meeting this week.

Sims operates more than 270 facilities in 20 countries across five continents.

"In some regions our returns are best in class, while in other markets we struggle to break even. We need to leverage the scale of the business platform to learn from our own best-in-class operations and show that being the largest listed metal and electronics recycler in the world has greater value than simply bragging rights," Claro said.

It is critical that the company manages the aspects of the business within its control as the timing of a recovery in steel and scrap markets remains uncertain, Claro said.

"The company remains committed to maintaining capital discipline and low gearing, continuing efforts to reduce controllable costs and improving synergies across our businesses. While we expect near-term challenges to persist, we remain optimistic in the long-term earnings potential of our global platform," he said.

Over the past four months, the New York-based company has reported mixed results across its various locations.

In the first half of Sims’ 2014 fiscal year, which started July 1, North American market conditions and results remain challenged due to weak scrap generation and intense competition for raw materials, Claro said.

Earnings from its operations in Australasia are trending higher, reflecting higher intake volumes and improved export sales margins, while restructuring of its metals business in the United Kingdom has brought improved results, he said.

Ferrous scrap markets have recently strengthened after softening in September and early October, with demand for ferrous scrap in the Mediterranean Basin and in Asia staying firm, Claro said.

"Ferrous scrap prices have increased by roughly $40 per tonne in the Mediterranean Basin and by about $35 per tonne in Asia since early July. Despite our expectations for firm ferrous scrap prices, near term, we believe it is unlikely these higher prices will translate into meaningfully improved margins due to intense competition for unprocessed raw materials in North America," he said.


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