Sims issues profit warning, will cut up to 800 jobs

Sims Metal Management, based in Sydney and New York, has issued a profit warning for its upcoming quarterly results, will buy back shares of its own stock and is scaling back operations globally, with a focus on the United States.

In a presentation, Sims has warned of “flat earnings” in the first half of its fiscal year and that it “now expects a $230 million impairment charge during 2016.”

Sims CEO Galdino Claro and Chief Financial Officer Fred Knechtel point to “ferrous prices [that fell] sharply by 30 percent from mid-September to November” as a leading cause for its financial woes. The also mention that “copper and aluminum prices weakened, down 15 percent and 10 percent, respectively” in the second half of the 2015 calendar year.

In the presentation Sims also announced its intention to buy back as much as 10 percent of the shares of its issued stock, saying the buyback “reflects the confidence board has in the outlook for the business, and the attractive underlying value of the operations relative to current market prices.”

In an effort to cut costs, Sims also announced in the presentation its intention to scale back operations globally, with its North American scrap yard portfolio facing the heaviest cuts.

According to the presentation, Sims is taking steps to eliminate as many as 800 jobs and to either cut back operations or idle as many as 35 of its 270 facilities globally. “The largest portion of these initiatives will address our most challenged operations in the Central Region of North America Metals,” say Claro and Knechtel.

The sale of some “noncore facilities and properties” may also occur, says Sims. Regarding the timing of the layoffs and shutdowns, Sims says, “The majority of these initiatives will be in progress by the end of the first half of fiscal year 2016 (December 31, 2015) and will be completed by the end of the second half of fiscal year 2016 (June 30, 2016).”

According to the industry sources, St. Louis-based Alter Trading Co. is also laying off personnel and idling equipment and machinery at some of its facilities. The majority of the company’s scrap facilities are in Iowa, Wisconsin and adjacent Midwestern states.