Sims (SGM) surges on AI build out
Sims (SGM) surged to the top of the leader board on Wednesday after forecasting sharply higher 2H earnings, while informing the markets that the conflict in the Middle East is having limited impact on its operational performance outside of pushing up shipping and fuel costs. The stock initially popped ~17% before settling back around up 9%. The metals recycler updated the market as it enjoyed strength in prices in both the non-ferrous and memory chip markets:
- In the 1H SGM reported $121.mn of Ebit.
- SGM expects underlying earnings before interest and tax of $350-400mn in the 12-months to June.
SGM guided to FY Ebit for its Sims Lifecycle Services (SLS) division to $165–185mn, underpinned by ongoing hyperscaler demand driven by the AI build-out. The Metals business remains supported by strong non-ferrous pricing, improving US domestic ferrous prices, and a continued focus on sourcing unprocessed material.
- AI demand supports SLS, metals mixed amid China pressure.
However, conditions are not uniform across regions. Elevated Chinese steel exports continue to weigh on scrap prices across export markets, including Australia and New Zealand, where ferrous pricing is expected to remain subdued in the near term.
Looking ahead, Sims expects a material improvement in 2H performance from its US operations, though regional pricing headwinds are likely to persist outside the US.
