Sims (ASX: SGM) Targets AUD 70-90mn Annual Savings from Cost Reduction Program

Highlights

• Sims is an ASX-listed firm, engaged in metal recycling and offers circular solutions for technology
• In 1HFY24, the company witnessed 7.4% YoY increase in revenue to AUD 4,114.4 million
• Allan Grey Australia Pty Ltd has the maximum stake in the firm with a shareholding of around 17.49%

Established in 1971, Sims Limited (ASX:SGM) is engaged in metal recycling and offers circular solutions for technology. The company focuses on purchasing, processing, and selling both ferrous and non-ferrous recycled metals. Additionally, the company supports businesses and data centres in managing end-of-life IT assets through processes such as reuse, redeployment, and recycling.

In the first half of the financial year 2024 (1HFY24), SGM’s sales revenue increased by around 7.4% YoY to AUD 4,114.4 million, backed by higher acquisition volumes which offset the impact of challenging export markets. During the reported period, statutory EBIT jumped around 0.2% YoY to AUD 163.8 million, and statutory NPAT recorded a fall from AUD 101 million in the previous corresponding period to AUD 65.8 million. The fall was driven by reduced trading margins and higher interest expenses.

Growth Prospects for Materials Sector

The data shared by the Australian Bureau of Statistics on 17 July 2024 revealed that in the quarter ending 31 March 2024, new private sector house commencements increased by 4.8% sequentially to 25,072 dwellings on a seasonally adjusted basis, while total dwelling commencements surged by 0.5% sequentially to 39,715.

In the March quarter, 46,864 dwellings were concluded in terms of trend. Private new houses increased by 14.6% annually since March 2023 to 30,992 dwellings, while private new other residential completions jumped by 5.6% over December 2023 to 14,844 houses.

Top 10 Shareholders of SGM

The top 10 shareholders of SGM have around 54.71% shareholding in the company. Allan Gray Australia Pty Ltd and Mitsui & Co Ltd have the highest stakes in the firm with shareholdings of nearly 17.49% and 17.31%, respectively.

Recent Business Update

Through an ASX update dated 8 May 2024, the company notified that Allan Gray Australia Pty Ltd has increased its shareholding in the company to 17.49% from 16.49% as of 6 May 2024.

Outlook

In 2HFY24, the company expects to see an improvement in its underlying EBIT over 1HFY24 for operations in the UK and NAM, driven by measures to reduce costs.

By FY26, the company expects to post annualised savings of AUD 70-90 million on the back of a cost reduction program introduced in February 2024. Also, the company is on track to improve financial resilience throughout economic cycles.

Share Performance of SGM

SGM shares closed 2.31% lower at AUD 10.14 apiece on 22 July 2024. In the last year, SGM’s share price has declined by almost 33.33%, and in the last three months, it has recorded a fall of 13.78%.

The 52-week high of SGM is AUD 16.43, recorded on 15 August 2024, while the 52-week low is AUD 9.85, recorded on 27 June 2024.

SGM Daily Technical Chart, Source: EODHD/Others

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 22 July 2024. The reference data in this report has been partly sourced from EODHD/Others.

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