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UPDATE 1-Italy's Bio-on blames hedge fund for plunge in sales; shares drop

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MILAN, Oct 1 (Reuters) - Shares in Italy's Bio-on plunged almost 40% on Tuesday after the bio-plastics firm reported a collapse in first-half sales, blaming what it has described as unfounded criticism of its accounts by a U.S. hedge fund.

The results, which saw sales fall to just under 1 million euros ($1.1 million) from 6.1 million in the first half of last year, came after Quintessential Capital Management (QCM) questioned Bio-on's accounts in July.

First-half core losses doubled to 5 million euros.

Bio-on also cut its full-year sales forecast to external customers to 20 million euros, compared with previous guidance for overall revenues of 78 million. It added it was confident of achieving a core profit of 8 million euros this year.

"The main reason was the attack by Quintessential in July," said the company's founder Marco Astorri. He said a new five-year business plan would be announced shortly to replace the current plan, which was due to conclude next year.

Bio-on's shares dropped 38% after failing to open at the start of trading. They were immediately suspended following the delayed opening.

The company said Envent Capital Market, the nominated adviser required for companies listed on the AIM segment of the market, had resigned, but gave no details.

QCM's criticisms in July led to a collapse in Bio-on's share price and to the opening of an investigation by Italian prosecutors for possible market manipulation.

Bio-on, which says it has developed a process for the production of biodegradable plastic from agricultural waste, has repeatedly denied QCM's accusations and has filed a legal complaint against the fund.

The Bologna-based company, whose customers include consumer goods giant Unilever , said talks to supply customers with its PHA plastics technology had slowed significantly because of the hedge fund's attack on the quality of its technology.

It said two independent experts, appointed after a meeting with prosecutors, had concluded the accounting criteria used for its 2018 results had been lawful.

Bio-on, which before QCM's allegations had a market capitalisation of just over 1 billion euros, produces what it says are environmentally-friendly plastics for the agri-food, design and cosmetics industries. At Monday's close the company was worth 363 million euros.

Bio-on said it was considering moving from the AIM part of the market to the Star segment for fast-growing small and mid-sized companies.

QCM said in a statement that Bio-on's results showed its analysis of the company had been right.

($1 = 0.9171 euros) (Reporting by Claudia Cristoferi; Writing by Stephen Jewkes; Editing by James Mackenzie and Mark Potter )