week of flurry

There has been a flurry of activity around publicly listed waste companies over the last week. The world’s biggest scrap metal company, Sims Metal Management, downgraded its profits while its smaller rival CMA Corportation was thrown a $49 million lifeline by Germany’s Scholz Group. Tox Free Solutions won a major contract, while iconic plastics company Nylex has lost its long fight for solvency, calling in the liquidators who will hive off its bin making operations.

In late January Sims (ASX:SGM) told the market its net profit after tax for the half-year period ended 31 December 2008 would be in the range of $90-95 million, “before any non-cash impairment charges”. This was down from previous guidance of $120-140 million, with weak global economic activity blamed. Now Sims has updated its guidance again.

“The company currently expects to record a non-cash impairment charge related to goodwill of approximately $173 million (pre and post tax) in its half-year accounts. The impairment of goodwill is associated with certain cash generating units in North America,” reads a statement lodged with the ASX.

Sims now expects to report a loss after tax in the range of $78-83 million after the non-cash impairment charges for the six months to December 2008, although its final half-year accounts will not be released until Thursday.

There has been better news from Australia’s other publicly traded scrap metal recycler, CMA Corporation (ASX:CMV), with global scrap recycler and trader Scholz Group pumping $49 million into the company through a private placement.

The cash boost follows Scholz’s initial investment of $11.25 million in November, and will see the German-based company become CMA’s largest investor – owning about 42% of the company - if existing shareholders approve the deal at an extraordinary general meeting to be held in early April.

Scholz will acquire 230 million shares at 21.3 cents each, representing a premium of 63.8% to the closing share price on February 12, CMA said. The German company bought 45 million shares in November at 25 cents – a premium of 25% at the time.

CMA says the backing of the global company is an advantage to its operations during the current “very difficult market conditions,” with the funds used for working capital, and to repay debt.

“With the support of Scholz, we will have a significantly strengthened balance sheet and are better positioned for a rebound in growth and profitability in the second half of 2009,” says MD Doug Rowe.

Perth-based Tox Free Solutions (ASX:TOX) had the best news for the market after winning a contract to provide its “Total Waste Management and Industrial Services” to Woodside Energy.

The contract covers waste management services in WA at Woodside’s LNG facility, Karratha Supply Base and its Karratha-based offshore production and exploration facilities. The contract also includes marine tank cleaning services, and is for a period of three years with two further one-year options.

The news was not so good for diversified manufacturer Nylex, which last Monday told the market it had defaulted on its bank loans and on Wednesday was suspended from trade as it went into voluntary administration.

“The Nylex group businesses will continue trading and we will be liaising with employees and unions, customers and suppliers urgently to ensure minimal disruption to operations. We will also meet with the relevant government agencies,” says Johan Vorster of receivers McGrathNicol.

“Nylex has iconic Australian brands and we believe there is significant value in the Nylex group that we aim to realise via a restructuring and business sales process.”