NEW YORK Sims Metal Management Ltd. will strive for additional underlying growth of Australian $238 million ($223.4 million) over the next five years, with roughly 75 percent of that expected to stem from a business optimization plan that includes realigning its North American operations into three regions.
The New York-based company is looking to raise earnings before interest and taxes (Ebit) by 350 percent over the underlying A$67.9 million in Ebit recorded during its 2013 fiscal year, it said in a five-year strategic plan released July 23.
Sims also will focus on generating around A$32 million ($30 million) in savings from streamlining operations, about A$180 million ($168.9 million) through optimization and roughly A$26 million ($24 million) from organic and acquisitive growth over the next five years, it said.
The full benefits of its A$32-million streamlining drive are expected by 2016. Sims expects A$11 million ($10.3 million) to stem from actions in its North America Metals business, where it will consolidate seven North American operating regions to three regions (West, Central, East) and reduce some overhead costs. This is in addition to its more recent divestment of "noncore facilities" in Utah and the idling of its Mobile, Ala.-based Gulf region facilities, which the company said have been "held for sale."
As part of its realignment strategy into three North American regions, Sims said its West Region will explore opportunities for offshore processing of scrap in end-markets, its Central Region will look to "break the industrys traditional adversarial relationship with domestic steel mills and build meaningful partnerships," while its East Region will reinforce its feeder yards network and supplier partnerships.
The company expects A$20 million ($18.8 million) in streamlining benefits to come from changes at its electronic recycling division, called Sims Recycling Solutions, via its exit from several loss-making operations in the United Kingdom and Canada, as well as a consolidation of facilities in Edison, N.J., and Dallas with other sites.
Sims also expects the relocation of its chief financial officer to New York from Chicago and the consolidation of its remaining Chicago back office with its West Chicago operation to deliver a streamlining benefit of A$1 million ($938,580).
The company has laid out a plan to deliver growth of about A$180 million through business optimization over a four-year period and will focus on, among other things: buying the right quality scrap for the right price; maximizing transport capabilities and reducing freight costs; increasing scrap processing yields; and developing value-added products and services.
Its metals business has identified opportunities for growth and will focus on organic feeder yard expansion to secure volumes and improve source control. Sims also will study asset swaps and joint ventures and look at longer-term options for a physical presence in China and East Asia.
Sims will also explore the potential to better serve the Continental European market as it works toward delivering around A$26 million over the next five years from organic and acquisitive growth.
The strategy was the result of a comprehensive review of the companys global operations, according to group chief executive officer Galdino Claro.
"As we streamline our portfolio, we will develop operations where we can best leverage our key competitive advantages of scale, export positioning and the largest global trading relationship network in the industry," Claro said in a statement.