Toshiba writes down nuclear business; chairman to resign

Mr Shiga will step down as chairman of Toshiba as the company warns of huge losses in its US nuclear power business.
Mr Shiga will step down as chairman of Toshiba as the company warns of huge losses in its US nuclear power business.

$8.9b write-down due to US cost issues and reduced prospects; shares drop $10b in value

TOKYO • Toshiba says it expects to book a 712.5 billion yen (S$8.9 billion) write-down in its nuclear power business, citing cost overruns at an American unit and diminishing prospects for its atomic-energy operations.

Mr Shigenori Shiga will step down as conglomerate chairman.

The charge will result in a provisional 500 billion yen loss for the nine months through Dec 31, the company said in a statement yesterday. In December, Toshiba had warned that the write-down could reach several billion dollars, triggering a share decline that has erased more than US$7 billion (S$10 billion) in market value.

As a result of the losses, shareholder equity will drop to negative 150 billion yen for the current year ending next month, Toshiba said.

The earnings results came after a chaotic afternoon, which began when the company missed its own deadline for announcing earnings. That raised questions over the Japanese company's finances, and the shares fell to near 38-week lows.

Toshiba is now under pressure to come up with a plan for shoring up its balance sheet, which was already under strain from a profit-padding scandal in 2015.

It has put up for sale a significant stake in its flash memory operations and is considering other ways of raising cash. The company previously planned to limit the sale to 20 per cent to maintain control.

Nand flash memory, used in smartphones and solid-state disk drives, is one of the few bright spots in Toshiba's sprawling portfolio, which includes personal computers, TVs, railway systems and elevators. Memory chips generated 50.1 billion yen in profit in the fiscal first half, accounting for more than half of total operating income profit in the period.

Said analyst Masahiko Ishino at Tokai Tokyo Securities: "The questions surrounding Toshiba are so numerous, where do you even begin? Investors want to know what will happen to its nuclear and chip businesses; whether elevator operations and some of Toshiba's listed subsidiaries will be sold off. There is also the question of why the nuclear write-down happened."

Toshiba's US$5.4 billion acquisition of Westinghouse in 2006 was a bet on the future of nuclear power and a way to balance volatility of chip operations with steady long- term revenues. The vision soured after the 2011 Fukushima meltdown damped demand and the firm's next-generation AP1000 modular reactor technology proved difficult to implement.

For the full fiscal year ending March 31, Toshiba forecast a net loss of 390 billion yen, reversing its November outlook for a 145 billion yen profit.

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A version of this article appeared in the print edition of The Straits Times on February 15, 2017, with the headline 'Toshiba writes down nuclear business; chairman to resign'. Print Edition | Subscribe