Sims Ltd. · ASX:SGM
Sims — H1 FY2020 Earnings Presentation
43 slides from Sims's earnings presentation, Feb 18, 2020
Slide 1: Financial Results Half year ended 31 December 2019
For personal use only Financial Results Half year ended 31 December 2019 18 February 2020
Slide 2: 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, 18 February 2020. It is provided in summary form and does not purport to be complete. It should be read in conjunction with
Slide 3: Agenda
Agenda Results Overview For personal use only Alistair Field, Group CEO Financial Results Stephen Mikkelsen, Group CFO Summary & Outlook Alistair Field, Group CEO Static Sheer recently installed in Melbourne, Australia (ANZ Metals) 3
Slide 4: 1H FY20 Themes
1H FY20 Themes Scrap price crash and historically low zorba prices produced 1H FY20 loss For personal use only First half challenges but prices subsequently improved The rapid collapse in ferrous scrap prices in September 2019 combined with historically low zorba prices severely compressed margins
Slide 5: Summary of Financial Outcomes
Summary of Financial Outcomes Fully franked interim dividend sustained For personal use only Sales Revenue Sales Volumes $2,709.6 million 4.474 million tonnes 1H FY19 1H 1H 4.30 FY19 million | 2H 4.25 million $3,334.1 million -18.7% 4.951 million tonnes -9.6% Underlying1 EBITDA Net Cash $74.9 millio
Slide 6: Employee Health & Safety
Employee Health & Safety Global commitment for zero harm today Safety remains the most important priority for both For personal use only our employees and the community Focus and progress on Critical Risk awareness and 3.0 2.8 management Total Recordable Injury Frequency Rate (TRIFR)1 Critical
Slide 7: Sustainability
Sustainability Sims Sustainability Strategy aligned with overall purpose and growth strategy Sims Sustainability Strategy For personal use only Sustainability Strategy aligned to our We close resource loops by enabling society to restore, repair, refurbish, remanufacture and purpose “Create a worl
Slide 8: Group Financial Performance
Group Financial Performance For personal use only A$m 1H FY19 1H FY20 % Chg Lower ferrous prices resulted in lower Sales revenue 3,334.1 2,709.6 -18.7% collection rates Statutory EBITDA 173.1 30.5 -82.4% 1 Non ferrous volumes remained resilient Underlying EBITDA 173.8 74.9 -56.9% Statutory EBIT
Slide 9: Markets
Markets Volatile market conditions with improved pricing in December and January 2020 Ferrous – Improved pricing since scrap market crash China Non-ferrous Reclassification For personal use only 400 China has reclassified high grade non-ferrous Turkey HMS 80:20 Price 350 metals as a “renewable met
Slide 10: Financial Results
For personal use only Financial Results Stephen Mikkelsen, Group CFO 10
Slide 11: Statutory EBIT Reconciliation
Statutory EBIT Reconciliation Business restructuring to reduce costs and rationalise sites For personal use only A$m 1H FY20 Restructuring in North America Metals and UK Statutory EBIT (95.2) Metals includes: Legacy Brand Write Off 14.6 Closing 11 sites in the UK Other Intangible Impairments 13.
Slide 12: Business Segment Financial Performance
Business Segment Financial Performance EBIT margins more adversely impacted than sales volumes For personal use only Sales volumes Underlying EBIT1 (A$m) 1H FY19 1H FY20 Chg % 1H FY19 1H FY20 Chg % (‘000 tonnes) North America Metals2 2,517 2,275 -9.6% North America Metals 55.3 0.1 -99.8% 2 ANZ Metal
Slide 13: North America Metals
North America Metals Break-even result despite challenging market due to higher material recovery and cost reductions Sales volumes were down 9.6% over prior For personal use only A$m 1H FY19 1H FY20 % Chg Underlying EBIT1 55.3 0.1 -99.8% corresponding period Proprietary Sales Volumes (‘000 tonnes
Slide 14: Australia & New Zealand Metals
Australia & New Zealand Metals Positive earnings supported by internal initiatives and cost reductions For personal use only A$m 1H FY19 1H FY20 % Chg Underlying EBIT was $22.3 million, down Underlying EBIT 1 51.8 22.3 -56.9% 56.9% over prior corresponding period Proprietary Sales Volumes (‘000 to
Slide 15: UK Metals
UK Metals Strategic restructure provides a lower operating cost base from 2H FY20 For personal use only A$m 1H FY19 1H FY20 % Chg Underlying EBIT loss of $28.4 million, down Underlying EBIT 1 6.8 (28.4) NMF compared to prior corresponding period Proprietary Sales Volumes (‘000 tonnes) 792 662 -16.
