The Sims Metal Management Ltd (ASX: SGM) share price dived 13% to $13.32 this morning following an update from the company. Here's what you need to know:
- CEO Galdino Claro is resigning to be replaced by Alistair Field, who has been with Sims for 2 years and previously was manager of the ANZ metals division
- Chief Financial Officer (CFO) Fred Knechtel is resigning to be replaced by Amit Patel as acting CFO. Amit has been with Sims since 1997 and was previously Group Chief Accounting Officer
- Based on preliminary unaudited results, underlying earnings before interest and tax (EBIT) is expected to be between $180 million and $185 million
- Net cash is expected to be approximately $370 million
- Full-year results to be released on 25 August
The resignation of both CEO and CFO seemingly shocked the market, given that Sims EBIT forecast would represent a significant increase in earnings compared to prior years:
As we can see, in 2016 Sims earned just $58 million in underlying EBIT, and $142 million in 2015. Whichever way you cut it, $180 million reflects significant growth, although much of that was already reflected in the share price. It's also possible that investors expected results to improve by more than they did.
With earnings improving, Sims could be one to watch, although to my mind there are many other companies out there that could prove a better investment for shareholders.
