Sims ‘well-placed’ to benefit from Trump’s steel tariffs: CEO
Sims CEO Stephen Mikkelsen expects Donald Trump’s tariffs on steel and aluminium to aid the listed metals recycler.
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Sims CEO Stephen Mikkelsen expects a new “nationalised” and “regionalised” international economic order to benefit the listed metals recycler, beginning with Donald Trump’s tariffs on steel and aluminium, which are already flowing through to higher steel and scrap metal prices in the US.
Scrap metal imports are excluded from Mr Trump’s 25 per cent tariffs on steel and aluminium imports coming into force on March 12, but Mr Mikkelsen said the policy shift was already having an impact on prices.
And, with Sims processing about three quarters of its annual volumes in the US, he said the business was well-placed to benefit from the new market dynamics.
“Our assessment is that, overall, the tariffs will benefit the US and challenge ANZ (Australia and New Zealand), and therefore in aggregate the impact should be positive given our larger US business,” he said after handing down the company’s interim results on Tuesday.
“It’s just hard to know the final impact of the tariffs and when the timing of that is going to happen … when they are actually going to impact the market. That’s something we’re all grappling with.”
Mr Mikkelsen said a “growing regionalisation” of the global economy would also provide opportunities for Sims given the company’s “optionality to sell domestically or internationally” in the US, Australia and New Zealand, while its e-waste and data centre recycling division, Sims Lifecycle Services, would benefit from “the USA’s desire to keep data in-country”.
Sims’s half-year results beat expectations on Tuesday, with the company reporting an underlying profit of $35.1m, up from $7m in the previous corresponding period, on a 4 per cent increase in revenue to $3.65bn.
Statutory profit fell to $30.8m, down from $98m in the first half of 2023-24, when the company reported a $170.4m gain on the disposal of its interest in the Landfill Management Services business.
Mr Mikkelsen described the result as a strong performance in a challenging market, “which many are citing as one of the most difficult in recent times”.
Weak economic conditions and elevated exports out of China are fuelling fears of a worsening global steel glut.
As part of a strategic reset to survive the tough economic conditions, Sims offloaded its British metal recycling business to Unimetals for £195m last year, and the company has been cutting costs amid a highly inflationary environment. It has also flagged a property sell-off.
Sims reported a 15.6 per cent decline in volumes in Australia and New Zealand for the six months to December 31 to 728,000 tonnes, while volumes in North America were down 1.3 per cent at 2.4 million tonnes, as the business “sacrificed low-margin processed tonnes to focus on gaining higher-margin unprocessed material”.
Sims told investors on Tuesday it had begun a review of its property portfolio, with market valuations for its landholdings suggesting a potential excess over book value of about $1.5bn.
“We have already identified some surplus land, and we’re actively marketing that,” Mr Mikkelsen told analysts. “In the next two years you should see some good movement on us selling surplus land.”
On the outlook, Sims said the global steel glut was likely to continue amid elevated exports out of China.
“It’s hard to see China cutting steel production in the short term, and thereby lowering exports. This will continue to dampen global ferrous scrap prices and steel prices. Non-ferrous volumes and prices have been robust, and we expect this to continue,” he said.
“Overall, supply-demand balance is expected to align with the first half, despite seasonal softness in January and February.”
Sims will pay an interim dividend of 10c a share.
Sims shares rose 1.5 per cent to $14.27 on Tuesday.
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