Sims investigates fraud claims in UK
Market watch top headlines
Scrap metal recycler Sims Metal Management fears managers of its British operations could have defrauded the company.
Sims says it has discovered that the carrying value of inventory at its Recycling Solutions business at Long Marston and Newport in Britain was overstated by about $60 million.
"The preliminary findings indicate the situation has arisen in the context of control failures and potential fraudulent conduct by local and regional plant management responsible for technology and downstream processing systems in the UK," Sims said in a statement on Monday.
Sims has set up a special board committee, headed by chairman Geoff Brundsdon, to investigate.
The company's auditors, PricewaterhouseCoopers, are also investigating.
"The immediate priority of the committee is to determine the amount of the adjustment and impact on the company's accounts," Sims said.
"The committee will also be responsible for understanding where the breakdowns in the company's control environment occurred, what initiatives will need to be taken to improve those controls, as well as overseeing the implementation of the recommendations it makes."
Meanwhile, Sims also expects there will be recognition of goodwill impairment in its first-half results, due out in February.
Sims in December downgraded its first-half earnings forecast by 20 per cent.
The downgrade came just four weeks after Sims forecast its underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) for the six months to the end of December would be in the range of $110 million to $120 million.
But, in an update to investors, it said continued challenging market conditions had forced it to reduce its forecast to between $87 million and $97 million.
The revision was caused mostly by weak intake volumes in its shipping program and lower demand, particularly by deep sea ferrous buyers.