Sims Shares Up 49% on Year Setting New Highs: Breakout Looming?

Sims shares (ASX: SGM) have moved to fresh 12-month highs, capping a remarkable recovery that has seen the stock climb 49% over the past year as markets price in a fundamental turnaround in profitability and operational momentum.

The Sims share price added 3.75% to close at A$22.97, having touched an intraday peak of A$23.26, the highest level since early 2024. The stock has now climbed 26% year-to-date, significantly outperforming the broader S&P/ASX 200 index and cementing its position among the best-performing industrial cyclicals on the Australian exchange.

The recent price action reflects growing conviction that the company has turned a corner after years of margin pressure, portfolio complexity, and cyclical headwinds.

The foundation for the share-price surge lies in a dramatic improvement in underlying financial performance. Sims’ fiscal 2025 results, released in August 2025, showed underlying EBIT surging to approximately A$175 million, nearly triple the A$59 million recorded in the prior year. Metal trading margins expanded by roughly 10% year-on-year, driven primarily by a significant recovery in North American operations.

The North American turnaround has been particularly striking. The region benefited from recent bolt-on acquisitions including Baltimore Scrap and Northeast Metal Traders, which have proven earnings-accretive and expanded Sims’ presence in key East Coast markets. Proprietary intake volumes declined only modestly, down about 6%, while sales volumes fell just 3.8%, demonstrating resilience in a still-patchy macro environment.

Group revenue received a boost from a 4% increase in average metal sales prices, supported by a richer non-ferrous mix. The company’s strategic pivot toward higher-value non-ferrous metals and away from lower-margin ferrous scrap is beginning to show tangible results in the income statement.

Importantly, Sims reported net profit from continuing operations of approximately A$2.4 million for the fiscal year ended 30 June 2025, compared to A$1.8 million the prior year. While the absolute profit figure remains thin relative to the company’s A$7.7 billion revenue base, it marks a clear inflection from the substantial losses that plagued earlier periods.

There is nuance beneath the headline figures. Statutory EBIT actually fell 47% to A$68.6 million from A$130.1 million, but the prior year was flattered by the one-off profit from the LMS Energy divestment. Fiscal 2025 included restructuring charges, site closures, and impairment costs as management cleaned up legacy issues. Markets have looked through this statutory noise, focusing instead on the underlying operational momentum.

Portfolio Simplification

A key pillar of the turnaround narrative has been aggressive portfolio rationalisation. In late 2024, Sims agreed to sell its entire UK metals operation to Unimetal Group for 195 million (approximately US$249 million). The UK business had been a persistent drag on group profitability, and its exit is widely viewed as de-risking the portfolio while freeing capital for higher-return opportunities.

The UK disposal follows a broader strategic review aimed at concentrating resources in North America, Australia, and the company’s fast-growing Sims Lifecycle Services (SLS) division. SLS, which handles data-centre decommissioning, IT asset disposition, and electronics recycling, delivered 22% revenue growth year-on-year in fiscal 2025, a growth rate that stands in sharp contrast to the low-single-digit moves in the bulk metals business.

Management has positioned SLS as a structural growth engine, leveraging secular tailwinds from corporate ESG mandates, e-waste regulations, and the expansion of hyperscale data centres. While still a relatively small contributor to group EBITDA, the division’s higher margins and non-cyclical revenue profile have become central to the bull case, with some analysts arguing it deserves a valuation premium relative to traditional scrap operations.

Commodity Backdrop

The scrap metal market environment has been volatile but generally supportive over the past 12 to 18 months. Non-ferrous scrap pricing has held up well, underpinned by decarbonisation policies, higher recycled-content mandates, and a gradual recovery in industrial activity across key end markets. Ferrous scrap, by contrast, has faced more divergent regional conditions, with trade frictions and shifting flow patterns, particularly involving China and Asia, creating pockets of margin pressure.

In Australia and New Zealand, Sims has faced headwinds from increased Chinese steel exports into Asia, which have compressed local trading margins even as North American performance improved. This regional divergence underscores the company’s ongoing exposure to global trade dynamics and commodity cycles, a reality that tempers some of the enthusiasm around the earnings recovery.

What Next For Sims

In February 2026, Sims declared an interim dividend of A$0.14 per share, fully franked, maintaining its payout despite the still-modest statutory profit base. The decision signals management confidence in cash generation and the sustainability of the recovery, while also appealing to yield-focused investors on the ASX.

However, some analysts have questioned whether the dividend is overly generous given ongoing capital requirements. Sims continues to invest in logistics infrastructure, including the Pinkenba facility in Australia, and is funding growth initiatives in SLS. Balancing shareholder returns with reinvestment needs will remain a delicate act, particularly if commodity markets soften or acquisition opportunities arise.

From a fundamental standpoint, the valuation debate is heating up. Bulls argue that the market is still under-appreciating the structural improvement in the earnings base, the optionality from SLS, and the potential for further margin expansion as operational improvements compound. They point to the company’s transformation from a distressed cyclical into an early-cycle recovery play with embedded growth assets.

Bears counter that the earnings base remains precariously thin on a statutory basis, with net margins still a fraction of revenue. They emphasise that Sims is fundamentally a leveraged play on global industrial production and metal prices, variables that remain vulnerable to macro shocks, China slowdown risks, or renewed trade tensions. After a near-50% rally, expectations for continued outperformance are high, leaving the stock vulnerable to disappointment if the next trading update or commodity price moves underwhelm.

The company has successfully navigated a multi-year restructuring, exited loss-making geographies, and captured meaningful margin expansion in its core North American franchise. Yet the stock’s valuation now embeds elevated expectations, and the business remains deeply cyclical with thin absolute profitability. There is plenty baked into the share price at these levels, although a glance at the 5 year chart above and this looks a lot like a breakout waiting to push. It would be wise to wait for confirmation and a retest to ensure the breakout has legs, and even then, there could be increased volatility during periods of price discovery.

Bull Case:

• Underlying EBIT tripled year-on-year, validating turnaround execution and margin recovery
• SLS division growing 22% annually, offering structural growth beyond commodity cycles
• UK exit and portfolio simplification reduce drag, improve capital allocation flexibility
• Non-ferrous exposure and ESG tailwinds provide pricing support in decarbonisation era
• Momentum and technical breakout attracting institutional and systematic buying flows

• Statutory net profit remains razor-thin at A$2.4m on A$7.7bn revenue base
• Highly cyclical earnings vulnerable to metal price swings and China trade dynamics
• ANZ margins under pressure from Asian steel exports, offsetting North American strength
• Valuation now embeds high expectations after 49% rally, limiting upside buffer
• Dividend payout may constrain reinvestment capacity amid ongoing capex and growth needs