Sims Metal Management Limited (ASX: SGM) is one of the world’s leading metal recycler, which operates in diverse geographies such as the United States, Australasia, and the United Kingdom.
Sims presented its Investor Strategy Day presentation on 8th April 2019. As per the presentation, the company operates more than 250 facilities across 18 countries. It recycles 430k tonnes of non-ferrous and 9.4 million tonnes of ferrous metals.
The company’s strategy is to broaden its participation in the environmental sector, through an array of business which aligns with the company’s objective. The objective of the company is to create long-term value by providing secure, and sustainable management of resources within the circular economy.
As per the presentation, the array of core business, which the company wants to grow and expand into adjacent markets include the following:
Sims Metals: The theme of the company operating in the segment is to consolidate the USA metals recycling industry and continue to play to its strengths in the export market with heightened flexibility. As per the company, its engineering and technology expertise provide the company with a competitive advantage, as it creates better quality materials, to meet the customers’ demand for high-quality materials.
Sims Waste to Energy: The objective of the business is to utilise shredding waste to create a new revenue stream and reduce costs. The company is encountering increasing cost of waste disposal and an increase in energy prices. The company has managed to reduce waste disposals, as well as energy costs.
Sims holds a competitive advantage as it gets 1.3 million tonnes of shredding waste per year, and shredding waste contains high energy (~16 megajoules/kg). Out of 1.3 million tonnes, 1.0 million tonnes come from plants that produce viable Automotive Shred Residue (ASR), and the company’s Waste-to-energy (WtE) facilities convert the viable shredding waste into 1,100 GWh per year.
As per the company, the WtE would remove 75% of the waste cost, which is at $103 million per annum
Sims Energy: The objective of the business is to expand the proven business model and technology globally. The company holds more than 20 sites across Australia, which produces almost 60MW of energy.
Sims Municipal Recycling: The objective of the business is to develop waste management solutions for mega cities, and the company is servicing largest US city since 2003 with an estimated population of 8.6 million. The company has operations in cities like New York, New Jersey and Chicago. The business further aims to grow municipal and private existing recycling contracts.
Sims E-Recycling: The objective of the business is to drive profitable growth through product stewardship and service for large corporate clients. The company has well established online resale channels with global footprints which aligns with cloud server centres.
The company is targeting a minimum of 15% return on growth projects requiring capital. The objective of the company is to further expand ferrous volumes in favourable geographies from 4,700k tonnes in FY18 to 5,800k tonnes in FY22 and then to 6,500k tonnes in FY25.
Sims aims to grow its non-ferrous business from 140k tonnes retail volume noticed in FY18 to 300k tonnes in FY25. The SGM recently posted its half-year FY19 results.
Also, the company wants to expand its waste to energy capacity to 290k tonnes of ASR by FY25.
The overall business of the company favourably bonds with the environmental concerns, which as per the prevailing economic conditions is among the top most concern of major economies, who are shifting towards zero-emission economies in line with Euro-6 standards.
The stock of the company closed the day’s session at A$11.410 (as on 8th April 2019), down by 2.728% as compared to its previous day’s closing price.
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