Sims Ltd. · ASX:SGM
Sims — Corporate Update (June 2017)
65 slides from Sims's corporate update, Jun 5, 2017
Slide 1: 2017 North America Investor Site Tour
Sims Metal Management 2017 North America Investor Site Tour 5-6 June 2017
Slide 2: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 2
Slide 3: Nearing final year of initial strategic plan
Nearing final year of initial strategic plan Five-year strategic target: Next five-year strategic target: lift return on capital from transformative business 2.3 % in FY13 to ≥10% by FY18 growth 3
Slide 4: Significant accomplishments have been achieved
Significant accomplishments have been achieved Safety Sustainability Controllable Costs TRIFR down by 58% CO2 emissions 26% lower Reduced by $212 million since FY13 since FY13 since FY13 Volume Break-Even Return on Capital Net Cash Improved by 41% 3x higher Increased by $464 million since FY13 since
Slide 5: Creating a best in class culture of safety
Creating a best in class culture of safety Recordable Injury Frequency Rate Total Recordable Injury Frequency Rate (TRIFR) 3.5 3.0 58% reduction in TRIFR 421 injuries prevented 2.5 2.0 3.3 1.5 2.8 1.0 2.2 1.5 1.4 1.3 0.5 1.2 1.0 0.0 Actual TRIFR Target TRIFR 5
Slide 6: Ongoing internal initiatives driving the Company to reach five year strategic goal
Ongoing internal initiatives driving the Company to reach five year strategic goal in FY18 Supplier Operational Product Quality Logistics Relationships Excellence & Service Internal initiatives expected to deliver additional $70 to $95 million in EBIT1 1) Estimated annual EBIT benefit once initiativ
Slide 7: Next five-year plan will focus on business growth
Next five-year plan will focus on business growth New Lines of Business Market Adjacencies Market Positioning Market Share Gain 7
Slide 8: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 8
Slide 9: Central oversight and regional execution
Central oversight and regional execution Group Project Management Responsible for oversight and reporting of key internal initiatives Office (PMO) Facilitate replication of initiatives Reporting directly into Group CFO Cross Functional Business Units Expertise Board (CFEB) Responsible for project ge
Slide 10: Standardising and replicating the highest value initiatives
Standardising and replicating the highest value initiatives across the Company A B Continuous improvement as an ongoing process for standardisation, replication, and institutionalisation of the highest value internal initiatives C Prioritise & Standardise Training Monitor & Audit Approve • Standardi
Slide 11: Implementation delivery on track
Implementation delivery on track FY17 FY18 FY19 New non-ferrous Metals Recovery Complete Plant (MRP) at Kwinana, Australia Dredging channel for Claremont Rail connection in Chicago Selected Key Initiatives1 Non-ferrous MRP upgrade at Claremont (NA Metals) Non-ferrous MRP upgrade at Chicago (NA Metal
Slide 12: Significant gains from initiatives since FY13
Significant gains from initiatives since FY13 Improved Return on Capital Delivery of major capital projects including: 8% 6.8% 7% Return on Capital Greenfield shredder and full-service metals 6% recycling facility in Kwinana, Australia 5% 4% Greenfield shredder, non-ferrous yard, and 3% 2.3% port fa
Slide 13: Capital allocation towards highest returning initiatives
Capital allocation towards highest returning initiatives Capital Expenditure Strong net cash balance of $311 million as of 31 Dec 2016 to support strong pipeline of internal initiatives 200 Majority of initiatives are lower-risk projects with 180 well established returns and implementation 160 frame
Slide 14: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 14
Slide 15: Logistics is a significant cost driver
Logistics is a significant cost driver Key expenses by type Freight expenses are a meaningful component of overall costs totaling $379 million in FY16 8% In total, freight expenses were 8% of Group costs 2% Raw materials and 24% of costs excluding raw materials Logistics costs include inbound and ou
Slide 16: Meaningful reduction in freight expenses
Meaningful reduction in freight expenses Freight Expenses Freight expenses per tonne have declined by 20%, roughly $10 per tonne, since FY131 Decline in freight expenses driven by numerous 800 60 factors including: A$ million (constant exchange rates) 700 Lowering trucking fleet downtime 50 600 More
Slide 17: Attractive access to rail and barge transport
