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Toshiba’s path to growth narrowing

Reuters

Toshiba Corp. President Satoshi Tsunakawa leaves a news conference in Tokyo on Tuesday.

Jiji Press TOKYO (Jiji Press) — Toshiba Corp. faces an uncertain future, hit hard by a massive loss from its U.S. nuclear business that forced the major Japanese electronics and machinery maker to consider selling more than half its stake in its profitable flash memory operations.

Toshiba President Satoshi Tsunakawa told a press conference Tuesday that he finds it difficult to say his company’s purchase in 2006 of U.S. nuclear power plant builder Westinghouse Electric Co. was right in terms of earnings, indicating Toshiba’s intention to explore the possibility of selling the subsidiary.

To improve its balance sheet, Toshiba is considering selling more than 50 percent of the shares in its lucrative flash memory business after spinning off the division.

The acquisition of Westinghouse cost Toshiba some ¥500 billion, but then President Atsutoshi Nishida claimed that it would become profitable.

In 2006, a series of plans to build nuclear power plants emerged globally on the back of high crude oil prices and as measures to counter global warming.

However, such plans have stalled, both in and outside Japan, following the severe accident at Tokyo Electric Power Company Holdings Inc.’s disaster-hit Fukushima No. 1 nuclear power plant in northeastern Japan in March 2011.

As the United States tightened its nuclear safety regulations, costs surged for four reactors that Westinghouse planned to build.

In 2012-2013, Westinghouse posted a total loss of ¥115.6 billion. Still, Toshiba continued putting its emphasis on nuclear operations, with then President Masashi Muromachi describing them as an “engine for growth.”

In late 2015, Toshiba acquired U.S. construction firm CB&I Stone & Webster Inc. through Westinghouse in order to accelerate nuclear plant construction. The acquisition led the Toshiba group to incur a loss of more than ¥700 billion in its nuclear operations.

An executive of a rival company of Toshiba says the acquisition of Westinghouse was the first misstep. To recoup the massive Westinghouse acquisition costs, Toshiba stuck fast to the nuclear business and deepened its wound.

To resolve an excess of debts over assets, Toshiba now plans to sell the flash memory business that has grown into its primary revenue source after it developed the technology for the first time in the world in 1984.

On Tuesday, Toshiba postponed the release of its earnings report for April-December 2016, following internal reports pointing out inappropriate pressure by the Westinghouse management on senior officials over accounting. It is expected to take about a month to investigate the issue.

At a press conference Wednesday, Japan Securities Dealers Association Chairman Kazutoshi Inano criticized Toshiba. “The company’s stock price has dropped sharply in line with an increasing sense of distrust,” he said.

Worries rekindled about Toshiba’s accounting. In fiscal 2015, Toshiba also put off its earnings announcement after improper accounting came to light.

The size of profit at the company’s social infrastructure business is smaller than the levels at the flash memory and nuclear operations.

It seems no easy task for Toshiba to map out a path toward growth, analysts said.Speech

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