Weak scrap metal prices and falling car sales have hurt metals recycler Sims Metal Management.Credit:Bloomberg
The company is still forecasting a full year underlying profit before interest and tax (EBIT) of between $20 million to $50 million. A result at the mid-point of the forecast,$35 million,would equal an 85 per cent decrease on last year's $230.3 million result on the same metric.
Investors dumped the company in the wake of the update,with the stock closing down 8.8 per cent at $9.20. But in earlier trading the stock was down as much as 15.5 per cent to $8.53,its lowest intra-day price since 2016.
The profit warningfollows a trading update Sims released in September,when it said there had been a"rapid deterioration"in the scrap metal market,with falling prices occurring at the same time as deep sea freight prices climbed.
Sims did not release a profit forecast with the September update,but it released figures showing that scrap metal prices had fallen from $US300 ($440) per tonne in early July to $US240 per tonne in mid-September.
The short term market fallout from the scrap price crash will be worse than originally anticipated.
Alistair Field,chief executive officer of Sims Metal Management
Sims chief executive Alistair Field said the company had unsold inventory leading into September,which was bought at prices reflecting the stronger market conditions prevalent in June-August.
"This inventory will be sold at a loss and will impact our results through to December,"he said.