Sims Ltd. · ASX:SGM
Sims — Investor Day (April 2019)
58 slides from Sims's investor day presentation, Apr 8, 2019
Slide 1: Sims Investor Strategy Day
For personal use only Purpose Grow Preserve Invest A webcast of Sims Investor Strategy Day Presentation can be viewed live at http://streamit.webcastcloud.com.au/Mediasite/Play/4e7c9020c40449f49270091200f4e3141d or on demand following the event at http://streamit.webcastcloud.com.au/Mediasite/Catalo
Slide 2: Sims Investor Strategy Day
For personal use only Purpose Grow Preserve Invest Sims Investor Strategy Day Create a world without waste to preserve our planet. 8 April 2019 Fortify
Slide 3: Disclaimer
Disclaimer The material contained in this document is a presentation of information about the Group’s For personal use only activities current at the date of the presentation, 8 April 2019. It is provided in summary form and does not purport to be complete. It should be read in conjunction with the
Slide 4: We Have Been Here for Over 100 Years
We Have Been Here for Over 100 Years and will be here for another 100 years For personal use only 100 2017 Celebrated 100 years 1917 1948 Albert G Sims Ltd listed on Australian Stock Exchange YEARS 1956 1988 Entered the US metals recycling 2008 Acquired Metal Management, one of the largest recyclers
Slide 5: Where We Are Today
Where We Are Today A great base to continue to grow Sims: For personal use only Largest listed dedicated metals recycling company globally Fe Largest dedicated metals recycler in the US Recycles Largest dedicated metals recycler in Australia and New 9.4 million tonnes of ferrous Zealand Seco
Slide 6: Sims Strategy
Sims Strategy For personal use only Competitive Statement Outcomes Advantages Be the global leader in metals recycling by: Sims’ strategy is to Global Structure Expanding our ferrous and broaden its participation non-ferrous volumes in Engineering and favourable geographies in the environmen
Slide 7: Strategic Process
Strategic Process Strong board and employee engagement For personal use only Fact Purpose Strategy Roadmap Base 7
Slide 8: Sims Purpose
Sims Purpose Create a world without waste to preserve our planet For personal use only We will build enterprises that: When we embrace our purpose, we will: Our strategy combined with our Purpose will: Create long-term value by providing Become a leading innovator in the Provide safer working
Slide 9: Megatrends
30 year megatrends An example of the analysis undertaken For personal use only Area Category Megatrends Impact to Sims Climate Natural disasters amore frequent and violent Increased push towards recycled materials to Change driven by rising CO2 emissions reduce carbon emissions Global waste will inc
Slide 10: Implications over next five to ten years
Implications over next five to ten years Sims is well positioned to benefit from global trends For personal use only Size and ability to trade is Global push for high Expand metal volumes in needed to compete in quality metals favourable geographies the market Growing demand for Under-investment in
Slide 11: Sims Integrated Strategy
Sims Integrated Strategy Grow core business and leverage synergies to expand into adjacent markets For personal use only Sims Group Sims Metals Sims Waste to Energy Sims e-Recycling Sims Energy Sims Municipal Recycling Fortify and grow Utilise waste to create new Grow product stewardship Expand prov
Slide 12: Sims Metals
Sims Metals Fortify and grow sustainable profits For personal use only Competitive Themes Outcomes Advantage USA metals recycling industry Engineering and technology Grow ferrous in favourable consolidation expertise to create better geographies quality Continuing to play to our Grow non-f
Slide 13: Sims Waste to Energy
Sims Waste to Energy Utilise shredding waste to create new revenue stream and reduce costs For personal use only Competitive Themes Outcomes Advantage Worldwide increasing costs Production and ownership of Generate a new revenue of waste disposal are a risk to 1.3 million tonnes per year of st
Slide 14: Sims E-Recycling
Sims E-Recycling Drive profitable growth through product stewardship and service for large corporate clients For personal use only Competitive Themes Outcomes Advantage Significant cloud computing Well established online resale Become the leading global growth channels provider of “cloud recyc