Attractive access to rail and barge transport Freight costs by mode Rail and barge transport can be 10% to 20% of the cost of trucking per ton-mile Majority of North America Metals facilities have either rail connections or barge loading docks1 20 with rail connections US freight cost per ton-mile 1
Slide 18: Logistics Initiative 1: Dredging of Claremont Channel
Logistics Initiative 1) Dredging of Claremont Channel Dredging of Claremont channel, allowing more Port Newark Dock Claremont Terminal tonnes to be loading into bulk ships docked at Newark, New Jersey Jersey City, New Jersey Claremont terminal Prior to the dredging, draft constraints required bulk s
Slide 19: Logistics Initiative 2: Chicago rail connection
Logistics Initiative 2) Chicago rail connection The Paulina St facility in Chicago is a major producer of HMS, shredded, and prompt scrap in the Midwest region However, transport to domestic steel mills can incur significant transport costs, while some mills only accept material by rail The recently
Slide 20: Further logistics initiatives underway
Further logistics initiatives underway More than 50,000 ocean containers used annually shipping non-ferrous, ferrous, zorba, recycled e-waste, and other commodities Global Ocean Containers Initiative to consolidate global ocean container contracts Maximise ability to leverage global spend with inter
Slide 21: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 21
Slide 22: Non-ferrous Metals Recovery Plant - Overview
Operational Excellence: Non-ferrous Metals Recovery Plant - Overview Shredded Zorba Steel Non- Metals Metallic Metal Ferrous Recovery Zurik Feedstock Shredder Shredder Plant Residue (MRP) An MRP is a downstream process that separates non-ferrous shredder residue Waste ICW (NFSR) into saleable commod
Slide 23: Non-ferrous Metals Recovery Plant - Technology
Operational Excellence: Non-ferrous Metals Recovery Plant - Technology MRP four key technology areas: 1. Screening: Downstream separation equipment, optimised through consistent inbound particle size screening 2. Air Classification: Downstream separation equipment process inbound material 3. Eddy Cu
Slide 24: New state of the art MRP at Claremont, NJ
Operational Excellence: New ‘state of the art’ MRP at Claremont, NJ New MRP & Zorba Claremont has one of the highest performing Processing Building shredders in the metal recycling industry However the current MRP can no longer DNF & ASR storage efficiently manage the downstream non-ferrous recovery
Slide 25: New state of the art MRP at Chicago, IL
Operational Excellence: New ‘state of the art’ MRP at Chicago, IL The Paulina street facility is one of only two major shredding operations in the Chicago area The MRP that currently exists resides 15 miles away from Paulina street due to a legacy operational footprint Existing MRP is in various sta
Slide 26: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 26
Slide 27: Zorba market overview
Product Quality: Zorba market overview Aluminium vs Zorba Prices Zorba is a primarily aluminium mixed metal and the main non-ferrous product recovered from non-ferrous shredder residue (NFSR) $0.90 Zorba is typically sold at purities of 85-96% metal $0.85 (65-80% Al, and 10-25% mix of Cu, Zn, Pb) $0
Slide 28: Zorba de-commoditisation initiative
Product Quality: Zorba de-commoditsation initiative Installation of a zorba separation plant at Claremont Terminal metals recycling facility in Jersey City, NJ Project Facility will process Claremont’s zorba into twitch (98-99% aluminium) and Overview ‘heavy metals’ (copper, brass, lead, zinc) Expec
Slide 29: Claremont Zorba Separation integrated with new MRP
Product Quality: Claremont Zorba Separation integrated with new MRP New Claremont MRP & Zorba Plant MRP Mixed Copper MRP Zorba Bearing Shred Density Heavy Metals Heavy Metals Twitch Separation & Zorba Separation Plant Separation Shred Upgrading Zorba Separation 29
Slide 30: Wider potential in domestic and export non-ferrous markets
Wider potential in domestic & export non-ferrous markets Key Markets Twitch Consumers Secondary Copper Smelters 30
Slide 31: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 31
Slide 32: Summary & outlook
Summary & outlook Significant internal initiatives to support reaching FY18 ROC target of ≥ 10% Extensive portfolio of internal initiatives driven by a strong central PMO structure Initiatives expected to deliver additional $70 to $95 million in EBIT per annum once complete1 Business remains well po
