Sims Ltd. · ASX:SGM
Sims — Non-Deal Roadshow (July 2022)
63 slides from Sims's roadshow presentation, Jul 6, 2022
Slide 1: UK Roadshow
For personal use only 6 and 7 July 2022 UK Roadshow
Slide 2: Disclaimer
Disclaimer The material contained in this document is a presentation of information about the Group’s activities current For personal use only at the date of the presentation, 6 and 7 July 2022. It is provided in summary form and does not purport to be complete. It should be read in conjunction with
Slide 3: Overview of Sims Limited
For personal use only Overview of Sims Limited 3
Slide 4: Sims Limited: The group at glance
Sims Limited For personal use only The group at glance • Publicly listed Australian Company (ASX: SGM; OTC: SMSMY) • Market capitalisation approximately A$2.7B 29 June 2022 • 1H FY22 Total sales volumes of 4,685 million tonnes • 1H FY22 Revenue A$4,265.0million • 1H FY22 Underlying EBIT A$361.7 mill
Slide 5: Our Purpose
Our Purpose For personal use only Create a world without waste to preserve our planet
Slide 6: HY22 Segment Overview
HY22 Segment Overview For personal use only 1H FY22 % of Group EBIT1 Metal Businesses 73 Sims Lifecycle Services 3 SA Recycling 36 Global Trading (3) Corporate & Other (9) Total 100% 1 Underlying earnings excludes significant non-recurring items, the impact of non-qualifying hedges, and internal rec
Slide 7: Integrated Business Model
Integrated Business Model We provide solutions that solve multi-decade challenges related to decarbonisation and circular economy For personal use only Sims Lifecycle Metal Recycling Municipal Recycling Resource Renewal Renewable Energy Services Buys, processes and sells Provides solutions to ferrou
Slide 8: Structural Market Tailwinds
Structural Market Tailwinds Create strategic opportunities for Sims For personal use only Increased environmental concerns for our Electrification and energy transition to customers drive copper and aluminium prices higher More stringent environmental controls lift standards Global push for high qua
Slide 9: Well Positioned to Capitalise on Trends
Well Positioned to Capitalise on Trends Our capabilities and business strategy continue to match the accelerated tailwinds For personal use only Competitive Advantages Growth Strategy Technology & People • Dedicated in-house engineering team Grow core business and leverage synergies to • Best-in-cla
Slide 10: Sustainability as a Strategy for Growth
Sustainability as a Strategy for Growth Drives the FY25 social, environmental and economic strategic targets1 For personal use only Operate Responsibly Metals Close the Loop Safety 9.6 m tonnes of ferrous volumes in favourable SRR Diversity Total recordable injury geographies Process 120,000 tonnes
Slide 11: Metal Businesses
For personal use only Metal Businesses 11
Slide 12: 1H FY22 Metals
1H FY22 Metals Segment Breakdown Product Breakdown For personal use only 3% Sales Volumes 5% 16% Sales Volumes 16% 51% 17% 92% North America Metal ANZ Metal UK Metal Global Trading & Other Brokerage 25% Sales Revenue 7% 68% Ferrous Non-Ferrous Shredder Recovery Non-Ferrous Retail SALES VOLUMES 12
Slide 13: Global Footprint
Global Footprint Extensive network of facilities enables global sourcing of infeed and UK Metal diversity of sales outlets 28 704 For personal use only Facilities 4 Shredders 1H FY22 Intake Australia , New Volumes Zealand & PNG Metal 51 859 8 North America Metal 57 2,401 12 SA Recycling 123 2,2851,2
Slide 14: Market Leadership Position
Market Leadership Position We are the world’s largest We are #1 and #2 in the markets we operate public recycler of metals by volume For personal use only #1 #2 North America UK Metal Metal & SAR New #1 Zealand Australia Metal Metal #1 Source: Sims’ estimates 14
Slide 15: Decarbonisation of the Metal Industry
Decarbonisation of the Metal Industry Using recycled metal is paramount to reduce carbon emissions For personal use only 7% of global Steel produced from EAF emits An electric arc furnace can be greenhouse emissions 83% less CO2/tonne compared charged with 100% steel scrap. A are produced by the to
Slide 16: Circular Economy
Circular Economy A circular economy is key to achieve net-zero targets For personal use only Moving to renewables can address 55 percent of global GHG emissions to meet the UN climate goals, it will be essential to address the remaining 45 percent that comes from manufacturing everyday products Elle
Slide 17: The Opportunities for Sims Ferrous
