Source: Morten B, Shutterstock
Metals and electronics recycler Sims Limited (ASX:SGM) shared its trading update and forecast earnings on Monday.
Post Announcement, the stock price jumped significantly to become a top gainer on the Australian benchmark AXJO, and was spotted trading 10.197% higher at A$16.750 per share at 1:48 PM AEST.
The Company announced that it is anticipating an Underlying EBIT for full year FY21 to hover somewhere between A$260 million and A$310 million in comparison with the loss of A$58.1 million recorded previous year.
The Company shared via an ASX release that its business divisions were performing strongly.
Also read: Sims Limited bets big on metal recycling
Source: © Dvande | Megapixl.com
The major driving forces behind these likely numbers are:
- Exclusive intake volumes for third quarter FY21 have risen to around 95% of FY19 average monthly volumes as compared to 85% in first quarter FY21.
- Elevated scrap rates have improved the gross margin per tonne and that margin has been managed in a much better way.
- Sustained accomplishment of annualised predominantly fixed cost savings in excess of A$70 million in FY21 as compared to FY19.
- A key input from SA Recycling propelled by soaring scrap rates, especially for zorba-linked products, great intake volumes, and good margin management.
Data Source: Company ASX and Media Release 19 April 2021
Meanwhile, as per the Company, the forecasted FY21 results mat face the following risks:
- Sims’ facilities and suppliers’ facilities or customer facilities might get hampered due to COVID-19 disturbances.
- Illiquid demand might cause instability in ferrous and non-ferrous prices.
- Macroeconomic and geopolitical risks.
The Company also revealed that it had received A$6.5 million and A$7.5 million for FY20 and FY21 respectively under the JobKeeper scheme.
As Sims has been improving on the finance and available cash front, the Company is likely to voluntarily return A$7.5 million to the government of Australia.
According to Refinitiv, Financial Research firm Jefferies stated that guidance indicates an EBIT of A$229 million in second half of 2021 at the midpoint of guidance. This is SGM's highest in a decade. The firm expects EBIT to level up significantly due to buoyant scrap pricing. However, the firm believes that this guidance is undeniably stronger than anything expected.
The stock closed the day’s session at A$16.560, up 8.947% from the previous close.