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Sims Metal share price lifts after $135 million sale

Kenneth Hall
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The Sims Metal Management Ltd (ASX: SGM) share price is up 2.59% at the time of writing after announcing an €83.5 million business sale.

Why is the Sims Metal share price moving today?

The Sims Metal share price is on the move after the sale of its European compliance scheme-oriented recycling operations.

A subsidiary of REMONDIS Group, TSR Recycling, will purchase the operations for €83.5 million (A$135.6 million).

The sale will cover operations across Germany, Austria, Netherlands, Belgium and Sweden. However, it will not comprise any assets that are part of the company’s global e-recycling IT asset disposal business.

The sale, which has seen the Sims Metal share price move more than 2% this morning, is part of a capital management strategy. Proceeds from the sale will be used to strengthen Sims’ “already strong” balance sheet. The sale is expected to have an impact on the group’s FY19 earnings.

Earnings before interest and tax (EBIT) estimates were provided as if the sale was completed by 30 June 2018.

Global E-Recycling underlying EBIT would have fallen $26.0 million lower without the sale of the European operations. The Net European Compliance Scheme Operations Contributions impact comprised $22.3 million. The remaining $3.7 million in EBIT was from Net Global E-Recycling (excluding European Operations).

How has Sims Metal performed on the ASX this year?

The Sims Metal share price closed at $10.82 per share on Friday, putting the Aussie recycler’s shares  up 10.40% so far this year, which is a significant underperformance against the S&P/ASX 200 Index (INDEXASX: XJO).

The benchmark Aussie index has gained 21.28% in 2019 and closed on Friday at 6,740.60 points.

With today’s share price gains, Sims Metal has a market cap of $2.25 billion and a net dividend yield of 3.78%. The company’s shares are currently trading at a price-to-earnings ratio of 14.52x prior after a difficult past month or so.

The post Sims Metal share price lifts after $135 million sale appeared first on Motley Fool Australia.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019