The Opportunities for Sims Ferrous For personal use only Sims’ Prime vs Obsolete Spread1 Midwest Region • Capitalise on demand driven by decarbonisation 250 200 • Extraction of non-ferrous, in particular 150 residual copper and aluminium USD$ 100 • Potential to attract significantly higher 50 pricin
Slide 18: Similar Opportunities in Non-Ferrous
Similar Opportunities in Non-Ferrous Non-Ferrous Redirecting scrap from traditional secondary markets to primary markets leads to higher pricing For personal use only ‘Postconsumer scrap is a key enabler towards a zero- carbon aluminium product. To grow in this area today, we focus across the recycl
Slide 19: Seizing the Opportunity
Seizing the Opportunity Through operational innovation and R&D in emerging technologies – enhanced liberation, advanced separation, artificial intelligence, robotics and quality assurance For personal use only Advanced Inbound source Enhanced density separation and control and liberation lower resid
Slide 20: Metal Business
Metal Business We seek to deliver on the metal targets through a very targeted and disciplined growth strategy For personal use only Grow non-ferrous retail business in the US and expand metal volumes in favourable regions Ferrous Strategic lens to identify organic and M&A growth opportunities • Coa
Slide 21: SA Recycling
For personal use only SA Recycling 21
Slide 22: SA Recycling Today
SA Recycling Today For personal use only 123 Facilities 23 Shredders Operations in 15 States 2.3 million tonnes 2.2 Sales Volumes +3000 employees Intake Volumes in 1H FY221 in 1H FY221 1 SAR volumes 100% 22
Slide 23: SAR's Rapid Growth Since 2017
SAR’s Rapid Growth Since 2017 Successful acquisition integration For personal use only • PSC Metals • Pirkle • DMW Metals Recycling • Southern Recycling • Tennessee Valley Recycling • Alter Trading • Metro • American Metal Recycling • Georgia Recyclers • Metals USA • The Scrap Yard • Ideal Metals &
Slide 24: SA Recycling's Business Priorities
SA Recycling’s Business Priorities For personal use only • Integration of acquisitions closed in 1H FY22 • Enhance presence in existing footprint • Investment in technology and infrastructure • Further downstream investment to produce mill ready products, semi-finished products, or reduce dependency
Slide 25: Sims Lifecycle Services
For personal use only Sims Lifecycle Services 25
Slide 26: Global Leader in Circular Cloud Solutions
Global Leader in Circular Cloud Solutions For personal use only Global Circular Cloud Consistent Reuse Servers Compliant Redeploy Networking Comprehensive Reengineer Storage Sustainable Recycle 26
Slide 27: Demonstrated Growth
Demonstrated Growth Growing and scaling the business profitably For personal use only Consecutive earnings growth over three years SLS Underlying EBIT (A$ million) 12 Significant Underlying EBIT 10 advancement in HY22 vs HY21 resulting in 46% growth primarily 8 due to market share gains 6 4 Good res
Slide 28: Diversified Earnings
Diversified Earnings For personal use only Underlying EBIT by Client – FY22 Estimated Enterprise - Other Hyperscaler Enterprise - Tech 28
Slide 29: Repurposing Represents 70% of Revenue
Repurposing Represents 70% of Revenue For personal use only Revenue by Category – YTD FY22 Reuse Service Recycling Other 29
Slide 30: Why SLS is Best in Market
Why SLS is Best in Market Strong competitive advantages to continue to demonstrate growth For personal use only Integrated service provider Global Enabling service sustainability Sims Lifecycle Services Linked to the A secure larger Sims partner Group 30
Slide 31: Pillars of Growth
Pillars of Growth For personal use only Expand services Grow current clients New clients - Fulfilment - Geographies - Co-locators - On site services - Services - Hyperscalers - Global Box - Enterprises e.g. Fortune Programme 500 - Sustainability 31
Slide 32: Growth Delivery & Execution
Growth Delivery & Execution For personal use only Operational Technical Innovation Readiness Development • Dedicated • Industry knowledge • Innovation with a experienced team and leadership growth mindset • New services and • Operational solutions • Delivery through a locations structured approach 3
Slide 33: Growth expected to continue
Growth expected to continue Targeting 300% growth in repurposed units over the next four years For personal use only Repurposed Units (millions)1 10 8 6 4 2 0 FY21 FY25 Forecast 1. A repurposed unit is any unit that re-enters the market by being resold or redeployed. It excludes units that are recyc
