Sims caught in e-scrap inventory scandal

Sims caught in e-scrap inventory scandal

By Editorial Staff, Resource Recycling

Sims Metal Management has cautioned shareholders that the value of its inventory held in the U.K. has been materially overstated — possibly due to fraud.

On Jan. 20, the massive metal recycling company announced in a statement that its inventory associated with its U.K. e-scrap businesses in Long Marston, England, and Newport, Wales, was in question.

Preliminary findings, according to the company, suggest that the approximately $60 million inventory adjustment is the result of control failures and potential fraud by local and regional plant management responsible for technology and downstream processing systems in the U.K.

In response, SMM's board has set up a special committee to oversee an investigation into the matter that will be conducted by the company's internal audit team. The immediate priority of the oversight committee is to determine the exact amount of the adjustment and the impact it will have on the company's accounts. The committee is also charged with understanding what went wrong and what remedies need to be applied, as well as what action needs to be taken regarding any employees or third parties involved in the incident.

The company was contacted by E-Scrap News but declined comment.

Predictably, investors responded negatively to the news, sending Sims' stock price down 58 cents on the day of the announcement, to close at $9.88 per share.

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   This article is ridicules 60,000,000.00 in inventory fraud. It's not fraud it's laziness. They continue to try and be the largest consumer of e-scrap and really have no idea of how this market has changed in the last 18 months. My company competes with Sims on a regular basis in Europe, Asia and in the United States and the one thing we have learned is that Sims is never afraid to lose money as long as they make it up in volume. If they actual took a look at their assay's and determined what their material value was they could be profitable. The problem is they have no structure and no accountability. Put someone in change of this division that cares if it is profitable and is less worried about flying around the world telling everyone how big of deal Sims is. This company has more tools available to it then 99% of it's competitors but refuses to use them. These changes would mean a lot less golf games and most likely some late nights (not drinking). So my guess is that they will continue to write off inventory and blame everyone but themselves. This does have a positive side though us smaller more polished companies will continue to grow and take the profitable market share from them until shareholders demand this fix and by that time they will be to far behind and not relevant it won't matter.