By Theo Francis, Kristin Broughton and Bob Tita
One of the biggest U.S. chemical companies is working on the formula for an accounting scandal.
Chemours shares fell more than 35% Thursday after the company said it was putting its top executives on leave and delaying its audited financial filings amid an internal investigation into its bookkeeping, compensation and ethics-hotline reports.
The announcement spooked investors who were expecting the Teflon maker to report its latest financial results. Instead, the company's board of directors said it was working with a law firm to conduct an investigation. The stock's drop erased about $2 billion in market value at the share's lowest price Thursday.
The company said it put Chief Executive Mark Newman on leave, as well as Chief Financial Officer Jonathan Lock and its chief accounting officer, Camela Wisel.
Newman has been CEO since 2021 and had previously served as the first finance chief when Chemours was carved out of DuPont. Lock became finance chief in June 2023 after holding other executive roles at the company since 2018. Wisel became chief accounting officer in fall 2021 and was previously treasurer.
Delaware-based Chemours was spun out of DuPont about a decade ago and is known for making compounds used in industrial processes and consumer products, including nonstick cookware. It is a producer of so-called forever chemicals that have long-lasting properties and some research has linked to health issues.
Chemours has opted to remain in the forever-chemicals business as competitors, including 3M, have announced plans to exit from the business amid liability claims. Newman has said there aren't adequate alternatives for the chemicals, which the company said are critical for semiconductors and electric vehicles. The chemicals -- formally known as perfluoroalkyl and polyfluoroalkyl substances, or PFAS -- account for about one-fifth of Chemours's annual sales.
In securities filings Thursday morning, Chemours said it is looking into reports made to its ethics hotline, how the company managed working capital, and how that in turn affected incentive compensation plans and custom metrics reported to investors and the Securities and Exchange Commission.
It also said the review, led by its audit committee, is taking into account "the 'tone at the top' set by certain members of senior management."
Typically, when companies disclose internal reviews, the underlying issues stem from processes related to financial reporting, said Arun Viswanathan, a research analyst at RBC Capital Markets. "This appears that it's a bit broader and deeper than that," he said, pointing to the company's review of its ethics hotline.
Chemours said it is evaluating one or more potential material weaknesses in its internal control over financial reporting, and that it would delay its earnings release.
The company expects to report 2023 sales of about $6 billion, down from $6.8 billion a year earlier, and a loss of $225 million to $235 million because of litigation and restructuring charges. It said it didn't expect to file audited results within 15 days and cautioned investors not to place "undue reliance" on preliminary results.
Denise Dignam, president of one of the segments, has taken over as interim CEO, while Matt Abbott, the chief enterprise transformation officer, has stepped in as interim finance chief. Abbott had previously served as chief accounting officer and controller at Chemours.
Write to Theo Francis at theo.francis@wsj.com, Kristin Broughton at Kristin.Broughton@wsj.com and Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
February 29, 2024 12:39 ET (17:39 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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