By Rhiannon Hoyle

Metals recycling company Sims said it faces mixed impacts from tariffs on steel and scrap markets, as it reported a drop in first-half net profit but gains in underlying earnings.

Australia-based Sims said tariffs are likely to benefit its North America Metal business and SA Recycling joint venture, which run big metal recycling operations in the U.S. Still, tariffs could create potential challenges for its Australia and New Zealand Metal operations, Sims said.

The company has been reshaping its portfolio to narrow its focus to places it sees the most potential, including the U.S. Last year, it sold its U.K. Metal business for roughly 195 million British pounds (US$246 million).

Sims on Tuesday reported a net profit of 30.8 million Australian dollars (US$19.6 million) for the six months through December. That was down from A$98.0 million in the year-earlier period, which included gain on asset sales of A$178.9 million.

Underlying profit, which strips out some one-time charges, rose to A$35.1 million, from A$7.0 million the year prior, Sims said.

"We delivered a strong performance against a challenging market, which many are citing as one of the most difficult in recent times," Chief Executive Stephen Mikkelsen said.

Directors declared an interim dividend of 10 Australian cents a share. Sims didn't pay an interim dividend a year ago.

Sims is focused on improving margins amid challenging conditions in world scrap-metal markets. Margins have been under pressure from tight scrap availability, subdued global steel demand and inflation pressures.

North America Metal, or NAM, which was losing money as recently as early last year, has staged a turnaround, helped by buying more unprocessed material and better utilizing its shredders.

"Strategic initiatives in NAM drove a significant uplift in the Sims Metal trading margins, despite lower ferrous prices and broader market headwinds, demonstrating that our strategy is working," Mikkelsen said.

Sims said it is well positioned for U.S. policy changes and that its U.S. sites, including the SA Recycling operations it jointly owns with Adams Steel, are ready to supply U.S. electric-arc furnaces with scrap to make steel. President Trump said he would next month impose 25% tariffs on steel and aluminum imports to the U.S., part of a structural change to the country's trade system that he said would make American products more competitive.

"We continued to challenge ourselves to stay ahead of structural market shifts and are extremely well-positioned to capitalize on increasing regionalization and the growing need for supply chain reliability, drawing on our strong domestic network capability," Mikkelsen said.

In Australia and New Zealand, Sims said it has faced ongoing headwinds from increased Chinese exports, contributing to a nearly 16% fall in first-half volumes. Global steel overcapacity and China's elevated exports are expected to continue, it said.

Still, Sims said Australia and New Zealand Metal increased its first-half trading margin by 1.6% year over year, helped by higher prices for nonferrous metals, like copper, and for zorba, a mix of shredded metals that mostly contains aluminum.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

February 24, 2025 18:14 ET (23:14 GMT)

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