Friday, April 12, 2024

Chemours’ stock plummets after releasing annual report, NC litigation driver of $238M in net losses

The Chemours Company released its annual financial report and an update on an internal report into senior management misconduct on Wednesday. (Port City Daily/File)

NORTH CAROLINA — The multinational chemical corporation at the heart of North Carolina’s PFAS controversy reported $238 million in annual net losses this week, primarily due to litigations in the state and multiple other fronts.

READ MORE: Chemours’ fight against GenX health advisory goes to court, holds national ramifications

ALSO: UN calls out Chemours, partner companies for human rights violations associated with PFAS

The Chemours Company released its 2023 financial report Wednesday, including fourth-quarter earnings, after a month-long delay due to ongoing accounting misconduct investigations. It states three executives, including CEO Mark Newman, were placed on administrative leave in late February after an internal audit found they manipulated the company’s accounting. 

The company reported $6 billion in 2023 net sales, $1.4 billion of which came in the fourth quarter. Despite beating Wall Street expectations of $1.3 billion in fourth quarter sales, other investor concerns led Chemours’ stock to plummet after releasing the report.

Chemours’ reported $18 million in fourth-quarter net losses, contributing to a total net loss of $238 million in 2023. The losses are primarily attributable to litigation and settlement costs, of which the report estimates a 2023 total of $786 million.

Environmental remediation costs related to NC’s Fayetteville Works plant represented Chemours’ single largest liability by far, with an estimated 2023 figure of $383 million — of which $76 million is attributed to current efforts. The remainder is estimated as long-term costs.

Chemours is a subsidiary of DuPont, which acquired the Fayetteville chemical manufacturing facility in 1969 and operated it for 40 years before transferring it to Chemours in 2015. The companies have discharged PFAS chemicals in the Cape Fear River throughout the period, leading to a host of ongoing lawsuits and settlements statewide.

North Carolina lawsuits against the company include New Hanover County’s January suit against PFAS producers, Attorney General Josh Stein’s case to make Chemours and other DuPont subsidiaries liable for their parent company’s discharges, a fight between the EPA and the company over the GenX health advisory level, and a class-action of over 100,000 statewide residents against the company.

To address litigation from Wilmington-based nonprofit Cape Fear River Watch and notices of violation from the Department of Environmental Quality, Chemours agreed to a consent order with DEQ and Cape Fear River Watch in 2019. The settlement put a number of PFAS-reduction requirements on the company, including providing alternative water supplies to households with GenX concentrations above the 140 parts per trillion health advisory level. The new report estimates liability for North Carolina’s off-site drinking water replacements at $175 million.

In December, DEQ ordered Chemours to expand testing in the Cape Fear region, leading to a potentially far higher number of households included in the program. 

Chemours’ report states the possibility of other future litigation related to Fayetteville discharges, as well as similar cases rising in other locations; the company’s Washington Works facility in West Virginia and Pompton Lakes plant in New Jersey have also been subject to pollution-related suits.

Additionally, company shareholders have enacted a class action lawsuit against the company for violating Security of Exchange regulations. Chemours’ annual report included an update on the internal investigation and noted it is cooperating with the SEC and the U.S. attorney’s office for the Southern District of New York in relation to the internal audit’s findings.

The annual report states the executives engaged in efforts to delay up to $100 million in payments to the company’s vendors and accelerated the collection of up to $260 million of recorded sales not due until the first quarter of 2024. The audit found similar actions of lesser extent also occurred the previous year, including a $40 million delay to vendors and an improper $175 million advance in collections.

The executives may have manipulated accounting to increase their bonuses; the report details the accounting figures as “part of a key metric for determining incentive compensation.”

Additional shareholder litigation and reputational damage from the audit are among a list of potential risk factors to the company’s future. Debt is another risk noted in the report, as the firm has about $4 billion in total debt as of December 31, 2023 and “may incur substantially more.” 

The report adds Chemours may not be able to obtain capital “on favorable terms or at all,” citing recent negative actions from credit rating agencies.

Chemours’ multinational presence spans 28 major production facilities in eight countries. This includes Titanium Technologies, the world’s largest producer of titanium dioxide used for coatings and plastics, and refrigerant-manufacturer Thermal & Specialized Solutions.

Advanced Performance Materials is another segment focused on fluoropolymer-based products, which rely on PFAS compounds. APM creates resins and additives used in a broad range of industries including the semiconductor and automotive sectors. 

The company notes fluctuations in energy and commodity prices as another potential risk, as its various segments depend on raw materials sourced throughout the world.

Port City Daily reached out to Chemours to ask about the report and internal audit but did not receive a response.


Tips or comments? Email journalist Peter Castagno at peter@localdailymedia.com.

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