Slide 33: Sims Metal Management North America Metals
Sims Metal Management North America Metals
Slide 34: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 34
Slide 35: North America Metals overview
North America Metals overview 1988: Entered the Jun-07: Formed Dec-12: Divested Aug-16: Completed US metals recycling 50% JV with Adams minor non-core sale and closure of market with the Steel creating SA assets in CO, UT, non-core assets in acquisition of LMC in Recycling and Nashville, TN Central
Slide 36: North America Metals business structure
North America Metals business structure North America Metals 100% 50% Sims Richmond NAM West NAM Central NAM East Municipal Steel SA Recycling Recycling Recycling 8 facilities 10 facilities 28 facilities New York City JV with Nucor US South-West 1 shredder 1 shredder 6 shredders curbside Steel 44 fa
Slide 37: Strong presence on the East and West coasts
Strong presence on the East and West coasts BC WA ME VT MT ND MN NH NY OR MA ID WI SD MI RI WY CT PA CA IA NJ NV NB OH IL IN MD DE UT WV VA CO MO KY KS NC TN AZ OK SC NM AR GA AL MS LA TX NAM shredders FL NAM facilities Joint venture shredders Joint venture facilities 37
Slide 38: Leading market share in exports and total volumes
Leading market share in exports and total volumes US Total Market Share US Export Market Share Sims Metal Management 11% OmniSource Sims Metal 8% Management 26% Other 40% Schnitzer 7% SMS 6% DJJ 6% Other EMR 74% 2% FPT 5% SA CMC Gerdau Alter Trading Recycling 4% 4% 4% 3% Source: USGS, 2015 Recycling
Slide 39: Improving business performance
Improving business performance with significantly more earnings potential North America Metals North America Metals Underlying EBIT 120 Underlying EBIT 100 40 80 A$ million 60 30 40 20 20 0 -20 A$ million 10 -40 FY10 FY11 FY12 FY13 FY14 FY15 FY16 HY17 0 North America Metals -10 Sales Volumes 12,000
Slide 40: Material collection rates below long-term levels
Material collection rates below long-term levels US ferrous scrap metal collection 300 US ferrous scrap collection per capita 280 260 Long-term average 240 collection rate is 30% above current levels 220 200 180 160 140 120 100 Source: USGS, US Census 40
Slide 41: Metal recycling industry capacity has declined
Metal recycling industry capacity has declined Active US Shredders Active US shredders down 13% since 2012 300 275 # active US shredders 250 225 200 175 150 Source: AMM, Company Reports 41
Slide 42: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 42
Slide 43: North America Metals - East Region Operations
North America Metals – East Region Operations Operations spanning major urban areas including New York/Newark, Philadelphia/Trenton, Boston/Providence and Chesapeake/Norfolk, VA Total catchment area of over 30 million people, with a GDP of over US$2.2 trillion The East Region represents the largest
Slide 44: Flexibility to supply both export and domestic customers
Flexibility to supply both export and domestic customers Domestic Export Barge 10 facilities with barge loading Bulk Ship 5 exclusive use deep water export capabilities utilising rivers and docks capable of loading 50 thousand intracoastal waterways for low-cost tonne handymax vessels water based tr
Slide 45: North America Metals - New York City Metro
North America Metals – New York City Metro Shredder & key facility Processing facility Barge dock capacity Deep water export dock Port Newark Claremont Terminal Newark, New Jersey Jersey City, New Jersey 45
Slide 46: Claremont Terminal & Port Newark
Claremont Terminal & Port Newark Claremont Terminal, New Jersey Port Newark, New Jersey Largest full service metals recycling facility Deep water export dock and stevedoring in North America Metals portfolio operation Large scale shredder Bulk ship loading & receiving Downstream MRP Barge loading &
Slide 47: Claremont Terminal - Jersey City, New Jersey
Claremont Terminal - Jersey City, New Jersey 1 2 6 10 11 4 3 7 8 9 1) Main Office 7) MRP Plant (Current) 2) Peddler Yard 8) MRP Plant (Future) 5 3) Truck Scale 9) Deep water dock 4) Stationary Shear 10) Barges 5) Metal Shredder 11) Municipal Recycling Plant 6) Rail line 47
Slide 48: Claremont Terminal - Jersey City, New Jersey
Claremont Terminal - Jersey City, New Jersey 48
Slide 49: Port Newark - Newark, New Jersey
Port Newark - Newark, New Jersey 8 6 4 2 7 1 5 3 1) Main Office 6) Loading Cranes 9 2) Truck Scale 7) Deep water dock 3) Rail line 8) Barge dock 4) HMS Inventory 9) Salt Stevedoring 5) Shredded Inventory 49
