Future of Japan's Toshiba in doubt as losses soar

Future of Japan's Toshiba in doubt as losses soar

Tokyo - Japan's electrical and engineering conglomerate Toshiba Corporation on Tuesday appeared to be close to the point of collapse after reporting a group net loss of 552 billion yen (S$7 billion) for the period from April to December 2016 owing to losses related to its US nuclear power business.

"At the present time, substantial doubt about the company's ability to continue as a going concern exists as of the filing date of the quarterly report," Toshiba said in a statement late in the day.

The 77-year-old, Tokyo-headquartered firm also acknowledged that it had a negative net worth (total assets minus total liabilities) of 226 billion yen as at end of December last year.

The net loss was even bigger than the 499 billion yen Toshiba had previously estimated while the negative net worth position was likewise well above the 191.2 billion yen Toshiba had projected earlier.

Toshiba said last month it could post a group net loss of one trillion yen for the fiscal year that ended March 31, 2017. This would be "the largest ever for a Japanese manufacturer", Kyodo News reported.

The firm also expects to report that it fell into a negative net worth position of 620 billion yen as at the end of March, the agency said.

Toshiba's auditor, PricewaterhouseCoopers Aarata, twice refused to sign off on the firm's accounts, resulting in publication being delayed.

But with markets pressing for information Toshiba went ahead and published its results without the auditor's approval.

Tokyo stock prices had already dropped in anticipation of the shocking results and are expected to fall further on Wednesday with the possibility that Toshiba could be delisted by the Tokyo Stock Exchange.

The shares are already on a watch list at the TSE because of a separate accounting scandal that Toshiba was involved in some two years ago.

Toshiba submitted plans to improve internal controls last month as requested by the Tokyo Stock Exchange.

If these are deemed insufficient, the company will be delisted, reports said.

Toshiba chief executive officer Satoshi Tsunakawa pledged at a briefing late on Tuesday that the company would "do its utmost to avoid" delisting of its shares, although he acknowledged that "any decision is for the stock exchange to make".

He said also that Toshiba hoped to bolster its financial position by selling some of its micro-chip assets.

Through this and other asset sales, Toshiba is confident that it can secure a sufficient financial base to continue operations, Mr Tsunakawa suggested.

The company has been brought low by massive losses at its Westinghouse nuclear engineering subsidiary in the US, which recently filed for Chapter 11 bankruptcy protection in order to stave off creditors.

Toshiba's efforts to find a buyer for the stake in Westinghouse have run up against concerns in the Trump administration that Chinese interests could gain control of the world famous nuclear engineering contractor.

Likewise, Toshiba efforts to sell off a stake in its high-tech "flash memory" business have run up against fears by the Japanese government that Chinese interests could secure control of the strategically important company.

Toshiba delayed its earnings release after it discovered that top management at Westinghouse exerted "inappropriate pressure" to minimise losses there.

According to Kyodo, Toshiba's "auditor is urging the company to examine any impact on its earnings in the current and past fiscal years", to see whether Westinghouse management might have known of massive losses for some time.

"Toshiba is clearly so desperate to avoid having any scrutiny of Westinghouse's past records that it is willing to issue a financial statement without the auditor's sign-off, and risk being delisted by the Tokyo Stock Exchange," environmental group Greenpeace said in a statement on Tuesday.

"Toshiba has learned the hard way which other companies and governments should be taking note that nuclear power has no future," it added.

btworld@sph.com.sg


This article was first published on April 12, 2017.
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