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Sims Metal Management Announces Fiscal 2013 Half Year Results

Stocks in this article: SMS

Mr. Dienst concluded. "We have now endured over four years of volatility and extremely challenging times in our markets. We believe closing the books on the first half of Fiscal 2013 is also a potential closing of the doors on this difficult chapter. Moving forward we see a business which is positioned to be a leader in the markets in which it operates, and on track to have reduced its fixed cost base on an annualised run rate in excess of $100 million before additional savings are realised in Global SRS as we head towards the end of Fiscal 2013. We are driving ahead with a clear strategy to generate strong returns on capital deployed in existing markets and establishing beachheads in the emerging scrap generating markets of the future. Backed by a confident, hungry, and safe working global team of 6,600 men and women ready to capitalise on improving market conditions, now more than ever we are confident that Sims Management Management's best days are ahead of it."


As of 31 December 2012, the Company had net debt balances of $293 million, representing 13% of total capital. 


As investors are aware, the Company's dividend policy is to distribute 45% to 55% of NPAT, subject to the Board's discretion. In the absence of statutory NPAT, even after looking through goodwill impairment, the Company has determined not to pay a dividend for the first half Fiscal 2013 period. The Company's dividend policy remains unchanged.

Goodwill Impairment Charge and Other Impairment Charges in the First Half of Fiscal 2013

As previously announced, due to the difficult economic environment, changes to the Company's operating results and forecasts, and a significant reduction in the Company's market capitalisation, the Company was required to perform a goodwill impairment test in accordance with Australian Accounting Standards Board (AASB) 136 – "Impairment of Assets." AASB 136 requires management to determine the value of the Company's cash generating units. Management assessed the recoverable amount on a value-in-use basis, utilising discounted cash flows. As a consequence of the impairment review, in the first half of Fiscal 2013, the Company recorded against its results a pre-tax $291 million ($259 million after-tax) charge to write-down the carrying value of goodwill and other identified intangible assets.

Reconciliation of Statutory Result to Underlying Result for the Half Years Ended 31 December 2012 and 31 December 2011
    Restated   Restated   Restated
(in A$ millions) HY13 HY12 HY13 HY12 HY13 HY12
Statutory Result $33 $100 $(321) $(637) $(295) $(633)
Significant Items:            
Goodwill Impairment N/A N/A $284 $615 $255 $597
Goodwill Impairment in Joint Ventures N/A N/A -- $58 -- $51
Impairment of Other Identified Intangibles N/A N/A $7 -- $4 --
UK Inventory Adjustments $17 $25 $17 $25 $13 $18
Other Inventory Adjustments $4 $8 $4 $8 $3 $5
Final Settlement of a business arrangement -- $6 -- $6 -- $4
Credit and related losses $2 $4 $2 $4 $1 $3
Fixed Asset Impairment $15 $(3) $15 $(3) $9 $(3)
Natural Disaster Related Costs $5 -- $5 -- $3 --
Redundancy Provisions $2 -- $2 -- $1 --
Commercial Settlement $(2) -- $(2) -- $(1) --
Provisions Related to Settlement of Disputes $3 -- $3 -- $3 --
Loss on Sale of Businesses $12 -- $12 -- $11 --
Impact of CTG derivatives $3 -- $3 -- $3 --
Underlying Result $94 $140 $31 $76 $10 $42
3  N/A indicates that EBITDA is calculated to exclude impairment of goodwill and other identified intangible assets in the presentation of both the statutory and underlying results.
EBITDA 4 :    
(in A$ millions) HY13 HY12
NPAT $(295) $(633)
Goodwill and intangible impairment charges $291 $673
Depreciation and amortisation $62 $64
Interest expense, net $9 $10
Income tax benefit $(34) $(14)
Statutory EBITDA $33 $100
Net Debt 5 :    
(in A$ millions) HY13 HY12
Total borrowings $364 $445
Minus cash balances $(71) $(121)
Net debt  $293 $324
Total Capital $2,241 $2,631
Net debt as a percentage of total capital 13% 12%
4 EBITDA is a measure of cash flow generating capacity that is commonly utilised by the investment community.
5  Net debt equals total borrowings minus cash balances at 31 December and reflects total borrowings as if borrowings were reduced by cash balances as a pro forma measurement. 

Cautionary Statements Regarding Forward-Looking Information

This release may contain forward-looking statements, including statements about Sims Metal Management's financial condition, results of operations, earnings outlook and prospects. Forward-looking statements are typically identified by words such as "plan," "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project" and other similar words and expressions.

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