Thu | Aug 17, 2017

Toshiba chairman resigns over huge nuclear business loss

Published:Wednesday | February 15, 2017 | 2:07 AM
Toshiba Corp President Satoshi Tsunakawa addresses a press conference at the company's headquarters in Tokyo, Tuesday, February 14, 2017. Japanese electronics and energy giant Toshiba said Tuesday that its chairman is resigning to take responsibility for problems that will result in a 713 billion yen (US$6.3 billion) loss in its nuclear business.

Toshiba Corp's chairman resigned Tuesday after the company logged such massive losses in its nuclear business that it must sell its lucrative computer-chip business to avoid going belly-up.

The company projected 712.5• billion (US$6.3-billion) loss for its nuclear business related to the acquisition of CB&I Stone & Webster by its US nuclear unit Westinghouse. The company also said it will not take on new projects to construct nuclear plants.

President Satoshi Tsunakawa said the company was also looking for potential partners to acquire a stake in Westinghouse.

He bowed deeply at a news conference to apologise for "troubling investors and stakeholders".

Earlier Tuesday, Toshiba delayed reporting its official financial results by a month, citing auditing problems. That sent Toshiba stock tumbling eight per cent in Tokyo trading.

After the market closed, it released unaudited numbers, warning they may change "by a wide margin".

The company said Shigenori Shiga, the chairman, will step down from the board, effective Wednesday, but stay on as a Toshiba executive.

Toshiba said its net worth was in the negative, at minus •191 billion (US$1.7 billion) by the end of last year. The company hopes to fix that by the end of March by selling its flash memory business and other assets.

In a stunning acknowledgement, Tsunakawa told reporters the company viewed its move into the nuclear sector by acquiring Westinghouse in 2006 as a misstep that led to its present woes.

Westinghouse's purchase in 2015 of CB&I Stone & Webster, a nuclear construction and services business, was aimed at winning more business in decontamination, decommissioning and plant projects. But it just amplified that problem.

Auditors questioned Toshiba's latest reporting on the acquisition of CB&I Stone & Webster after a whistle-blower, an employee at Westinghouse, wrote a letter to the Westinghouse president.

The company said it will reorganise its nuclear business to be directly under Tsunakawa for stricter monitoring. It will also focus on reactor maintenance, the nuclear fuel business and decommissioning of the Fukushima nuclear plant in Japan, where reactors went into multiple meltdowns after the March 2011 earthquake and tsunami.

 

Efficiency

 

Efficiency moves expected at CB&I Stone & Webster never played out, resulting in a huge overvaluation of the company's worth that led to the huge losses. Toshiba denied it had purposely covered up the problems.

In its preliminary results, Toshiba said it anticipates a group net loss of •500 billion (US$4.4 billion) for April-December of last year, including the •712.5 billion hit from its nuclear business.

The company is forecasting a group net loss of •390 billion (US$3.43 billion) for the full year through March 31, instead of the yen145 billion profit it had anticipated earlier.

Toshiba, founded in 1875, employs about 190,000 people and used to be one of the most respected brands of Japan Inc. It still has a sprawling business spanning household appliances, railways, hydrogen energy and elevator systems.

The company has been grappling in recent years with a scandal over company officials' doctoring of accounting books to meet unrealistic profit targets.

"It is so unfortunate that this has happened," said Ryoji Sato, a company director, when asked by a reporter about the company's promises to come clean. "We must keep trying to do better."