The deepening trade stoush between America and China has severely dented profits at listed recycling outfit Sims Metal Management sparking a 17 per cent collapse in its share price.
The group said on Monday that it expects its underlying earnings before interest and tax for the first half of the financial year to come in at $110 million, a 12 per cent fall on the same period in 2018.
Sims, which has large operations in the US and Europe, shares recovered slightly by the close of trade to end down 16 per cent, or $1.79, to $9.19.
Sims is one of the first large Australian companies to issue a set of results that has been directly impacted by the trade war.
Other major companies, including miners BHP and Rio Tinto and manufacturer BlueScope have all warned of potential impacts from the ongoing economic downturn in China caused by its trade dispute with the US.
Sims chief executive Alistair Field said the first half had been challenging for all recycling companies globally and conditions would continue to be tough for the near future.
I am confident that our strategy of producing high quality products that better meet the needs of our customers is key to our long term success.Sims chief executive Alistair Field
“We are meeting these challenges and will maintain our focus on capitalising on our strengths and on improving underperforming businesses,” Mr Field said.
“I am confident that our strategy of producing high quality products that better meet the needs of our customers is key to our long term success.”
Sims’ North American metals business was hit during the half, with earnings in the division falling 4.6 per cent to $33.1 million due to uncertainty surrounding tariffs, trade wars and Turkey’s economic challenges.Loading
Turkey is increasingly important to US ferrous scrap metal exporters for its crude steel production industry and makes up 24 per cent of all US scrap exports. China is also a large buyer of US scrap metal, accounting for 7 per cent of the US export market.
Turkey’s economic woes and the country’s demand for higher quality scrap metal also impacted Sims’ European business.
Sims’ Australian and New Zealand business was also down during the half, falling 1.4 per cent to $43.6 million. Sims will report its half-year results on February 20.