In acquiring a majority stake in Sims Municipal Recycling, an industry investment group is assuming the reins of a company that grew profitability by 150% last year as commodity prices rose.
Sims Limited on Dec. 30 announced that it will sell a 50.46% stake in its curbside recycling business, Sims Municipal Recycling (SMR) of New York LLC, to Closed Loop Partners and other investors.
The transaction sends $45.4 million to Sims Limited, which is an Australian-headquartered scrap metal recycling company that’s also involved in municipal MRFs, electronics recycling and some alternative energy production. Investors buying a stake in SMR will get to appoint three of SMR’s five board seats.
Closed Loop is a New York-based investment group that has a number of municipal recycling veterans in its leadership core. It describes its mission as providing “equity and project finance to scale products, services and infrastructure at the forefront of the development of the circular economy.”
“Closed Loop Partners has the strategic management focus and expertise to help more rapidly take SMR to the next level in expanding recycling beyond New York City,” Alistair Field, CEO and managing director of Sims Limited, stated in a press release. “Together, we look to expand the materials accepted by SMR, optimize recycling accessibility across New York City, and significantly grow SMR’s service areas across the United States.”
In the New York metropolitan area, SMR has large MRFs in Jersey City, N.J., and Brooklyn, N.Y., as well as a glass processing plant in Jersey City.
The Jersey City Claremont MRF is one of the largest in the region, and the Sunset Park MRF in Brooklyn is “the largest and most sophisticated plant for commingled residential recyclables in North America,” according to Sims Limited. SMR also operates a Palm Beach County, Fla. MRF.
Sims is a key processing partner for New York City’s recycling program.
The company sorted and marketed 660,000 metric tons of curbside recyclables during the 2021 fiscal year, including all of the metal, glass and plastic containers and half of the fiber collected by the New York Department of Sanitation from New York City households. SMR’s goal is to recycle 750,000 metric tons a year by 2025.
Closed Loop’s acquisition is the latest in a handful of MRF investment deals from the group.
Fluctuating earnings of late
The Closed Loop Partners investment comes as SMR is recovering strongly from post-National Sword commodity price pains. During the 2021 fiscal year (July 1, 2020-June 30, 2021), SMR reported earnings before interest and taxes (EBIT) of 3.5 million Australian dollars (over $2.5 million U.S. as of Jan. 4, 2022; all dollars below in U.S.). That was up 150% from the year before, on a constant-current basis (not taking into account fluctuating values between U.S. and Australian dollars). But the fiscal year 2020 EBIT, about $1 million, was down sharply from $5.4 million during the 2019 fiscal year, shortly after China’s National Sword campaign had the effect of driving down commodity values.
SMR said its increase in profits last year was largely a product of higher scrap prices, particularly for plastics. At the same time, SMR, like other North American MRF operators, reported higher costs driven by COVID-19 impacts and related higher residential recycling volumes, according to the company’s annual financial report.
SMR’s underlying EBIT accounted for less than 1% of Sims Limited’s total EBIT during the 2021 fiscal year. Because SMR is so small relative to the company’s other businesses, Sims Limited doesn’t report its revenues, so past and present profit margins can’t be compared.
WasteDive last week reported on the investment, how it came about, and what advantages the companies see.
According to the recent announcement, the investment transaction is expected to close in the first quarter of this calendar year.
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