Recycler Sims Metal Management has warned of possible fraud at two of its British electronics recycling sites, sparking a sharp fall in the company's shares.
Simms shares were 54 cents, or 5.41 per cent, lower at $9.44 at 1439 AEDT.
Sims said on Monday that the realizable value of some stock at its Recycling Solutions businesses at Long Marston near Birmingham in England and Newport near Cardiff in Wales had been overstated by about $60 million.
The businesses in question recycle electronics, including computers and televisions. Sims' biggest recycling business is in metals.
"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.
The spokesman said the company was investigating the matter and could not comment on how many people may be involved or the precise time frame of the activity in question.
The spokesman also would not comment on how or when the matter was uncovered.
Sims has set up a special board committee, headed by chairman Geoff Brundsdon, to investigate.
Sims said the committee is working closely with its chief executive Daniel Dienst, chief financial officer Rob Larry, the company's external auditor, PricewaterhouseCoopers, and legal counsel Baker & McKenzie.
"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."
The Sims spokesman said the company would provide an update on the matter when it releases its financial results in mid-February.
Meanwhile, Sims also expects there will be recognition of goodwill impairment in its first-half financial results.
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.