Company Reports

We expect increased demand for scrap metals over our forecast period, driven by growth in electric arc furnaces, spending on infrastructure, and steel and copper as the main materials in vehicles, electronics, and machinery.

Sims' fiscal 2026 underlying EBIT jumped 168% to AUD 468 million. Strong prices for nonferrous metals like copper and aluminum lifted its North American recycling businesses, while earnings at its computer recycling unit, SLS, rose fivefold to AUD 173 million. Still, shares fell 11%.

Sims lifts fiscal 2026 underlying EBIT guidance, 14% higher at the midpoint, on strong nonferrous metals prices. Nonferrous metals, primarily aluminum and copper, are essential materials that support key growth areas such as data centers, electric vehicles, and renewable energy.

We expect increased demand for scrap metals over our forecast period, driven by growth in electric arc furnaces, spending on infrastructure, and steel and copper as the main materials in vehicles, electronics, and machinery.

Sims has provided a trading update and guidance for fiscal 2026 earnings. It expects underlying EBIT of AUD 350 million-AUD 400 million. This is more than double the prior year, due to higher nonferrous prices and growth in the electronics and computer recycling business. Shares were up 9%.

We expect increased demand for scrap metals over our forecast period, driven by growth in electric arc furnaces, spending on infrastructure, and steel and copper as the main materials in vehicles, electronics, and machinery.

We expect increased demand for scrap metals over our forecast period, driven by growth in electric arc furnaces, spending on infrastructure, and steel and copper as the main materials in vehicles, electronics, and machinery.

Sims' first-half fiscal 2026 underlying EBIT of AUD 121 million was 66% higher than the prior year on a mix-shift to higher-margin sales. AI-driven demand has lifted prices for non-ferrous metals, such as copper and aluminum, and supported exceptional growth in Sims' computer recycling business.

Ferrous scrap metal is used by US steelmakers, with about 70% of its steel produced in an electric arc furnace. But low demand is suppressing prices, despite tariffs intended to protect the steel industry. Meanwhile, nonferrous pricing is strong, with high demand from data center customers.

Sims' fiscal 2025 underlying EBIT of AUD 175 million was almost three times last year's. Growth reflected a 200-basis-point increase in metals trading margin to 22% due to higher average sales prices, operational cost cuts, and a sales mix shift to higher-margin nonferrous metals.

We expect increased demand for scrap metals over our forecast period, driven by growth in electric arc furnaces, spending on infrastructure, steel and copper as a main material in vehicles and machinery, and in the near term, improved demand for US manufactured steel due to tariffs.

The Trump administration's tariffs on steel, aluminum, and copper are intended to support US producers, by switching supply away from imports in favor of local production. As the largest metals recycler in the US, Sims supplies scrap metals to the industries requiring these materials.

We expect increased demand for scrap metals over our forecast period, driven by growth in electric arc furnaces, spending on infrastructure, steel and copper as a main material in vehicles and machinery, and in the near term, improved demand for US manufactured steel due to tariffs.

We initiate coverage on no-moat Sims Metal Group with a fair value estimate of AUD 15.80 per share. We assign Sims no-moat, High Uncertainty, and Standard Capital Allocation ratings. Shares are modestly undervalued, and we think the market has not fully factored in the impact of US steel tariffs, which we expect to be a tailwind for Sims.

We expect increased demand for scrap metals over our forecast period, driven by growth in electric arc furnaces, spending on infrastructure, steel and copper as a main material in vehicles and machinery, and in the near term, improved demand for US manufactured steel due to tariffs.

As foreshadowed in our note on Oct. 12, 2021, we cease coverage on Sims. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to client demand, investor interest, and staffing. The break in coverage of Sims is likely to be temporary and we look to reinitiate on the company in the future.

Sims’ strategy positions the company for growth in an increasingly circular economy, where waste of resources is being progressively minimised. The strategy will see the company retain metals recycling at its core. To this end, Sims seeks to grow its ferrous volumes by 50% and double its non-ferrous volumes in North America over the coming five years. But the strategy also seeks to broaden the scope of Sims, both within its existing e-recycling franchise and further afield in renewable energy. Eyeing the substantial investment in data storage centres, also known as "the cloud," Sims aims to become a leader in cloud hardware recycling with a goal to take 10% market share in depreciated hardware recycling for Infrastructure as a Service providers such as Microsoft and Amazon Web Services. Sims also seeks to become a renewable energy player, leveraging the expertise of its joint venture partner, LMS energy, in landfill energy generation. Further, net energy generation will flow from Sims’ waste-to-energy, or WTE, program which will capture its currently landfilled, non-metallic shredding waste from its metals business, known as ASRs, and utilise this waste to produce energy via gasification technology. The strategy will see Sims invest in seven plants within the next 10 years. The strategy will reduce landfill costs and move Sims toward being a net electricity generator over the long term.

We place our fair value estimate on no-moat Sims under review and notify clients of our proposal to temporarily cease coverage in late October 2021. We intend to reinitiate coverage at a later date. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to client demand, investor interest, and staffing.

Sims’ delivery of full-year fiscal 2021 EBIT of AUD 387 million broadly tracked our expectations as a recovery in scrap market prices and liquidity benefitted Sims’ in late fiscal 2021. Steel prices remain elevated as a result of robust demand from the automotive and construction sectors amid the global economic recovery from the coronavirus shock of 2020. With the conducive conditions expected to hold in steel and scrap metal markets into fiscal 2022, we raise our fiscal 2022 EBIT estimate by a sizable 145% to AUD 625 million. However, with appreciably lower scrap prices, and correspondingly lower operating margins anticipated longer-term, we make no change to our AUD 11.50 per share fair value estimate. We continue to forecast an unchanged EBIT margin of 2.3% at midcycle, down from a forecast cyclical high of 6.5% in fiscal 2022. Shares in the no-moat stock trade at a hefty 51% premium to our unchanged fair value estimate.

Sims’ strategy positions the company for growth in an increasingly circular economy, where waste of resources is being progressively minimised. The strategy will see the company retain metals recycling at its core. To this end, Sims seeks to grow its ferrous volumes by 50% and double its non-ferrous volumes in North America over the coming five years. But the strategy also seeks to broaden the scope of Sims, both within its existing e-recycling franchise and further afield in renewable energy. Eyeing the substantial investment in data storage centres, also known as "the cloud," Sims aims to become a leader in cloud hardware recycling with a goal to take 10% market share in depreciated hardware recycling for Infrastructure as a Service providers such as Microsoft and Amazon Web Services. Sims also seeks to become a renewable energy player, leveraging the expertise of its joint venture partner, LMS energy, in landfill energy generation. Further, net energy generation will flow from Sims’ waste-to-energy, or WTE, program which will capture its currently landfilled, non-metallic shredding waste from its metals business, known as ASRs, and utilise this waste to produce energy via gasification technology. The strategy will see Sims invest in seven plants within the next 10 years. The strategy will reduce landfill costs and move Sims toward being a net electricity generator over the long term.