The Chemours Company (NYSE:CC) plunged in trading after the company announced that its internal review did find “material weaknesses” in its financial reporting. The chemical company’s Audit Committee found delays in payments of about $100 million to certain vendors from Q4 2023 to Q1 2024, and accelerated receivables collection of around $260 million to Q4 2023. These receivables were originally not due to be received until Q1 of FY24.
The internal review also found that similar, but smaller, actions were taken in Q4 2022, which resulted in delayed payments of up to $40 million to vendors from Q4 2022 to Q1 2023, and accelerating receivables collection of up to $175 million into the fourth quarter of FY22. These receivables were originally not due to be received until Q1 of FY23.
Strong Measures Against Former Senior Management
Furthermore, the Audit Committee found a lack of transparency by three former members of senior management who were also on Chemours’ Board of Directors. The Compensation Committee considered the Audit Committee’s findings and used full negative discretion to adjust compensation for these three former members of the senior management.
Consequently, Chemours announced last month that its Board had placed President and CEO Mark Newman, SVP and CFO Jonathan Lock, and VP, Controller, and Principal Accounting Officer Camela Wisel on administrative leave.
Financial Reporting Weaknesses
In addition, the internal review revealed four financial reporting weaknesses, prompting revisions to its March 31, 2023, June 30, 2023, and September 30, 2023 financial statements. Chemours has also revised its Balance Sheet as of December 31, 2022, and its cash flow statements for FY22 and FY21.
Moreover, the company announced its Q4 results with adjusted earnings of $0.31 per diluted share on net sales of $1.4 billion, up by 2% year-over-year. This was above consensus estimates of earnings of $0.23 per share on sales of $1.29 billion.
Is CC a Buy?
Analysts remain sidelined about CC stock with a Hold consensus rating based on two Buys, three Holds, and one Sell. Over the past year, CC stock has declined by more than 10%, and the average CC price target of $30 implies an upside potential of 19.6% at current levels.
