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)

Market Cap

$1.95B

Dividend Yield1.52%

Average Volume (3M)0.00

Price to Earnings (P/E)―

Beta (1Y)0.65

Revenue GrowthN/A

EPS GrowthN/A

CountryUS

Employees3,887

SectorBasic Materials

Sector Strength64

IndustrySteel

Share Statistics

EPS (TTM)0.12

Shares Outstanding193,223,480

10 Day Avg. Volume0

30 Day Avg. Volume0

Financial Highlights & Ratios

PEG Ratio-0.13

Price to Book (P/B)0.33

Price to Sales (P/S)0.00

P/FCF Ratio12.22

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$9.19

Price Target Upside6.24% Upside

Rating ConsensusModerate Sell

Number of Analyst Covering5

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

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

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

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.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
6.76B	7.20B	8.08B	9.28B	5.93B	4.92B
	Gross Profit
906.40M	1.04B	844.30M	1.15B	852.20M	530.60M
	EBIT
408.40M	-117.80M	15.00M	367.10M	110.70M	-190.20M
	EBITDA
281.70M	282.80M	150.20M	491.90M	230.60M	-41.50M
	Net Income Common Stockholders
-114.20M	-57.80M	181.10M	599.30M	229.40M	-265.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
242.90M	280.80M	329.80M	267.50M	254.10M	243.10M
	Total Assets
4.47B	4.90B	4.71B	4.44B	3.68B	3.21B
	Total Debt
593.40M	949.30M	804.80M	701.70M	557.10M	480.40M
	Net Debt
392.30M	856.20M	496.10M	448.90M	316.80M	253.10M
	Total Liabilities
1.73B	2.34B	2.05B	1.90B	1.56B	1.22B
	Stockholders Equity
2.74B	2.56B	2.66B	2.54B	2.12B	1.98B
Cash Flow		Free Cash Flow
243.50M	-12.10M	218.70M	273.10M	800.00K	-205.80M
	Operating Cash Flow
448.50M	202.50M	449.20M	547.80M	129.40M	-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	-259.70M	10.40M	-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
SMUPF		$1.95B	―	-1.24%	1.52%	―	―
Sector *	51 Neutral	$2.02B	-1.14	-21.36%	3.64%	2.88%	-30.57%
ORRAF		$1.56B	11.70	4.78%	5.90%	―	―
BMBLF		$20.45B	25.48	26.45%	2.55%	―	―
JHIUF		$11.19B	24.51	21.09%	―	―	―
STKAF		$8.56B	29.01	4.54%	4.50%	―	―
AMC	68 Neutral	AU$32.25B	16.36	20.24%	5.62%	-1.42%	25.16%

* Basic Materials Sector Average

Performance Comparison

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.