Slide 50: Port Newark - Newark, New Jersey
Port Newark - Newark, New Jersey 50
Slide 51: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 51
Slide 52: North America Metals - Central Region Operations
North America Metals – Central Region Operations Operations spanning major urban areas including Chicago, Houston, and Tulsa, OK Total catchment area of over 17 million people, with a GDP of over US$1.2 trillion The Central Region is comprised of two parts, the Midwest and Southwest, which combined
Slide 53: Well positioned to supply domestic steel mills
Well positioned to supply domestic steel mills Chicago Radius Houston Radius Source: EPA 53
Slide 54: Paulina Street - Chicago, Illinois
Paulina Street - Chicago, Illinios 1) Main Office 4) Metal Shredder 2) Non-Ferrous Building 5) Rail line 3) Mobile Shear 6) Barge dock 6 1 2 3 5 4 54
Slide 55: Agenda
Agenda Group Strategy Update Internal Initiatives Update Logistics Operational Excellence Product Quality Summary & Outlook North America Metals Business & Market Review East Region Central Region Appendix 55
Slide 56: Diverse US supply base
Diverse US supply base Post Industrial % North America Metals Supplier Groups Stampings & clippings 12-14% Borings & turnings 3-5% 6% 6% Other 1-3% 10% Total ~20% 45% Obsolete Material % Construction & demolition 20-30% 12% Passenger vehicles 15-25% Major appliances 5-10% 21% Other light iron 5-10%
Slide 57: Balanced commodities sales mix
Balanced commodities sales mix Ferrous Metals Sales Revenue by Product1 Heavy Melt Steel Bundles & Bales Shredded Steel Plate & Structural 2% 17% Non-Ferrous Shred Recovery Zorba (aluminium based) Zurik (stainless steel based) Non-Ferrous Metals 52% Aluminium Copper 23% Lead Nickel Zinc Used Beverag
Slide 58: US ferrous market prices and mix
US ferrous market prices and mix US Ferrous Scrap Market by Price US Ferrous Scrap Market by Volume $450 13% $400 6% 33% $350 8% $300 US$ / tonne $250 14% $200 26% $150 Shredded HMS 1&2 $100 Bundles & Busheling Cut Structural & Plate Turnings, Boring, Punch Other HMS 1/2 - East Coast Export HMS 1 -
Slide 59: Financial summary - group
Financial summary - group A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 1H FY16 1H FY17 Group Results Sales Revenue 7,453 8,847 9,036 7,193 7,129 6,311 4,652 2,412 2,385 Underlying EBITDA 379 414 253 190 242 263 184 61 133 Underlying EBIT 235 283 123 67 119 142 58 -5 77 Underlying NPAT 127 182 74 17 69 102
Slide 60: Financial summary - business segment
Financial summary – business segment A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 1H FY16 1H FY17 Sales Revenue North America Metals 4,834 5,782 5,773 4,256 3,996 3,417 2,353 1,236 1,111 ANZ Metals 1,126 1,300 1,190 1,047 1,188 1,053 744 377 492 Europe Metals 783 954 1,056 935 1,063 1,037 759 372 415 Glob
Slide 61: Financial summary - business segment
Financial summary – business segment A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 1H FY16 1H FY17 Sales tonnes (‘000) North America Metals 9,906 10,964 11,080 9,377 8,152 7,018 5,772 2,990 2,735 ANZ Metals 1,578 1,764 1,765 1,764 2,054 1,874 1,418 700 862 Europe Metals 1,394 1,466 1,651 1,645 1,609 1,589
Slide 62: Financial summary - product segment
Financial summary – product segment A$m FY10 FY11 FY12 FY13 FY14 FY15 FY16 1H FY16 1H FY17 Sales tonnes (‘000) Ferrous Trading 9,068 10,115 10,320 9,396 9,331 8,325 6,768 3,361 3,505 Ferrous Brokerage 3,264 3,518 3,597 2,840 1,918 1,617 1,307 688 628 Non Ferrous 565 571 586 550 566 539 476 250 227 T
Slide 63: Metals Recycling global footprint
Metals Recycling global footprint Europe Metals North America Metals UK United States & Canada Australia & New Zealand Metals Australia New Zealand Metal Shredder / Key Metals Recycling facility Metal Shredder (50% JV owned) 63
Slide 64: Electronics Recycling global footprint
Electronics Recycling global footprint Europe, Africa, and Middle East UAE Europe North America South Africa United States Asia Pacific India Singapore Australia New Zealand Electronics Recycling facility 64
Slide 65: Disclaimer
Disclaimer The material contained in this document is a presentation of information about the Group’s activities current at the date of the presentation, 5 June 2017. It is provided in summary form and does not purport to be complete. It should be read in conjunction with the Group’s periodic report