Slide 16: Sims Lifecycle Services
Sims Lifecycle Services On track to achieve FY20 volume targets For personal use only A$m 1H FY19 1H FY20 % Chg Sale of European Compliance Scheme Operations during 1H FY20 (subject to Underlying EBIT1 10.0 14.8 48.0% Underlying EBIT European Commission approval) 10.0 14.5 45.0% (constant currency
Slide 17: SA Recycling
SA Recycling EBIT reduction primarily driven by falling zorba prices and ferrous scrap market crash For personal use only A$m 1H FY19 1H FY20 % Chg Underlying EBIT of nil due to: Underlying EBIT (50% share) 16.8 - NMF Low pricing for zorba Sales Volumes (‘000 tonnes) 840 800 -4.8% (50% of SA ton
Slide 18: Global Trading
Global Trading Lower costs reflect lower employee benefits expense and operation of one non-ferrous trading office For personal use only A$m 1H FY19 1H FY20 % Chg Underlying EBIT represents external and Brokerage Gross Margin 6.8 5.9 -13.2% SA Recycling brokerage less the costs of Operating Costs
Slide 19: Corporate & Other
Corporate & Other Transparency of costs for growth businesses For personal use only Corporate (A$m) 1H FY19 1H FY20 % Chg Corporate 1 Underlying EBIT (29.1) (31.3) -7.6% Underlying EBIT of $(31.3) million, increased Underlying EBIT (constant currency) (29.1) (30.3) -4.1% 4.1% over prior correspond
Slide 20: Product Segment Sales Volumes
Product Segment Sales Volumes Stable non-ferrous volumes despite challenging market conditions For personal use only Sales volumes (‘000 tonnes) 1H FY19 1H FY20 Chg % Sales Volumes by Region North America Metals 2,517 2,275 -9.6% Total proprietary sales volumes ANZ Metals 875 806 -7.9% decreased b
Slide 21: Net Cash Position
Net Cash Position Returning value to shareholders through dividends and share buy back A$m 1H FY20 For personal use only Net Cash at 1 July 2019 347.5 Working capital decline of $63.6 million Net profit (91.1) $50 million seasonality similar to 1H FY19 Depreciation & amortisation 98.1 Non-cash i
Slide 22: Capital Expenditure
Capital Expenditure Continued discipline in the capital expenditure program For personal use only Capital Expenditure Capital expenditure reduction initiatives have 250 reduced capex by $25 million compared to original FY20 forecast 200 Net cash balance of $151.2 million as at 31 December contin
Slide 23: Strategic Progress & Outlook
For personal use only Strategic Progress & Outlook Alistair Field, Group CEO 23
Slide 24: Strategic Growth: Sims Resource Renewal
Strategic Growth Sims Resource Renewal: To convert 1 million tonnes of ASR to quality products For personal use only Progress - Energy Recovery Plant ASR will be converted to vitrified product and a high quality syngas that can produce Detailed investigation of four short listed technologies dif
Slide 25: Strategic Growth: Sims Lifecycle Services
Strategic Growth Sims Lifecycle Services: Setting the foundations to scale and grow the business profitably For personal use only Integrated Active engagement with all major global service cloud providers across multiple products provider and regions Global Enabling compliance sustainability Str
Slide 26: Conclusion & Outlook
Conclusion & Outlook Resilience shown despite challenging markets and an attractive long-term growth outlook remains 1H FY20 For personal use only The September scrap price crash, combined with historically low zorba prices and aggressive competitor buying behaviour, severely impacted first half m
Slide 27: Questions & Answers
For personal use only Answers Questions & 27
Slide 28: Appendix
For personal use only Appendix 28
Slide 29: Group Profit & Loss
Group Profit & Loss A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Sales revenue 6,310.9 4,651.7 5,079.4 6,448.0 6,640.0 3,334.1 2,709.6 -18.7% Statutory EBITDA 265.6 83.0 313.5 395.8 358.1 173.1 30.5 -82.4% Underlying EBITDA 260.0 190.4 292.4 392.3 363.4 173.8 74.9 -56.9%
Slide 30: North America Metals
North America Metals A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Sales Revenue 2,916.4 1,942.5 1,984.0 2,607.1 2,725.6 1,401.0 1,133.0 -19.1% Statutory EBITDA 66.2 35.2 106.0 121.0 124.8 60.9 12.4 -79.6% Underlying EBITDA 88.4 84.8 124.4 159.5 162.6 84.4 43.4 -48.6% Depr
Slide 31: Investment in SA Recycling
Investment in SA Recycling A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Statutory EBIT 0.5 (120.6) 26.3 67.8 41.0 21.9 - NMF Underlying EBIT 0.5 (1.5) 26.3 68.5 35.9 16.8 - NMF Assets 243.1 126.8 131.9 180.7 211.1 197.3 207.4 5.1% 1 Intake Volumes (000's) 2,156 2,005 2,55
Slide 32: Australia & New Zealand Metals
Australia & New Zealand Metals A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Sales Revenue 1,053.3 743.6 981.4 1,071.0 1,203.7 617.0 503.5 -18.4% Statutory EBITDA 85.0 58.0 90.9 121.6 125.6 53.4 42.3 -20.8% Underlying EBITDA 98.5 75.6 102.4 126.2 137.9 67.4 47.8 -29.1% Dep
Slide 33: UK Metals
UK Metals A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Sales Revenue 1,036.6 759.1 924.3 1,203.0 1,186.9 586.2 487.6 -16.8% Statutory EBITDA 38.0 (15.7) 50.5 42.0 19.7 10.7 (46.6) NMF Underlying EBITDA 44.3 43.8 54.2 50.5 39.5 16.5 (13.5) NMF Depreciation 12.5 13.8 12.0 1
Slide 34: Global Trading
Global Trading A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Sales Revenue 455.2 352.6 386.6 733.5 690.9 342.4 293.2 -14.4% Statutory EBITDA 14.1 3.2 3.1 19.0 23.3 10.6 3.0 -71.7% Underlying EBITDA (8.2) (10.5) (15.3) (12.3) (14.9) (7.2) (6.4) 11.1% Depreciation 0.1 0.1 0.
