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Sims Ltd. (SMUPF)
:SMUPF

Sims (SMUPF) AI Stock Analysis

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Positive Factors
Divestment and Debt
SGM announced the sale of the UK business for total after-tax cash proceeds of ~A$385mn, which should help push the balance sheet to a zero net debt position.
Earnings Estimate
Incorporating the trading update and the closing of the UK divestment, the FY25 EBIT estimate is increased by 22% to A$170m.
Stock Valuation
With the stock trading at a ~20% discount to NAV and c.45% below the replacement value implied by the UK sale, SGM could announce a buyback when cash proceeds from asset sales are received.
Negative Factors
Earnings Volatility
SGM trades on 28x FY25 earnings which is viewed as unsustainably high given historical earnings volatility.
Market Competition
Earnings guidance wasn't provided but SGM expect intense competition for scrap supply in the US and cost inflation to continue.
Market Weakness
Ongoing near term scrap market weakness.

Sims (SMUPF) vs. SPDR S&P 500 ETF (SPY)

Sims Business Overview & Revenue Model

Company DescriptionSims Limited engages in buying, processing, and selling ferrous and non-ferrous recycled metals in Australia, Bangladesh, China, Turkey, the United States, and internationally. The company operates through six segments: North America Metals, Investment in SA Recycling, Australia/New Zealand Metals, UK Metals, Global Trading, and Sims Lifecycle Services. It is involved in the collection, processing, and trading of iron and steel secondary raw materials; and other metal alloys and residues, principally aluminum, lead, copper, zinc, and nickel bearing materials. The company also engages in the provision of environmentally responsible solutions for the disposal of post-consumer electronic products, such as information technology assets recycled for commercial customers; and environmentally responsible recycling of negative value materials, including electrical and electronic equipment. In addition, it provides secondary processing and other services comprising recycling of municipal curbside materials, stevedoring, and other sources of service. Sims Limited was founded in 1917 and is headquartered in Mascot, Australia.
How the Company Makes Money

Sims Earnings Call Summary

Earnings Call Date:Feb 24, 2025
(Q2-2025)
|
% Change Since: -1.82%|
Next Earnings Date:Aug 19, 2025
Earnings Call Sentiment Neutral
The earnings call presented a balanced picture with significant highlights in financial growth, operational improvements, and strategic positioning in key markets. However, these were tempered by ongoing market challenges, weather impacts, and strategic choices impacting volumes in NAM and ANZ.
Q2-2025 Updates
Positive Updates
Strong Financial Performance
EBITDA and EBIT both up substantially. Trading margin increased by 22% despite flat sales volumes, indicating focus on margins is driving better financial outcomes.
SLS Segment Growth
SLS reported strong growth with repurposed units contributing to a nearly 21% increase in revenue and a 2.2 percentage point increase in EBIT margin.
Operational Improvements in NAM
NAM achieved a significant turnaround with a 3.5 percentage point increase in trading margin. Focus on buying unprocessed material increased shredder utilization and drove a 31% increase in zorba sales volumes.
Strategic Positioning in EAF Market
Well-positioned to supply existing and new EAFs in the U.S. with a strong network capable of supporting increased demand for scrap.
Cost Reduction Initiatives
Successfully delivered $64 million in annualized savings last year and targeting another $35 million in the current financial year.
Negative Updates
Challenging Market Conditions
Ferrous scrap prices were generally lower, and the global steel market remains challenging with fluctuations impacting performance.
Weather Impact on NAM
Extraordinarily cold and wet weather in the U.S. slowed down scrap collection and mill operations in January and February.
ANZ Market Challenges
ANZ faced headwinds with tight scrap supply and challenges in the export market due to ongoing global steel production by China.
NAM Volume Strategy
Deliberate reduction in dealer volumes to focus on margins resulted in lower overall sales volumes, reflecting a cautious approach in a competitive scrap market.
Company Guidance
During the call, the company provided detailed guidance, highlighting several key metrics of interest. They reported a substantial increase in both EBITDA and EBIT, showcasing a strong financial performance. The trading margin saw a notable rise of 22% despite flat sales volumes, underscoring the company's strategic focus on margins over volumes. The North American Metal (NAM) division was a focal point, with a 3.5 percentage point increase in trading margin percentage, driven by an 8.6 percentage point rise in unprocessed scrap, which also contributed to improved shredder capacity utilization. The company also highlighted a 31% increase in zorba sales volumes, reflecting a strategic shift towards buying more unprocessed material. In terms of capital management, the company outlined a revised framework targeting a gearing ratio of less than 15% and an operating leverage rate of 0.5x underlying EBITDA. Additionally, they introduced a new dividend policy aiming to return 25% to 35% of pre-growth free cash flow to shareholders, emphasizing a commitment to maintaining a strong balance sheet while rewarding investors.

