Sims Shares Drop Despite Strong Earnings Growth: What Happened?

Sims Ltd shares (ASX: SGM) closed 11.04% lower at A$22.97 today, despite delivering a 168% jump in underlying earnings. With Sims’ share price having run up substantially (+50%) over the past year, there may well have been some profit taking following the print.

Today’s pullback came despite what would typically be considered a stellar result for the firm, although such had been the growing enthusiasm for the company’s Sims Lifecycle Services division and its exposure to AI infrastructure decommissioning, that the all around print wasn’t enough for markets on the day.

Why Are Sims Shares Down?

Sims delivered a transformation in profitability for the full year 2026, with group sales revenue climbing 6.9% to A$8,007.5 million. More impressively, underlying EBITDA jumped 69.3% to A$727.8 million, while underlying EBIT soared 167.6% to A$468.0 million, well above the A$420–435 million guidance range provided in June.

Underlying net profit after tax rose to A$289.1 million, a near-tripling from the A$83.1 million recorded in FY25. Return on invested capital improved by 7.2 percentage points to 11.7%, up from just 4.9% in the prior year, signalling a fundamental shift in capital efficiency. The company declared a final fully franked dividend of 20.0 cents per share, bringing the full-year total to 34.0 cents, up from 23.0 cents in FY25.

The standout performer was the Sims Lifecycle Services division, which posted sales revenue of A$757 million, up 77.4% year-on-year, with underlying EBIT climbing 429.8% to A$172.7 million. The division repurposed 16.8 million units, almost double the prior year’s volume, driven by strong demand for recovered memory components from hyperscale data centre operators investing heavily in AI infrastructure.

The core metals recycling business also contributed to the strong result, benefiting from supportive non-ferrous metal pricing and improved ferrous market conditions in North America. Management had flagged throughout the year that aluminium and other non-ferrous streams were experiencing favourable pricing dynamics, while the North American metals segment saw materially improved second-half performance.

Amidst all the positive actuals for FY26, the shift to FY27 guidance is where things began to unravel slightly for SGM bulls.

Forward Guidance

Looking ahead to FY27, management struck a cautiously optimistic tone. The company expects supportive market conditions for non-ferrous metals and AI-related asset recovery to continue, with SLS forecast to contribute first-half underlying EBIT between A$75 million and A$90 million.

Yet management was careful to emphasise that the timing of data centre decommissioning remains variable, in a reminder that SLS earnings can be lumpy and project-dependent rather than following a smooth growth trajectory. Annualising the midpoint of the H1 guidance suggests SLS may deliver full-year EBIT broadly in line with FY26 rather than showing meaningful acceleration, a key factor in the drawdown.

The guidance implies markets had moved beyond management’s own expectations, pricing in a steeper growth curve for SLS and sustained strength in metals markets that may prove difficult to deliver.