Sims Metal Management Ltd (SGM)
F3Q10 Earnings Call
May 6, 2010 8:45 am ET
Daniel W. Dienst - Group Chief Executive Officer, Executive Director
Robert C. Larry - Group Chief Financial Officer
Benjamin Wilson - JP Morgan
Michael Slifirski - Credit Suisse
Emily Behnke - Deutsche Bank
Andrew Gibson - Goldman Sachs
Eric Prouty - Canaccord Adams
Brent Thielman - DA Davidson
[Ethline Peach – CBA]
[Pam Stread - Stread Investments[
Scott Hudson - CLSA
Michael Evans -Quest Asset Partners
Todd Scott – RBS
Michelle Applebaum - SMI
Daniel W. Dienst
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Good morning, good evening and welcome everyone to today’s call. We are dialing in from the UK and as we near the midnight hour here, we appreciate you joining us for this review of our results for the 9 month period ended 31 March 2010.
Joining me as usual is our Chief Financial Officer, Rob Larry. Our call today will follow the same accelerated format that we used for prior interim market update calls. First, I will provide some initial thoughts before returning the call over to Rob, who will provide some details on our financial results, including some highlights of the third quarter.
Then I will make some closing remarks on market condition before we take a few questions and time permits. As always, we would like to start by welcoming all the men and women of Sims Metal Management and partners at our joint ventures across the world, many of whom are listening to the call or webcast today. We would like to thank our employees for another hard fought 9 months in what can only be described as trying times. Your hard work and perseverance during these times is an inspiration. We thank you.
While we spent a great deal of time speaking to this internally, we will never miss an opportunity to remind our Sims Metal Management teammates that our first priority is safety. We cannot be satisfied with the designation of safest in our industry. We must strive to be one of the biggest companies in all manufacturing and all industry. We must stand shoulder-to-shoulder with the safest companies in the world. So far this year the trend is our friend and let’s keep it that way.
Before turning the call over to Rob, let me make a few observations about the quarter just finished and what we are seeing out there now. Against the backdrop of the severe winter in the northern hemisphere, volcanic ash cloud, human made natural disasters in the Gulf of Mexico that may or may not disrupt shipping routes, 52-foot cresting rivers in Tennessee, human made natural disasters in the form of pigs, botched terrorist attacks, fears of a Chinese cooling, which we have all mulled for the better part of the last ten years, continued extreme volatility in the underlying commodities that we make and sell, and anemic to modest economic recoveries in important markets in which we operate. We are nonetheless starting to feel more optimistic about our business.
While a statement of the obvious that all bets are off because a cataclysmic external event happened, let me quickly point to some of the reasons for this guarded optimism. While scrap intakes increased only sequentially in Q3 by 3% versus the second quarter as the coldest winter on record in the UK for two decades and one of the snowiest in the US abated, we began to see improved flows toward a late part of the quarter just completed.
As we have noted in prior calls, volume challenges were acute through and post the global financial crisis in those two important markets for us. Whether the improved flows that we are currently seeing are a function of seasonality and/or sustainable trends in consumer and industrial behavior and in what relative percentage, it is too early to tell.
Related to that first observation, we are somewhat encouraged by the data emerging from developed parts of the world in which most of our facilities sit; be it you GDP growth, IP growth, housing starts, photo production and sales, all seem to be pointing towards recovering economic activity. Of course all the data is compared to the dismal gray recession prior period.
The reported data is backed up however, by anecdotal data, which come from my peers and consumers; melters, steel mills, traders, public and private, and from our boxes sitting at the manufacturing plants that we service. Our consumers have picked up scrap around the world. They have been successful in pushing up finished and semi-finished steel prices as a result by some better demand and discipline in passing through input costs.
Experience tells us that its steel and metal making recoveries are far from linear and are often lumpy and bumpy and this one should certainly be no different. Our technology, the investments in non-ferrous recovery continue a pace and there is nothing further to report today since the last update call in late February.
Initial installations are being fine tuned in North America, metal is being generated and engineering for additional locations is underway. Since growth has been and will continue to be the hallmark of our company, and in all likelihood we will be asked the question in Q & A regarding the same, the only update we will provide in that regard is that we are seeing some more deal flow, to use investor parlance.
As vendor expectation begins to move towards more realistic valuations in both the traditional business and the recycling solutions business. Finally, growing optimism is also rooted in the dedication of talented people, our most important assets. With two months left in fiscal 10, and looking forward to fiscal ’11, the men and women of Sims Metal Management remain focused on what is within our control and will continue to position our company for long-term success and the creation of shareholder value.