Toshiba's delisting fears ease as auditors sign off on results

But firm's future still clouded as plans to help pay off debts by selling chip unit have stalled

TOKYO • Toshiba has probably avoided immediate delisting after its auditor signed off on its financial results, albeit with criticism of its governance, but its future remains uncertain, with no progress in talks to sell its chip unit for much- needed cash.

PriceWaterhouseCoopers Aarata (PwC) gave a "qualified opinion" on Toshiba's results for the year ended March as well as for April-June, according to a filing yesterday. That means the auditor broadly vouched for Toshiba's bookkeeping.

However, PwC also issued a rare "adverse opinion" on the firm's internal controls, saying losses at its now-bankrupt United States nuclear arm, Westinghouse, were not booked in a timely manner.

Toshiba has struggled to win back shareholder trust since 2015 when it said it had inflated profits over several years. Analysts have said it is unclear whether the firm can stay listed in the long term regardless of the auditor's endorsement.

Last month, Asahi newspaper reported the auditor was considering issuing an adverse opinion only, a move that could have led to the delisting of the 140-year-old firm.

That would have reduced its ability to raise money for its cash-hungry memory chip business, putting its competitiveness at risk.

PwC said some Westinghouse-related losses booked in the business year through this March should have been recorded in the previous year. Toshiba said it disagreed.

Even with the reprieve, analysts have said, Toshiba's long-term prospects are bleak, with the firm trying to raise cash by selling its flash memory business - its only division to show significant growth after the sale of its medical devices unit last year.

If the losses had been booked as per PwC's opinion, Toshiba would have recorded negative net worth - liabilities exceeding assets - for two consecutive years. That would normally trigger a delisting from the Tokyo Stock Exchange.

The bourse is currently reviewing Toshiba's governance to decide whether the firm can stay listed.

Analysts have said that delisting was unlikely as long as PwC signed off on the results.

Even with the reprieve, analysts have said, Toshiba's long-term prospects are bleak, with the firm trying to raise cash by selling its flash memory business - its only division to show significant growth after the sale of its medical devices unit last year.

The chip unit accounted for 94 per cent of Toshiba's total April- June operating profit of 96.7 billion yen (S$1.2 billion). The result represented a leap up from the 16.3 billion yen posted a year earlier, allowing Toshiba to raise its full-year earnings outlook.

The conglomerate hopes that auctioning off its chip unit will help it pay off debts and cover the impact of US$6.3 billion (S$8.6 billion) in liabilities linked to Westinghouse, but talks on the sale have stalled.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 11, 2017, with the headline 'Toshiba's delisting fears ease as auditors sign off on results'. Print Edition | Subscribe