Slide 15: Sims Energy
Sims Energy Expand proven business model and technology globally For personal use only Competitive Themes Outcomes Advantage Energy demand is increasing Energy and engineering Expand the landfill energy expertise since 2001 business model to the US and Drive to reduce greenhouse UK gas emiss
Slide 16: Sims Municipal Recycling
Sims Municipal Recycling Develop waste management solutions for mega cities For personal use only Competitive Themes Outcomes Advantage Waste is increasingly Serviced largest US city since Expand existing recycling recycled, reused or 2003 – population 8.6 million contracts to add other waste
Slide 17: Target Measures
Target Measures Targeting minimum 15% return on growth projects requiring capital For personal use only FY18 FY22 FY25 NAM Ferrous Volumes (‘000 tonnes) Expand metal volumes in favourable geographies 4,700 5,800 6,500 NAM Non-Ferrous Retail Volumes (‘000 tonnes) Grow non-ferrous business 140 200 300
Slide 18: Waste to Energy (WtE)
For personal use only Waste Lower cost Energy Preserve Sims Investor Strategy Day Waste to Energy (WtE) 8 April 2019 Fortify
Slide 19: Waste to Energy Opportunity
Waste to Energy Opportunity 1 million tonne of Automotive Shred Residue (ASR) can be converted to energy / year For personal use only Waste is a resource Sims Targeted WtE Facilities Extra Large Plant >130k tonnes ASR Sims generate 1.3 million tonnes of ASR /yr Excellent returns for large WtE pl
Slide 20: Process and Technology
Process and Technology Solutions based on gasification technologies – this is not traditional incineration For personal use only Inputs Process Outputs Vitrified Waste Gasification (Road base – 18% of input) Plant Waste by Technology 100% Metal Sims Waste ASR (3% or more) 80% 75% (60K - 200K 60% Ste
Slide 21: Sims is well placed
Sims is well placed With unique advantages to succeed and minimise waste and environment impact For personal use only Why Sims High energy content in ASR 75% of feedstock is guaranteed from Material Approximate Calorific Value (MJ/kg) internally produced ASR MSW 7 3rd party feedstock improves th
Slide 22: Sound investment today
Sound investment today With significant potential upside if feed-in tariff (FIT) and tipping fee increases For personal use only Electricity feed-in tariffs Single ANZ WtE Plant Financials Australian electricity feed-in tariffs are Feed-in increase to $125 / MWh in 2030 dynamic with current peak >
Slide 23: Waste to Energy (gasification) deployment
Waste to Energy (gasification) - Phase 1 Over 5 years two sites will be implemented and two more in planning/execution For personal use only Approach, location and timing 5 Year Deployment Plan Best initial WtE implementations are in ANZ and NAM due to economic, environmental, logistics Feasibilit
Slide 24: Waste to Energy (gasification) roll out
Waste to Energy (gasification) - Phase 2 Roll out to sites that meet sustainable criteria based on a proven scalable model For personal use only Investment WtE – Cumulative Revenue to Investment 2,500 A WtE facility is a 30 year investment and 2,000 the suitability of each location is 1,500 Millio
Slide 25: Sims E-Recycling
For personal use only Cloud Growth B2B Circular Sims Investor Strategy Day Sims E-Recycling 8 April 2019 Fortify
Slide 26: Current Sims E-Recycling business model
Current Sims E-Recycling business model Dominated by traditional “shredding” operations For personal use only Enhanced B2B Services make Global B2B Clients Compliance Schemes & Trading >75% 26
Slide 27: Future Sims E-Recycling business model
Future Sims E-Recycling business model Path to Achieve Meaningful Growth For personal use only Compliance Schemes & Trading make Circular Economy Add closed loop OEMs B2B Expansion Largest target – Recycle the cloud 27
Slide 28: Circular economy
Circular economy Sims E-Recycling already has an established business model For personal use only Business Process HP closed-loop hardware recycling program Customer Customer purchases HP recycles EOL product product HP Circular Product manufactures product recycled Economy in action Closed-loop Rec
Slide 29: Global cloud service market
