The Sims Metal Management (ASX:SGM) share price has plunged $1.40 or 10.5 per cent to $11.98 after the scrap metal recycling company warned first quarter FY19 earnings would be lower than anticipated.
In a statement to the ASX, Sims Metal said that while first quarter profits would be a significant improvement over the first quarter of FY18, they would be less than the fourth quarter of FY18.
The company blamed trading volatility and challenging Zorba sales.
Sims said a further update on trading conditions and outlook will be provided at the company’s 2018 Annual General Meeting on 8 November 2018.
The falling Sims Metal share price will be a further blow to the Firetrail Australian High Conviction Fund, which in August added to its overweight position in the company.
The L1 Long Short Fund will also be feeling the pain, the fund recently saying it expected the Sims Metal share price to reverse course.
This highlights how difficult it can be investing in highly cyclical stocks. A low share price can compensate for some of the risks, but rarely does it protect investors from deteriorating trading conditions.