'Excellent performance': Sims (ASX:SGM) share price rockets 16% on stellar earnings

It was a half of strengths across the board for Sims.

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Key points

  • Sims released its half-year results today, with a robust set of outcomes
  • Sales revenue, operating cash flows, and after-tax profits grew substantially compared to the same time last year 
  • In the last 12 months, the Sims share price has gained around 36%. 

The Sims Ltd (ASX: SGM) share price has shot into the green today and is now 16.44% higher at $17.45.

Investors are bidding up Sims shares following the release of the metal and electronics recycling company's FY22 half-year results.

Sims share price jumps alongside revenue, EBIT

The company outlined several investment highlights for the period, including:

  • Sales revenue of $4,265.0 million, up 73.9% from prior corresponding period
  • Statutory earnings before interest and tax (EBIT) of $341.4 million, up 334.9% million from the same time last year
  • Underlying EBIT of $361.7 million, up 541.3% million from this time in FY21
  • Cash flow distribution of $135 million, up 458% from prior corresponding period
  • Operating cash flow of $290.8 million, up 94.8% from the prior corresponding period
  • Return on "Productive Assets" of 37.5%, up from 6.2% in the year prior

What else happened this half for Sims?

A key takeout is the company announcing an underlying EBIT of $361.7 million. This is more than 540% higher compared to the same time last year and seems to have pleased investors, judging by the soaring Sims share price.

Much of the growth waterfall that trickled down Sims' profit and loss this half stemmed from an 80% growth in sales revenue to $4.26 billion.

Sims notes the high-octane growth was due to "higher sales volumes and higher material prices, combined with disciplined margin management".

In fact, the group's trading margin increased by 45% through this "disciplined management", specifically, of "the buy/sell spread as selling prices increased".

As a result, the company recognised a statutory net profit after tax (NPAT) of more than $253 million. That's a substantial gain of 378% on the previous year, whereas underlying NPAT gained 622%.

Impressively, this half also marked the lowest number of injuries recorded year-on-year since 2019.

Management commentary

Speaking on the announcement fuelling the Sims share price today, Group CEO and managing director Alistair Field said:

We delivered an excellent performance in HY22 with earnings above guidance, driven by growth in trading margin, against a backdrop of volatile freight markets and inflationary pressures. We significantly improved our operating cash flow from 2H FY21, increased cash returns to shareholders, and maintained the strength of our balance sheet. Intake volumes grew strongly and were close to pre-COVID levels, highlighting the continued strength of our metal businesses.

What's next for Sims?

The release notes that intake volumes are solid into 2H FY22 both in the metal business and its joint venture, SA Recycling.

The momentum is strong as non-ferrous commodity prices race higher than HY22 averages and ferrous prices remain elevated.

Sims also explains that SA Recycling's acquisition of PSC Metals will commence full contribution in 2H FY22.

Sims share price snapshot

In the last 12 months, the Sims share price has gained around 36% and is up 8% this year to date. In the past month, it has climbed 11% and is soaring more than 13% over the past five days of trading.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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