Battered Toshiba out of easy options to plug nuclear hole
Battered Toshiba Faced with the prospect of a multi-billion-dollar writedown that could wipe out its shareholders’ equity, Japan’s Toshiba is running out of fixes it is burning cash, cannot issue shares and has few easy assets left to sell. Toshiba says it will be weeks before it can give a final number, but a writedown of the scale expected – as much as 500 billion yen, according to one source close to Toshiba – would leave the group scrambling to plug the financial hole and keep up hefty investments in the competitive memory chip industry, which generates the bulk of its operating profit.
Toshiba Corporation is a Japanese multinational conglomerate corporation headquartered in Tokyo, Japan. Its diversified products and services include information technology and communications equipment and systems, electronic components and materials, power systems, industrial and social infrastructure systems, consumer electronics, household appliances, medical equipment, office equipment, lighting and logistics. Toshiba is organised into four business groupings the Digital Products Group, the Electronic Devices Group, the Home Appliances Group and the Social Infrastructure Group. Toshiba is the seventh largest semiconductor maker in the world by revenue.
Toshiba shares slump: What’s going wrong?
The Japanese industrial giant has now had more than 40% of its value wiped off since 26 December. It comes after the firm’s chairman apologised and warned that its US nuclear business may be worth less than previously thought. Toshiba stocks had already lost 20% on Wednesday and 12% on Tuesday. Toshiba shares slumped sharply on Thursday, the third straight day of heavy losses.
Why are Toshiba shares tanking?
Most people still recognise the name Toshiba for its electrical products, but it is a very diverse conglomerate. Toshiba said on Wednesday that it faced a possible heavy one-off loss, linked to a deal done by its US subsidiary, Westinghouse Electric. The size of the writedown is not likely to be established until February, but is expected to run to several billion dollars. It has this week also reported “inefficiencies” in the labour force at CB&I, along with other factors driving up costs.
Why does a falling share price matter?
Shares have fallen for a reason – investors selling up because of the unease they feel about the position the company is in. That uncertainty saw ratings agencies including Moody’s and S&P cut their ratings on Toshiba’s credit, making it more expensive for the firm to borrow money. A lower share price also reduces the amount of new funds that can be raised by selling shares. So if it needs to raise funds, that means going to the banks for support or selling off parts of the business. Toshiba recently sold its medical business – which had been doing well – to rival Canon.
What does this mean for Toshiba’s reputation?
Even if it is a one-off loss rather than ongoing, it seems somebody somewhere got the numbers wrong or did not anticipate the scale of problems at CB&I. And that reflects badly on the firm’s management. Toshiba president Satoshi Tsunakawa has this week apologised for “causing concern”. Toshiba is still struggling to recover after it emerged in 2015 that profits had been overstated for seven years, prompting the chief executive to resign.
What are the prospects for Toshiba’s nuclear business?
Since the Fukushima disaster in 2011, nuclear energy has been a much harder sell. Some governments have opted to scale back how much they planned to rely on nuclear as an electricity source, or turn away from nuclear energy altogether to focus on renewables. Big nuclear projects around the world have faced heavy delays, partly caused by a lack of skilled workers needed to meet regulatory standards.
Toshiba is ‘burning cash at an alarming rate’
TOKYO Faced with the prospect of a multibillion-dollar write-down that could wipe out its shareholders’ equity, Japan’s Toshiba is running out of fixes: It is burning cash, cannot issue shares, and has few easy assets left to sell. Toshiba says it will be weeks before it can give a final number, but a write down of the scale expected as much as 500 billion yen, according to one source close to Toshiba would leave the group scrambling to plug the financial hole and keep up hefty investments in the competitive memory chip industry, which generates the bulk of its operating profit.