Company says inventory figures may be off by around $60 million.
Sims Metal Management Ltd. has advised the market that it has identified that the carrying value of inventory at its U.K. business has been overstated. According to a Sims statement, the inventory in question is predominately associated with Sims Recycling Solutions locations in Long Marston and Newport.
The statement notes that the company believes the inventory adjustment to be around $60 million and relates to both changes in the assessment of the net realizable value of certain stock and to book-to-physical adjustments. The company’s 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 U.K.
A special committee of Sims’ board has been formed to take responsibility for the investigation. The committee is headed by chairman Geoff Brunsdon. The committee also includes Gerald Morris, Jim Thompson, Heather Ridout and John DiLacqua.
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. The committee will also determine what action will be taken in relation to any employees or third parties determined to be responsible. The committee will have access to whatever external support it requires.