Slide 34: Financial Highlights
For personal use only Financial Highlights 34
Slide 35: Summary of HY22 Financial Outcomes
Summary of HY22 Financial Outcomes Achieved a high-quality result with sales volume, revenue, profit growth and margin expansion. Significantly higher cash flow distribution and balance sheet strength maintained For personal use only Sales Revenue Sales Volumes $4,265.0 million 4.685 million tonnes
Slide 36: Business Segment Financial Performance
Business Segment Financial Performance More than a sixfold increase in EBIT. Improved volumes driven by NAM and SA Recycling Sales volumes For personal use only HY21 HY22 Change (‘000 tonnes) Underlying EBIT1 (A$m) HY21 HY22 Change Metal Business2 3,664 3,941 7.6% Global Trading 567 675 19.0% 2 Meta
Slide 37: Net Cash Position
Net Cash Position Substantial increase in operational cashflow funded acquisition in ANZ, capital expenditure and increased cashflow distribution through buyback and dividends For personal use only A$m 1H FY22 Opening Net Cash 8.3 • Operating cash flow of $290.8 million in 1H Underlying net profit 2
Slide 38: Cash Generation
Cash Generation Significant improvement in H1 FY22 operating cash flow For personal use only 2H FY21 Operating cash flow increased from negative $19.9 million in 2H FY21 to positive $290.8 million in 1H FY22, a $310.7 million improvement, largely due to a substantially smaller increase in working ca
Slide 39: Underlying EBIT Guidance for FY22
Underlying EBIT Guidance for FY22 • Underlying EBIT expected to be in the range of $750 million to $770 million. For personal use only • It is worth noting that there are shipments scheduled to occur close to the year end and, in accordance with revenue recognition policies, this has the potential t
Slide 40: Other Financial Highlights
For personal use only Other Financial Highlights 40
Slide 41: Trading Margins & Operating Costs
Trading Margins & Operating Costs Metal Recycling 30% 300 For personal use only 23% 23% 25% 22% 21% 22% 22% 250 Trading Margin Trading Margin A$ / tonne 20% 200 • Margin in percentage terms typically steady through the cycle. 15% 150 10% 194 100 • Steady margins reflect the value added through 122 1
Slide 42: Balance Sheet
Balance Sheet Working capital requirements tightly aligned to commodity prices For personal use only • Cash investment into working capital is tightly aligned 700 1,000 to the price of ferrous and non-ferrous metal, with 900 average revenue / tonne, largely mirroring changes in 600 raw material inta
Slide 43: Balance Sheet
Balance Sheet Working capital relative to sales is more stable through the cycle For personal use only 10% • In absolute terms, working capital requirements move with commodity prices. 9% • In relative terms through the cycle, average working 8% capital1 has remained relatively steady at 7% to 9% of
Slide 44: Balance Sheet
Balance Sheet Target net cash balance of A$100 million For personal use only 700 • Target of $100 million net cash, represents conservative cash management bias in a commodity exposed business. 600 • Targeted net cash will be modified for short term 500 fluctuations driven by commodity price movemen
Slide 45: Capital Expenditure
Capital Expenditure Disciplined and appropriate capital expenditure program For personal use only 250 • FY22 has seen a pick-up in the rate of capital spend post-COVID as activity levels return to normal. • Going forward, sustaining capital expenditure is 200 expected to approximate depreciation (ex
Slide 46: Recycling Capital
Recycling Capital Prudent capital management through a range of funding alternatives For personal use only Case Study: SMR • Identified as having returns below IRR hurdle • Good strategic opportunities but execution difficult due to required management focus Constant assessment of returns • Partner
Slide 47: Capital Management
Capital Management Capital management aligned to shareholder value For personal use only Summary of Priorities 1. Target $100 million net cash excluding significant changes in working capital attributable to commodity price movements. 2. Invest in growth capex and acquisitions that deliver sharehold
Slide 48: Sustainability
For personal use only Sustainability 48
Slide 49: Our ESG Journey
Our ESG Journey Positioning us well to support our stakeholders For personal use only Developed Published first First disclosure Sims Purpose sustainability Reconciliation Awarded Terra to the CDP articulated strategy Action Plan Carta Seal 2005 2008 2013 2018 2019 2020 2021 2022 Named Corporate Fir
