Sims Metal Management Limited ADRSMS

Morningstar Rating

Stock Research and Analysis

by Min Ye

As a leading metal recycler, Sims Metal Management sees its earnings fluctuate with global metal demand, particularly steel demand, as roughly two thirds of its revenue comes from ferrous scrap, a key raw material for steel production. We think Sims Read more

Bulls Say

The long-term demand for steel and ferrous scrap should resume as nations emerge from recession and the industrialization in developing countries continues.

Sims has high growth potential as a leading consolidator in the fragmented metal recycling industry.

Potentially stricter carbon emission standards will increase demand for ferrous scrap, as electric arc furnaces emit substantially less carbon dioxide than blast furnaces when producing steel. Read more

Bears Say

The current global recession is deep and could hurt steel demand for an extended period.

A growth-through-acquisition strategy creates additional uncertainty, as integration may not be successful and the company could overpay for targets.

The metal recycling industry's relative fragmentation compared with the steel industry, its main customer, weakens recyclers' bargaining position. When the steel market turned south in late 2008, ferrous scrap prices collapsed faster than steel prices did. Read more

Strategy

Sims' strategy is to expand its metal recycling business internationally, particularly in North America and the United Kingdom, where scrap metal resources are abundant. The company grows by acquiring Read more

Management

Daniel W. Dienst, formerly CEO of Metal Management, assumed the group CEO role after the Sims-Metal Management merger. Previously, Dienst was a managing director at an investment bank and for three years was chairman of the board of Metals USA, a leading Read more

Profile

Sims Metal Management was created from the 2008 merger of two leading metal recycling companies: Sims of Australia and Metal Management of the United States. It is one of Read more

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