A trio of updates from third-quarter trading companies ahead of their June 30 balance dates produced one good, one bad, and one okay.
The good news came from AGL Energy
(ASX:AGL) and was significant enough to push the shares up 7% yesterday. The bad news came from scrap metal group Sims
(ASX:SGM), which pushed the shares down. Meanwhile, the okay update came from waste group Cleanaway Waste Management
(ASX:CWY).
AGL’s positive update showcased the benefits of the company not being plagued by plant problems, as it had been in the last couple of years. The company informed the ASX in a brief statement that it now expects its underlying EBITDA to range between $2.120 billion and $2.200 billion for the year ending June 30.
This is compared to its previous guidance of $2.025 billion to $2.175 billion and represents a significant improvement (between 56% and more than 60%) over its 2023 figure of $1.361 billion. AGL also revised its June 30 underlying net earnings guidance to between $760 million and $810 million, compared to its previous guidance of $680 million to $780 million. This is substantially higher than 2023's figure of $281 million, marking a jump of 170-190%.
AGL explained that more than halfway through the second half, the company had seen a "continued strong operational and financial performance of the business, due to improved plant availability, flexibility, and generation, higher consumer demand over the summer period in New South Wales and Queensland, and continued strong Customer Markets performance.”
Sims, on the other hand, witnessed its shares sliding nearly 10% at one stage on Tuesday after it adjusted its 2023-24 guidance, now expecting second-half underlying EBIT to be marginally lower than the first half.
This is in contrast to its previous guidance for underlying EBIT "to improve in H2 FY24 compared to HY1 FY24.” Sims CEO Stephen Mikkelsen attributed the downgrade to ongoing market challenges across the industry. He stated, "SA Recycling and ANZ Metal have faced increased challenges compared to the first half. Pleasingly, despite North America Metal facing similar market challenges, we anticipate an improved second-half performance as early positive outcomes of the targeted strategies for margin improvement are emerging. We remain confident in the medium to long-term fundamentals, driven by global decarbonization efforts.”
Despite these market pressures, NAM’s operations are forecasting an improved Underlying EBIT performance in 2H24 compared to HY24, driven by positive developments in targeted operational metrics - including increased unprepared scrap and stronger domestic sales volumes.
However, SA Recycling experienced a deterioration in ferrous intake volumes and margins through March and April and is now forecasting a lower 2H24 compared to HY24. In ANZ, lower domestic demand for scrap metal, coupled with challenging export scrap metal markets influenced by Chinese steel exports, has resulted in reduced demand and prices for scrap. Consequently, we are now forecasting a lower 2H24 for ANZ compared to the HY24. At UK Metal (“UK”), a number of operational changes have resulted in a reduced cost base, improved margins, and the closure of non-strategic loss-making yards. UK is forecasting an improved Underlying EBIT performance in 2H24 compared to HY24,” Sims said in Tuesday’s release.
Lastly, there was an unchanged update from Cleanaway on Tuesday. The company maintained its June 30 EBIT guidance at “approximately $350 million (compared to the $302 million for 2022-23) and said it remains on track for growth in 2025 and 2026. "Optimized landfill management is resulting in a lower D&A expense of $360 to $370m, down from $370 to $390m and the interest expense expected to be $117m,” the company said in a presentation to a Sydney investment conference.
