Toshiba losses are increasing. The electronics company has announced that 2016 losses will be more than it had forecast. Losses are now expected to reach 995 billion yen ($8.94 billion) for the year to March. Toshiba’s original estimate for losses had been 950 yen.
As we reported earlier, Toshiba had stated in April that it faced an uncertain future. This was due to a number of issues such as the 2015 accounting scandal. The company’s chief executive resigned along with a number of senior managers when it was found that its profit for the previous seven years had been inflated by $1.2 billion. But that wasn’t all of Toshiba’s woes.
Westinghouse, the company’s nuclear facility, was also in trouble financially. This company had helped to drive the electric grid, and was intimately involved in the development of nuclear energy. Westinghouse filed for Chapter 11 bankruptcy protection in March. This was a blow to the global nuclear energy industry.
Not only that, but Toshiba’s Nand chip business was, and still is, under threat. Toshiba is trying to sell the chip business to get some capital. US Boston global alternative investment firm, Bain Capital, and the Japanese government have planned to form a consortium for the purchase. Bain Capital plans to invest 850 billion yen ($7.7 billion) in equity. This cash may buy Toshiba time.
However, Toshiba’s Japanese chip operation is jointly run by US firm Western Digital. This firm has filed the International Court of Arbitration with a request to prevent the sale. None of this helps Toshiba’s situation. The company has received permission to yet again to delay filing its annual earnings. It had previously received a deadline of June 30, but this has now been put back to August 10.
The Toshiba losses have ultimately led to the company being demoted from the first to the second section of the Tokyo Exchange. It has also been given a grace period prior to being delisting from the Tokyo stock exchange running from April 1st, 2017 to March 31st, 2018. It is an interesting situation for onlookers, although not for those involved.
Will Toshiba fold or won’t it? Much depends on the sale of its Nand chip business. As stated above, Bain Capital and Japanese government investors plan to invest in the Nand chip business with 850 billion yen ($7.7 billion).
In addition to these investors, the consortium includes the Development Bank of Japan (DBJ) and Innovation Network of Japan. They will each provide 300 billion yen in equity, while the Mitsubishi UFJ Financial Group Inc will provide 550 billion yen. This totals to 2 trillion yen ($18 billion).
This should be sufficient to keep Toshiba solvent – if the deals go though. Only time will tell. Toshiba will still have to deal with all the various issues that got it into this situation. Toshiba losses came about for a number of reasons, and each of these will have to be addressed.
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