Slide 50: The Value Sims Delivers
The Value Sims Delivers Sims plays an integral role in decarbonisation Our measurable impact on For personal use only decarbonisation We are strategically • 8.6 million tonnes of scrap metal positioned to for reuse in low-embodied capture growth from Metal Recycling emission processes and products a
Slide 51: Latest Credentials
Latest Credentials Recognition for our ESG performance in FY22 For personal use only Ranked 11th in the Ranked 87th in the Ranked #6 in Global 100 list of most Clean200 global list of Sustainability sustainable companies, publicly traded Magazine’s Top100 Terra Carta Seal for ranked for the 8th time
Slide 52: Accelerating Decarbonisation of Our Business
Accelerating Decarbonisation of Our Business Brought forward carbon neutrality target by 12 years For personal use only Targets set in line with SBTi Sims Carbon Emissions Tonnes of Co2e 2025 2030 ▪ 23% reduction in Carbon neutral in direct direct operations operations (scope 1 & 2) (scope 1 & 2) ▪
Slide 53: Current Emissions Profile
Current Emissions Profile Net total emissions declined despite increased activity For personal use only Tonnes of CO2e (t) Net total Scope 1 Net Scope 2 1 CO2e/$1M revenue FY20 152,154 3.6% 78,592 73,562 19% 31.00t FY21 146,655 81,190 65,465 Renewable 24.78t Energy FY21 Emissions Profile - Business
Slide 54: Pathway to Reaching 2025 Targets
Pathway to Reaching 2025 Targets Achievable through renewable electricity transition For personal use only • By 2025 we will: 23% reduction by • Have shifted to renewable 2025 electricity wherever commercially feasible • Accelerated delivery of fuel efficiency and substitution projects • Have advanc
Slide 55: Our Roadmap to Carbon Neutrality
Our Roadmap to Carbon Neutrality Key Initiatives to decarbonisation 2022 2030 For personal use only Design to Procurement Advocate for Carbon risk Engage decarbonise Model shadow carbon & capex an orderly, assessment on employees price to guide internal decisions policies 1.5° transition strategy &
Slide 56: Increased Focus on Gender Diversity
Increased Focus on Gender Diversity Resulted in earlier accomplishment of the board diversity target For personal use only In 2021 launched ‘Women Leading Board Diversity Gender Pay Gap Women in Senior at Sims’ to support female leaders Management Target Achieved FY21: FY22 H1: 21% Australia: 5.0% v
Slide 57: Safety Performance
Safety Performance Strategic safety focus driving reduction in critical incidents and injuries For personal use only Total Number of Incidents and Injuries . Key initiative highlights: Significant reductions FY19-H1 to FY22-H1 80 • Analysed incident data collected in the last 10 years to 68 identify
Slide 58: Appendix
For personal use only Appendix 58
Slide 59: Metal Operations
Metal Operations For personal use only Sorting, Baling, Container, Foundries, Smelters, Granulation + Polishing Truck, Rail Refineries SHELMO, Insulated Wire Non-Ferrous Retail Zorba + ZSP Polishing + Container, Foundries, Smelters, Zurik Advanced Truck, Rail Refineries Separation Collection, Sims F
Slide 60: Driving Accountability and Transparency
Driving Accountability and Transparency 2025 and beyond goals defined to measure success OPERATE RESPONSIBLY CLOSE THE LOOP For personal use only 1 Foster a safe work environment 5 Become carbon neutral by 2030 and achieve net zero by 2050 1.1 Total Recordable Injury Frequency Rate (TRIFR) ≤ 1 5.1 R
Slide 61: Trading Margins & Operating Costs
Trading Margins & Operating Costs North America Metals 30% 300 24% 22% 22% 21% Trading Margin 25% 21% 21% 250 For personal use only Trading Margin Margin in percentage terms have remained steady A$ / tonne • 20% 200 through the past five-year cycle, including the most 15% 150 recent HY22 period. 10%
Slide 62: Trading Margins & Operating Costs
Trading Margins & Operating Costs ANZ Metals 30% 26% 28% 26% 28% 29% 28% 300 For personal use only Trading Margin 25% 250 Trading Margin A$ / tonne • Margin in percentage terms have remained steady 20% 200 through the past five-year cycle, including the most 15% 281 150 recent HY22 period. 10% 188 1
Slide 63: Trading Margins & Operating Costs
Trading Margins & Operating Costs UK Metals 30% 300 Trading Margin 25% 250 For personal use only 19% Trading Margin 19% Margin in percentage terms have been somewhat A$ / tonne • 20% 16% 16% 200 15% 14% steady through the past five-year cycle. 15% 150 10% 100 • Slightly greater volatility in margins