Sims Metal Management Ltd (ASX: SGM) is the world's largest listed recycler of metals and electronics with global operations. The company and its shareholders have endured a tough five years with the business facing numerous challenges particularly in its North American operations. The release of the recycler's half-yearly results show significantly improved performance and could herald a change in Sims' fortunes and make it (potentially) an opportune time for investors to enter this beaten-up stock.
The Results
- Sales revenue gained 4.8% to $3.6 billion
- Underlying net profit after tax surged 348% to $42 million
- Underlying earnings per share rallied 351% to 20.3 cents per share
- Net debt declined by $33 million to $121 million
- No dividend declared
Outlook
Around 83% of Sims' revenues are in North America and Europe which means the company is heavily exposed to foreign currencies. The recent weakening of the Australian dollar offers a significant tailwind for the firm. Sims' restructuring plans and cost savings are also starting to have a real impact on the group with margins improving. Coupled with growing volumes and better pricing as industrial conditions improve, the outlook for Sims is looking brighter.
Foolish takeaway
In the past year the market's view of BlueScope Steel Limited (ASX: BSL) has improved greatly with the shares rallying 56.5% against a broader S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) which is up 6%. Meanwhile, Sims and Alumina Limited (ASX: AWC) have returned -3.8% and -0.4% respectively.
While each of these firms has different commodity exposure and business models they have all faced a number of similar challenges. With Sims' shares rallying nearly 8% by early afternoon, but still down 40% over the past five years, there could be significant upside if the company can continue to produce improved earnings performances.
