Another heavy news day among ASX stocks on Wednesday, including earnings upgrades from companies of very different sizes and a controversial key hire.
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Scrap metal merchants Sims Ltd (ASX: SGM) issued a major upgrade to its 2021-22 performance and also provided an early hint for a solid start to the 2022-23 financial year.
The improvement brings to mind the way another steel company – BlueScope which is riding steel prices and demand higher – especially in the US.
That improved demand for steel has been evident in the scrap market and Sims’ share price now for more than a year.
Sims said in Wednesday’s statement that the updated guidance was “consistent with the strong FY22 outlook provided at the Macquarie Conference” in early May where it didn’t issue figures, but made it clear the solid conditions for the year to date had not changed and were expected to continue.
Sims says it now expects underlying EBIT (earnings before interest and tax) for the year ended June 30 to be in the range of $750 million to $770 million.
That compares to the actual EBIT reported for 2020-21 of $341 million and the underlying figure of $386 million. Underlying EBIT for the six months to last December was $362 million.
The improvement left the market unimpressed and the shares only edged up 0.9% to $18.30. That was better than the 0.36% rise in the ASX 200 on Wednesday.
High metal prices and improved metal volumes have provided the main drivers of improvement over the FY21 result, the company explained.
And the timing of metal deals later this month and early in July could help the new year start with a bang.
“It is worth noting that there are shipments scheduled to occur close to the year end and, in accordance with revenue recognition policies, this has the potential to impact whether EBIT is attributed to FY22 or FY23,”Sims told the market
CEO Alistair Field said in the statement to the ASX “our strategy has, to date, served us well in navigating the challenging price volatility experienced in the second half of FY22”
“Due to geopolitical and economic uncertainty and the associated volatility, we expect these challenging conditions to remain as we move into the first quarter of FY23.”
But he again repeated a warning about costs and logistics (which will be the most mentioned problems in the August reporting season).
“We are also closely managing the impacts of freight and logistics volatility, and actively seeking medium-term efficiency gains to assist in mitigating inflationary cost pressures across the Company,” Mr Field warned.
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There was a more positive reaction to the update from Sydney marketing and communications company Enero Group (ASX: EGG), which forecast not only a solid rise in revenue but a much faster increase in EBITDA for the year to June 30.
Enero shares rose 1% to end at $2.95 after touching a day’s high of $3.13.
Directors told the ASX that it expects net revenue of between $192 million and $193 million, up 20% year-on-year from 2020-21.
Operating EBITDA (excluding significant items) is forecast to rise by between 34% and 36% to $61 million and $62 million.
CEO Brent Scrimshaw said in the ASX statement that the company’s strong earnings momentum reflects the success of our operating framework and the execution of our growth vision for the Company.”
“The acceleration in FY22 H2 growth is delivered across the portfolio of businesses, with particular strength in the US market”.
Enero Group businesses include digital agency Orchard; creative agency BMF; brand, marketing and PR comms consultancy Hotwire; programmatic marketing platform OBMedia; and issues management comms advisory CPR.
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Meanwhile, Boral has appointed as CEO a man who left Cleanaway in early 2021 after allegations of bullying were raised against him.
Former Cleanaway CEO, Vik Bansal will replace Zlatko Todorcevski at Boral from early next December. The change at the top of Boral, now controlled 70% by the Kerry Stokes controlled company, Seven Group Holdings, came in a surprise announcement to the ASX on Wednesday morning well before trading started.
The Boral statement praised Mr Bansal’s time at Cleanaway and not the manner of his departure in January, 2021.
Boral chairman Ryan Stokes mentioned it in an effusive statement welcoming the new CEO, adding that a new type of CEO is needed for the concrete and asphalt group’s next phase, and he’s not worried about Mr Bansal’s tough management style.
“The Board is excited by the opportunity to work with Mr Bansal and has confidence in his ability to lead Boral.
“Vik is a seasoned leader with extensive experience, and has a track record of instilling discipline and efficiency in complex businesses to create value for all stakeholders.
“He is the right leader to guide the Company into a new era. Vik has the passion, commitment and strategic leadership skills required to drive a performance orientated culture with a focus on productivity, stakeholders and leveraging Boral’s competitive advantages.”
His departure from Cleanaway came after an investigation by The Australian Financial Review alleged Mr Bansal had bullied and harassed staff.
In September, 2020 the company told investors it “takes allegations of misconduct in the workplace very seriously” and had investigated the concerns.
“Mr Bansal has acknowledged his behaviour should have been better and expressed contrition,” Cleanaway said in an ASX statement at the time.
Cleanaway chair, Mark Chellew said in the same statement that “Mr Bansal had some issues with overly-assertive behaviour in the workplace and has acknowledged that he needed to address them”.
Now he has been named to the CEO’s position at Boral in a decision no one saw coming to replace Zlatko Todorcevski who will remain in the CEO role until transition to Mr Bansal is completed.
Boral said in its statement on Wednesday that between 2015 and 2021 Mr Bandsal “Transformed Cleanaway, implementing the Footprint 2025 strategy, embedding strong financial and operational discipline, improving safety, and prioritising customer service while developing a network of prized infrastructure.”
In Wednesday’s statement from Boral Mr Bansal said he was delighted to be appointed as Boral’s CEO and Managing Director and to support Boral reach its potential and return value for shareholders.
“Boral is an iconic and compelling business with great assets and a well-respected and motivated workforce.
“I am excited to be part of Boral’s next phase of creating value for all its stakeholders through a culture of safety, and focus on service, sustainability and simplification.”
Mr Stokes thanked Mr Todorcevski for his contribution to the business and for continuing to lead the company during the transition.
“Over the last two years, Zlatko has overseen significant change, including a roadmap for the company’s transformation, the successful sale of non-core assets and the return of proceeds to investors.
“The Boral of today is a more focused business that now has the opportunity to prioritise efficiency, new opportunities and growth. It is the right time to transition to a new leader.”
Mr Todorcevski said he was proud of his achievements at Boral and acknowledged the work of his team.
“I am proud of what we have achieved over the last two years to return Boral’s focus to its core Australian operations, all while facing unprecedented challenges, including the worst of the pandemic, construction shutdowns and floods. I am particularly proud of the leadership position Boral is taking to decarbonise our business and provide leading sustainable solutions to our customers.
“I would like to thank Ryan and the Board for the opportunity to serve as Boral CEO, and for their ongoing support and counsel.”
Investors didn’t worry about the new CEO’s time at Cleanaway or why he left, they chased Boral shares all day, sending them more than 14% higher to end at $3.28 higher at the close.
That gain was helped by Boral’s small free float of shares with the Stokes company, Seven Group, owning 70% of the shares. That helped magnify the strong demand. ASX data shows yesterday’s volume was much higher than normal.
But being all but a private company because of the high level of control by Seven Group, the Stokes family don’t really have to take notice of any message the new CEO’s appointment might send.
