Sims Metal Management announced that the revenue of USD 8.6 billion and a net loss after tax of USD 150.3 million for fiscal 2009. In its report, the company the largest metal recycling firm in the world reported net income before a non cash goodwill impairment charge of USD 40.8 million.
Sales revenue increased 13% to USD 8.6 billion due largely to the merger with Metal Management Inc and despite YoY declines in average selling prices, particularly in the H2 of fiscal 2009. Sims Metal Management’s fiscal cash flow from operations was USD 554 million compared to USD 248 million in fiscal 2008. In fiscal 2009 the Company’s total scrap intake and shipments were 12.6 million tonnes and 13.2 million tonnes respectively. Intake and shipments declined predominantly as a consequence of the global financial crisis by 28% and 25% respectively as compared to pro forma intake and shipments in fiscal 2008.
Mr Daniel W Dienst CEO of Sims Metal Management stated that “Fiscal 2009 was an extremely difficult year for Sims Metal Management as it was for our entire industry and all companies engaged in the global trading of bulk commodities. The challenges we faced due to the global financial crisis during fiscal 2009 the worst on record for perhaps 80 years included the near halt of the credit markets, the failure or inability of certain ferrous and non ferrous consumers to honor contractual commitments, the severe constriction of scrap flows around the world and substantially reduced demand for recycled raw materials.”
Mr Dienst said that “During fiscal 2009 we took decisive action to reduce spending and headcount to mitigate the impact of the global recession on the company, positioning Sims Metal Management as an even leaner and stronger company. We have maintained a strong balance sheet through low gearing and we more than doubled cash flow from operations in the past fiscal year providing us with the financial flexibility to further expand our unrivaled global footprint and continue with technology and efficiency investments. With pricing and demand for scrap improving and subject to recovery in scrap generation we believe Sims Metal Management is poised for renewed growth, success and shareholder value creation in fiscal 2010.”
In North America, sales revenue was up 38.2% on the prior corresponding period to USD 6.4 billion. On a US dollar equivalent basis, sales revenue was up 11.6% to USD 4.8 billion. Earnings before interest and tax were a loss of USD 88.5 million. Sims Metal Management’s fiscal 2009 pro forma scrap intake in North America declined by 29% as compared to the prior corresponding period.
Full year results for North America were impacted by inventory adjustments, non ferrous contract renegotiations and other atypical items amounting to USD 71 million, USD 19 million and USD 36 million respectively as well as a non cash goodwill impairment charge of approximately USD 190 million. EBIT in North America would have been USD 227.5 million had it not been for these adjustments.
North American controllable expenses in US dollars were reduced by approximately 24% in the Q4 when compared to the Q1. Controllable expense reduction was a priority in fiscal 2009 as a measure to offset margin compression and to align resources with lower scrap flows and market conditions. We also implemented tighter controls over buy prices and inventory levels.
In Australasia, sales revenue for the region was down 33.6% on the prior corresponding period to USD 1.2 billion. EBIT was down 89.7% to USD 18.7 million. Scrap intake in the region decreased by 27% for the 2009 fiscal year on a YoY basis.
Full year results in Australasia were impacted by USD 9 million of inventory adjustments, USD 9 million of non ferrous contract renegotiations and USD 12 million of other atypical items. EBIT, before inventory adjustments, non ferrous contract renegotiations and other atypical items would have been USD 48.7 million but for these adjustments. Controllable expenses were reduced by 16% in the Q4 when compared to the Q1.
In Europe, sales revenue was down 15.5% on the prior corresponding period to USD 1.1 billion. EBIT was a loss of USD 33.1 million. Scrap intake in the region decreased by 20% in the 2009 fiscal year on a YoY basis.
Full year results in Europe were impacted significantly by USD 39 million of inventory adjustments and USD 8 million of non ferrous contract renegotiations. EBIT before inventory adjustments and non ferrous contract renegotiations would have been USD 13.9 million but for these adjustments. Controllable expenses in the Q4 in local currencies were reduced by 11% when compared to the Q1.
Mr Dienst said that “Our European Division expanded its presence in the UK in fiscal 2009 with the acquisition of All Metal Recovery. Through acquisition, organic growth and capital improvement initiatives we have significantly enhanced our ability to take advantage of improving market conditions in Europe if and when they develop.”
He said that the ferrous markets have recently firmed in terms of pricing and demand, primarily due to strong demand from export markets in developing countries. Non ferrous markets remain liquid with relatively firm pricing. Scrap flows continue to be lackluster relative to historic highs but have modestly increased recently. A sustainable recovery in scrap flows, relative to the highs of a year ago is subject to successful economic stimulus plans being implemented around the world and a return to more normalized consumer discretionary behavior and industrial production. Due to the lack of clarity regarding future economic conditions that could affect scrap flows, Sims Metal Management will not provide a more specific outlook for fiscal 2010 at this time.
He added that “We are encouraged by recent trends in the marketplace. Ferrous consumers in key export countries are returning to the market, as are US steel mills, though volumes remain well below historical levels. This increased demand for ferrous scrap metal is driving improved pricing. Similarly, while off the peaks seen at the beginning of fiscal 2009, the market for non ferrous scrap metal is stable if not robust. Volumes at Sims Recycling Solutions have continued to be strong throughout the economic downturn and we are optimistic that SRS will generate attractive returns as and when improved margins take hold.”