Global cloud service market Strong business relationships with key players in cloud service and hardware For personal use only There are three groups of customers: 2018 Cloud Revenue1 (US$bn) estimated 30 28 Cloud service providers 26 25 20 Data center hardware providers 20 Large corporate c
Slide 30: Top data centre locations
Top 10 data centre locations Current SRS Footprint aligns with large global data centre locations For personal use only 198 107 419 406 242 262 2,208 102 131 # of Data Centers # Sims E-Recycling location 228 # Subcontractor location 30
Slide 31: Data centres and mobile cloud storage
Data centres and mobile cloud storage High volume and high quality For personal use only 31
Slide 32: Conclusion
Conclusion Targeting 10% market share by 2025 The cloud is growing exponentially For personal use only Infrastructure as a Service (IaaS) is the fastest-growing segment of the market Sims E-Recycling has strong global relationships with the dominant IaaS providers Sims E-Recycling considers
Slide 33: Sims Energy
For personal use only Business model Analyse Invest Global Sims Investor Strategy Day Sims Energy 8 April 2019 Fortify
Slide 34: Sims Energy
Sims Energy Expand proven business model and technology globally For personal use only Competitive Themes Outcomes Advantage Energy demand is increasing Energy and engineering Expand the landfill energy expertise since 2001 business model to the US and Drive to reduce greenhouse UK gas emiss
Slide 35: Landfill energy expertise
Landfill energy expertise Intellectual property (IP) is transferable from LMS Energy For personal use only LMS has been successful because of the REC creation from landfill energy site intellectual property it has developed: 25,000 LMS Energy Landfill Gas Extraction operation 20,000 Gas Condit
Slide 36: Determining the best opportunity
Determining the best opportunity Staged and disciplined approach For personal use only Stage One Stage Two • Political stability • Gov. incentives • Opportunity size • Gas resource • Legal system • Energy prices • Location & grouping • Plant availability Region Country Company Projects • Grid reliab
Slide 37: Potential targets identified
Potential targets identified Stage one identified USA and UK as the best regions For personal use only USA and UK offer the best opportunities Many landfill energy in the USA These are mature markets so acquisition of underutilised assets is the best entry mechanism Apply LMS Energy intellectu
Slide 38: Determining the best opportunity
Determining the best opportunity Staged and disciplined approach For personal use only Stage One Stage Two • Political stability • Gov. incentives • Opportunity size • Gas resource • Legal system • Energy prices • Location & grouping • Plant availability Region Country Company Projects • Grid reliab
Slide 39: Potential targets identified
Potential targets identified Within the best regions For personal use only Target opportunities are around the 15 to 20 MW size range USA LFG projects 630 A number of operational landfill energy Companies that meet criteria 12 sites appear underutilised Initial targets 4 Some underperfor
Slide 40: Why Sims Energy
Why Sims Energy Proven business model, technology and expertise for the best opportunities For personal use only Familiar with the proven business model Ready access and knowledge of the required technology and expertise Potential long term offtake agreements Relatively stable earnings Lev
Slide 41: North America Metals (NAM)
For personal use only Ferrous Non-ferrous Consolidate Grow Sims Investor Strategy Day North America Metals (NAM) 8 April 2019 Fortify
Slide 42: Strong Market Leadership
Strong Market Leadership Well positioned in key North American markets For personal use only 4 RSR JV New England 8 7 West Midwest 18 Metro/East 10 4 Southwest Southeast 51 27 8 # SMM Sites # SAR Sites # RSR JV Sites 42
Slide 43: Sims Metals
Sims Metals Fortify and grow sustainable profits For personal use only Competitive Themes Outcomes Advantage USA metals recycling industry Engineering and technology Grow ferrous in favourable consolidation expertise to create better geographies quality Continuing to play to our Grow non-f
Slide 44: USA Market
USA Market Leading market share with more opportunity to grow For personal use only USA Market Size (million tonnes) Estimated USA Market Share by Volume 70 60 60 9% 9% 50 39% 40 6% 6% 30 6% 20 6% 5% 10 8.5 5% 5% 5% 0 Ferrous Non-Ferrous Sims Omni DJJ SMS Schnitzer FPT Domestic Export Gerdau Triple
