Sims Metal Management (ASX: SGM) is successful year-over-year in terms of the financial results improvements. There was an improvement of underlying EBIT as compared to the last fiscal year by 53%. The cause of this improvement was driven by strong increase in the demand for the ferrous and non-ferrous metals. There was improvement seen in the margins, boosted yield of material as well as the useful contributions through the joint ventures. The company has also implemented internal initiatives which has also added direct benefits to the EBIT of worth $40 million in the FY2018.
The company is working continuously in order to improve the shareholders return by 53 cents per share which are 100% fully franked. The dividends have also increased from 8.0% in FY17 to 10.3% in FY18. There was an improvement seen across both ferrous and non-ferrous products for the majority of FY2018. There was an increase in the demand of steel making raw material as a result of increased global steel consumption in China. China provided higher prices for ferrous scrap metal. There was an increased in the global demand for non-ferrous secondary metals in FY18. It was evident over the same period that the price movement of copper and aluminium got increased by 20% over the same period in the prior year.
There were certain macroeconomic uncertainty which the company tried to mitigate through the capital investment, trading expertise and global geographic footprint. Using the external growth opportunities, the company tried to strengthen its existing platform and the company is also moving ahead to invest in the emerging technology. As a result of construction of two metal recovery plants within the US and next generation downstream technology in response to China’s National Sword initiative, the company experienced an increase in the capital expenditure by nearly 40% to $176 million. The investments made for the advanced metal separation fit well into our core competencies of large volume processing, early technology adoption, and leveraging economies of scale. In the long-term, the company is optimistic that Sims will definitely be benefitted from the existing trends in the market. Apart from that the group has used another $56 million for acquisitions, most remarkably Morley in the UK. Another $38 million was used to acquire the 50 per cent interest of the Sims Pacific Metals joint operations. These investments will help to meet the core competencies and also enhance the returns.
The purpose-driven corporate strategy aligned with our new management team will help to maintain its focus on streamlining the systems and processes. The management team consist of leaders from various backgrounds who are very capable of leading the Company and have potential to meet the requirements for the success. Their diversity in experience will help to run the business in the more efficient manner.
The company is happy to announce that this year was the safest year as the company has tried to mitigate the risk associated with the health and safety of the employees.
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