Why the Sims (ASX:SGM) share price edged higher today

The Sims Ltd (ASX: SGM) share price edged higher today following a positive update regarding an acquisition. Here’s the details.

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Sims Ltd (ASX: SGM) shares edged higher today following news of the company’s acquisition of certain assets from Alumisource Corporation. By the market’s close, the Sims share price was up 1.13% to $12.55.

Based in Pennsylvania, Alumisource provides specialised raw materials in the form of custom shredded and blended aluminium scrap to North American aluminium and steel industries.

What did Sims announce?

The Sims share price was on the move today after the company advised that its recently acquired Alumisource assets were purchased for a guaranteed amount of US$22.5 million. It noted that further payments would follow over the next three to five years using a pre-determined earnout formula.

As a result of the takeover, Sims projects a net increase in its North American metal division’s non-ferrous retail sales volumes. The company revealed that for FY21, it expects an additional 33,000 tonnes to be sold. Sims recorded total non-ferrous retail sales volumes of 140,000 tonnes in FY20.

In addition, Sims stated that Alumisource’s founder and CEO, Gabe Hudock, will continue his role for a three to five-year minimum period. This will ensure a smooth transition and enable the business to focus on safety and sustainability.

Management commentary

Sims CEO and managing director Alistair Field spoke about the acquisition saying:

I’m pleased to achieve this key milestone toward delivering our strategic targets and growing non-ferrous retail volumes in North America. Major aluminium customers in the United States continue to seek product that is suitable for direct charging. Alumisource meets these needs by providing ‘in- spec’ furnace ready product in an automated and safe manner.

Alumisource is an ideal fit with our purpose, [to] create a world without waste to preserve our planet, and our sustainability goals. One tonne of aluminium produced from recycled sources mitigates 7.9 tonnes of carbon emissions compared to aluminium produced from virgin material

…We are committed to a disciplined capital management approach and ensuring that new capital investments fit with our strategy and purpose, as well as meeting minimum hurdle requirements

About the Sims share price

The Sims share price has travelled almost 17% higher over the past 12 months. The company’s shares hit a multi-year low of $5.52 in March 2020, before moving on an upwards trajectory.

At the current Sims share price, the company commands a market capitalisation of around $2.5 billion.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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