Sims tops earnings, expects momentum to build in second-half

Sims (ASX: SGM) shares are up 17% after the metals and electronics recycling company topped its own guidance and analyst expectations in the first-half of FY22.

Financials at a glance: 

• Revenue of $4.3bn, up 74% 

• Net profit of $269m, up 622% 

• Interim dividend of 41 cents per share, up 240% 

• $54m share buyback to be executed in the second-half

Bell Potter and Citi had forecasted first-half profits of $245m. 

Sims ticks all the boxes 

“In terms of the near term outlook for commodity demand, while growth slowed in China more than we anticipated in the second half of calendar year 2021, we see the headwinds easing over the course of 2022,” said CEO Alistair Field. 

“We significantly improved our operating cash flow from 2H FY21, increased cash returns to shareholders, and maintained the strength of our balance sheet. Intake volumes grew strongly and were close to pre-COVID levels.”

Favourable macro-trends 

Ferrous and non-ferrous metal prices rose 30% and 60% respectively in the first-half compared to a year ago.

Metals price inflation has more than offset any inflationary pressures on business costs, with trading margins up 45%.

To-date, Sims said that commodity prices are tracking higher than first-half averages and ferrous prices remain "elevated, albeit volatile".

Over the medium-term, Sims expects ongoing infrastructure spending and the global transition to low-carbon solutions to drive demand for recycled metals.