Sims Financial Statement Overview

Summary
Sims faces challenges with profitability and cash flow despite maintaining a strong balance sheet. The negative net income and declining free cash flow highlight risks in operational efficiency and financial health. While there are positive signs in gross margin improvements, the company needs to address leverage and cash management issues to stabilize and drive future growth.
Income Statement
58
Neutral
Sims has struggled with revenue growth, seeing a decline in revenue from 2023 to 2024. The gross profit margin improved from 10.44% in 2023 to 27.51% in 2024, indicating better cost management. However, the net profit margin has turned negative due to a significant net loss in 2024, reflecting challenges in controlling operational expenses and financial costs.
Balance Sheet
65
Positive
The debt-to-equity ratio increased slightly from 0.30 in 2023 to 0.37 in 2024, indicating a moderate rise in leverage. The equity ratio remains stable, reflecting a strong balance sheet. Return on Equity (ROE) turned negative in 2024 due to net losses, which highlights profitability challenges despite a solid financial structure.
Cash Flow
50
Neutral
Operating cash flow decreased significantly from 2023 to 2024, impacting free cash flow, which turned negative. The free cash flow to net income ratio is unfavorable, indicating cash generation issues despite some operational cash inflow. Overall cash flow management needs improvement to support future liquidity needs.
Breakdown
TTMJun 2024Jun 2023Jun 2022Jun 2021Jun 2020
Income StatementTotal Revenue
6.76B7.20B8.08B9.28B5.93B4.92B
Gross Profit
906.40M1.04B844.30M1.15B852.20M530.60M
EBIT
408.40M-117.80M15.00M367.10M110.70M-190.20M
EBITDA
281.70M282.80M150.20M491.90M230.60M-41.50M
Net Income Common Stockholders
-114.20M-57.80M181.10M599.30M229.40M-265.30M
Balance SheetCash, Cash Equivalents and Short-Term Investments
242.90M280.80M329.80M267.50M254.10M243.10M
Total Assets
4.47B4.90B4.71B4.44B3.68B3.21B
Total Debt
593.40M949.30M804.80M701.70M557.10M480.40M
Net Debt
392.30M856.20M496.10M448.90M316.80M253.10M
Total Liabilities
1.73B2.34B2.05B1.90B1.56B1.22B
Stockholders Equity
2.74B2.56B2.66B2.54B2.12B1.98B
Cash FlowFree Cash Flow
243.50M-12.10M218.70M273.10M800.00K-205.80M
Operating Cash Flow
448.50M202.50M449.20M547.80M129.40M-65.30M
Investing Cash Flow
-83.60M-344.50M-245.20M-274.80M-126.90M-28.50M
Financing Cash Flow
-377.70M-75.50M-155.00M-259.70M10.40M-67.90M

Sims Peers Comparison

Overall Rating
UnderperformOutperform
Sector (51)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
$1.95B-1.24%1.52%
51
Neutral
$2.02B-1.14-21.36%3.64%2.88%-30.57%
$1.56B11.704.78%5.90%
$20.45B25.4826.45%2.55%
$11.19B24.5121.09%
$8.56B29.014.54%4.50%
AUAMC
68
Neutral
AU$32.25B16.3620.24%5.62%-1.42%25.16%
* Basic Materials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
SMUPF
Sims
8.65
1.69
24.28%
ORRAF
Orora
1.12
-0.22
-16.42%
BMBLF
Brambles
15.29
5.76
60.44%
JHIUF
James Hardie
24.00
-6.93
-22.41%
STKAF
Stockland
3.45
0.59
20.63%
AU:AMC
Amcor PLC Shs Chess Depository Interests
13.98
-0.36
-2.51%
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.