Shares in scrap metal giant Sims Ltd jumped sharply yesterday after it upgraded its June 30 earnings forecasts.
The company said it will also return $7.5 million in JobKeeper payments in the wake of the upgrade.
The shares ended up more than 8% at $16.56. They hit a two-year high of $16.90 in trading.
In the update Sims said proprietary scrap intake volumes for the third quarter increased to around 95% of FY19 average monthly volumes, compared to 85% in the December half.
It also reported a general improvement in gross margin per tonne due to higher scrap prices, and good margin management.
Annualised fixed-cost savings are now estimated to be more than $70 million compared to the 2019 financial year.
“While the short-term outlook still has risks that could result in earnings volatility, Sims is well-positioned in the medium-term to benefit from global infrastructure spending, the need for countries and companies to reduce their carbon footprint from steel production to meet CO2 commitments, and the potential for China to import meaningful volumes of recycled ferrous products,” CEO Alistair Field said.
Sims said risks to the forecasted FY21 result included COVID-19 disruptions to its facilities, or those belonging to its customers or suppliers.
The company received $6.5 million from JobKeeper in the 2020 June 30 year and $7.5 million in the current financial year which will be returned.
“Due to the rapid and significant financial improvement to date in FY21, Sims will be voluntarily returning $7.5 million to the Australian Government,” the company said in Monday’s statement.