Slide 35: Sims Lifecycle Services
Sims Lifecycle Services A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Sales Revenue 795.0 792.7 726.9 758.4 746.5 349.6 247.9 -29.1% Statutory EBITDA 53.0 (2.6) 30.6 34.5 26.4 11.6 13.8 19.0% Underlying EBITDA 57.1 23.3 36.3 39.7 34.5 14.3 21.1 47.6% Depreciation 10.6 11.2
Slide 36: Corporate & Other
Corporate & Other A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 Chg % For personal use only Sales Revenue 54.4 61.2 76.2 75.0 86.4 37.9 44.4 17.2% Statutory EBITDA 8.8 6.4 6.1 (10.1) (2.7) 4.0 5.6 40.0% Underlying EBITDA (20.6) (25.1) (35.9) (39.8) (32.1) (18.4) (17.5) 4.9% Depreciation 8.9 10.4 9.5
Slide 37: Financial Summary – Group
Financial Summary – Group A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 For personal use only Group Results Sales Revenue 6,310.9 4,651.7 5,079.4 6,448.0 6,640.0 3,334.1 2,709.6 Underlying EBITDA 260.0 190.4 292.4 392.3 363.4 173.8 74.9 Underlying EBIT 139.2 64.0 180.1 275.1 230.3 109.6 (23.2) Underl
Slide 38: Financial Summary – Segment
Financial Summary – Segment A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 For personal use only Sales Revenue North America Metals 2,916.4 1,942.5 1,984.0 2,607.1 2,725.6 1,401.0 1,133.0 ANZ Metals 1,053.3 743.6 981.4 1,071.0 1,203.7 617.0 503.5 UK Metals 1,036.6 759.1 924.3 1,203.0 1,186.9 586.2 487
Slide 39: Financial Summary – Segment (cont.)
Financial Summary – Segment (cont.) A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 For personal use only Proprietary sales tonnes (‘000)1 North America Metals 5,499 4,517 4,344 4,865 4,887 2,517 2,275 ANZ Metals 1,782 1,377 1,530 1,585 1,763 875 806 UK Metals 1,583 1,350 1,589 1,691 1,602 792 662 Tota
Slide 40: Financial Summary – Product
Financial Summary – Product A$m FY15 FY16 FY17 FY18 FY19 1H FY19 1H FY20 For personal use only Sales tonnes (‘000) Ferrous Trading 8,325 6,768 7,009 7,709 7,817 3,963 3,521 Non Ferrous 539 476 454 432 435 221 222 Brokerage 1,617 1,307 1,237 1,715 1,551 767 731 Total 10,481 8,551 8,700 9,856 9,803 4,
Slide 41: Income Tax Expense – 1H FY20
Income Tax Expense – 1H FY20 Income Tax Benefit A$m Loss Before Tax Effective Tax % /(Expense) For personal use only Statutory Result (102.7) 11.6 -11.3 Significant Items 72.0 (15.6) 21.7 Normalised Results (30.7) (4.0) 13.0 41
Slide 42: Lease Standard Impact – 1H FY20
Lease Standard Impact – 1H FY20 A$m EBIT EBITDA For personal use only Underlying Result (23.2) 74.9 Lease Depreciation N/A 31.2 Lease Interest Expense 2.3 2.3 Underlying Result Excluding Lease Standard Impact (25.5) 41.4 42
Slide 43: Significant items
Significant items 1H FY19 Pre-Tax 1H FY19 After-Tax 1H FY20 Pre-Tax 1H FY20 After-Tax A$m For personal use only Total Total Total Total Legacy brand write offs - - 14.6 11.0 Other intangible asset impairments - - 13.0 9.4 Restructuring and redundancies 0.1 0.1 33.6 26.9 Loss on sale of European comp