Slide 45: Grow non-ferrous retail business
Grow non-ferrous retail business Significant organic initiatives and strategic bolt-on acquisitions For personal use only NAM Non-Ferrous Retail – Target Volume Purchase Strategy 350 Growth Increased buying from source 300 300 Engineering & Technology Non-Ferrous Retail (‘000 tonnes) 250 Product
Slide 46: Grow ferrous business
Grow ferrous business Significant organics initiatives and strategic bolt-on acquisitions For personal use only NAM Ferrous - Target Volume Growth Feeder yard expansion 7,000 Procure more at source 6,500 6,000 5,800 Bolt on acquisitions 5,000 4,700 Regional consolidation opportunities 4,000 Engi
Slide 47: Conclusion
Conclusion Significant opportunities to fortify and grow sustainable profits NAM is the largest ferrous participant in a fragmented market. For personal use only Abundant opportunities to profitably expand NAM’s footprint: – Organic – Acquisition Significant opportunity to grow non-ferrous ret
Slide 48: Capital Management
For personal use only Growth Returns Capital Discipline Sims Investor Strategy Day Capital Management 8 April 2019 Fortify
Slide 49: Capital structure principles
Capital structure principles Structuring the balance sheet for growth is the priority For personal use only Target $100 million average net cash Fund growth assets within the $100 million target but temporarily allow gearing(1) to increase to 10%(2). Return to $100 million net cash target within
Slide 50: One possible scenario into the future
One possible scenario into the future Assume a single point forecast in a stable world(1) For personal use only Stable prices at around current pricing Stable market conditions Stable EBIT margins + Growth capex and returns as set out in today’s presentations, noting that growth capex for AN
Slide 51: Growth capex
Growth capex Significant potential growth capex through to FY24 For personal use only Scenario Forecast Growth Capex FY20-FY24 165 ~A$670 million 350 158 North America Metals Sims Waste to Energy Sims Energy 51
Slide 52: Scenario outcome
Scenario outcome Overlay of capital structure principles results in internally funded growth For personal use only Net Cash Position 1,400 1,200 1,000 800 600 400 $000 200 Target net cash - (200) (400) (600) FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 1 Cash flow Maintenance Capex Growth Capex
Slide 53: A possible downside scenario
A possible downside scenario(1) For personal use only Test the business for resilience Pricing reduced by 30% in FY21 and FY22 before recovering to stable in FY23 Price reduction is a significant enough fall to impact margin and volume (1) This downside scenario is only one possibility and is
Slide 54: Downside scenario outcome
Downside scenario outcome While challenging, the business is resilient For personal use only Downside Case Scenario 1,000 800 600 Net cash troughs the year following the downside 400 $000 200 - (200) (400) (600) FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 Cash flow Maintenance Capex Growth Cap
Slide 55: Working capital movement
Working capital movement There is a partial “natural hedge” relating to cash flow movements For personal use only Working Capital Movement Under Downside Example 200 Lower inventory value and receivables 150 100 50 $000 - (50) (100) (150) Higher inventory value and receivables (200) FY20 FY21 FY22 F
Slide 56: Summary and Conclusion
Summary and Conclusion Structuring the balance sheet for growth is the priority For personal use only Target $100 million average net cash Sims has the potential to internally fund its significant growth capex Targeting minimum 15% IRR on a post tax nominal basis on growth projects Paying 10
Slide 57: Conclusion
For personal use only Purpose Grow Preserve Invest Conclusion “Road map for the next five years”
Slide 58: Summary of strategic initiatives
Summary of strategic initiatives Sims has a solid pipeline of capital and non-capital growth opportunities For personal use only Legend Metals EXISTING Grow business in existing footprint BUSINESSES Selectively enter developing markets Value chain integration …Grow New Portfolio Optimisation Optimis