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Sims Metal Management Limited (SMS)

2013 Earnings Call

August 22, 2013 7:00 pm ET

Executives

Geoffrey Norman Brunsdon - Chairman, Chairman of Finance & Investment Committee, Member of Risk, Audit & Compliance Committee and Member of Remuneration Committee

Robert C. Larry - Group Chief Financial Officer

Daniel W. Dienst - Former Group Chief Executive Officer, Chair of Combined North American Metals Recycling Business, Executive Director, Member of Nomination/Governance Committee, Member of Safety, Health, Environment & Community Committee and Member of Finance & Investment Committee

Analysts

Ramoun Lazar - UBS Investment Bank, Research Division

Ben Chan - BofA Merrill Lynch, Research Division

Andrew Gibson - Goldman Sachs Group Inc., Research Division

Jason Harley Steed - JP Morgan Chase & Co, Research Division

Scott Hudson - CLSA Limited, Research Division

Brent Thielman - D.A. Davidson & Co., Research Division

Liam Farlow - Macquarie Research

Sohail Tharani - Goldman Sachs Group Inc., Research Division

Michael Slifirski - Crédit Suisse AG, Research Division

Sam Haddad - Bell Potter Securities Limited, Research Division

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the fiscal year 2013 Full Year Results Conference Call for Sims Metal Management Limited. I must advise you that this conference is being recorded today, Thursday, the 22nd of August 2013 in United States and Europe; and Friday, 23rd of August, 2013, in Australia and Asia. Today's presentation may contain forward-looking statements, including statements about the financial condition, results of operations, earnings outlook and prospects of Sims Metal Management Limited. Because these forward-looking statements are subject to assumptions and uncertainties, actual results may differ materially from those experienced or implied by these forward-looking statements. Those risk factors can be found on the company's website, www.simsmm.com. Investors are encouraged to review the filings made by Sims Metal Management Limited with the Securities and Exchange Commission, including its Form 20-F, which we filed with the SEC on March 18, 2013, which describes some of the factors that may cause actual results to differ from these forward-looking statements. As a reminder, Sims Metal Management is domiciled in Australia and all references to currency are in Australian dollars unless otherwise noted.

I would now like to hand the conference over to your first speaker today, Mr. Geoff Brunsdon, Chairman of Sims Metal Management Limited. Please go ahead, sir.

Geoffrey Norman Brunsdon

Ladies and gentlemen, welcome to today's presentation of Sims Metal Management's results for the full year ended 30 June, 2013. I'm speaking to you today from Sydney, and I'm joined by our Chief Financial Officer, Mr. Rob Larry, who will be presenting our financials and Mr. Todd Scott, our Head of Investor Relations. As you know, I'm Chairman and will be leading today's call on behalf of our global leadership team that is directing our company while the board conducts our CEO search. With regard to today's format, we'll step through the slide presentation posted this morning to our websites and to the ASX website. I'll be starting off by giving a general overview of our results and operating performance. Rob will present a more detailed review of our financial performance, and I will then conclude with an update on the strategy and some final thoughts on our current outlook.

Before we begin, I'd like to address the many employees who are now will be listening to today's call. I'd like to personally thank you for the hard work you put into the business over the past year and what has been very challenging business conditions for the industry. Your safety is of critical importance to us. In that regard, we are achieving a promising reduction of 9% in total loss time frequency rates through FY '13. The board and I remain committed to putting safety as our most important priority and believe that strong safety performance is a good indicator of the company that's in control.

I'd also like to say that this is my first and I expect the last I'm presenting the results for Sims Metal Management. As most of you will be aware, the board has been evaluating candidates for the group CEO role. This process has progressed and has narrowed to a small number of external candidates. We expect to announce an appointment by the end of the first quarter FY '14. Before we begin, we have today announced the appointment of an additional Non-Executive Director, Mr. Robert Bass. Mr. Bass is a recently retired partner of Deloitte based in New York.

Let's now begin the presentation and I'm looking at Slide #3. The company today announced an underlying EBITDA of $191 million before significant items. The underlying net profit after tax of $17 million and underlying earnings per share of $0.083. On a statutory basis, net profit after tax was at $466 million loss due to significant write-downs of goodwill and intangible assets, as well as write-downs in the United Kingdom. Strong cash flows and the release of working capital reduced net debt by 47% to $154 million as of 30th of June. Balance sheet gearing dropped to 7% from 11% a year prior. Maintaining low gearing remains a focus for the company during this time of constrained activity so as to stay in a position to fund increase working capital requirements as and when underlying business conditions improve. The company's dividend policy is to distribute 45% to 55% of net profit after tax subject to the board's discretion. In the absence of a statutory net profit after tax and after looking through goodwill impairment, the board has determined not to pay a final dividend for FY '13.

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