Toshiba books loss on its USA nuclear operations

Japanese conglomerate Toshiba Corp, which purchased nuclear power plant builder CB&I Stone & Webster in December 2015, said this week that it would likely book a loss of several billion dollars this fiscal year due to high cost overruns associated with nuclear power plant projects.

The Tokyo-based conglomerate said in a statement that costs linked to the 2015 transaction will possibly come to "several billion U.S. dollars, resulting in a negative impact on Toshiba's financial results".

The announcement came after Toshiba shares closed almost 12 percent lower on media reports about the potential loss earlier in the day.

The Japanese conglomerate attributed the writedown to higher-than-expected cost overruns at US power projects handled by the Stone & Webster it acquired last December from Chicago Bridge & Iron Company (CB&I).

Toshiba was fined a record ¥7.4 billion yen in December previous year after Japanese regulators found the manufacturer misled investors by filing false financial statements.

Clashing over who should shoulder potential liabilities related to cost overruns and over calculations for working capital for the unit, CB&I sued Toshiba's Westinghouse division after Westinghouse said it was owed more than $2 billion.

Toshiba shares traded 12.27 percent lower at 388.70 yen at the break, paring an earlier loss of as much as 16.3 percent.

Toshiba, led by new chief executive Satoshi Tsunakawa, has positioned its nuclear and semiconductor businesses as key pillars of growth while seeking to scale down less profitable consumer electronics units such as PCs and TV sets.

As of end-September, Toshiba had shareholders' equity of 363 billion yen, or just 7.5 percent of assets, which could fall close to zero if the company is forced to log significant losses.

As the deadline for the finalization of the procedure is nearing, Toshiba said it has found that the goodwill will reach a level of several hundred billion yen, or several billion dollars, resulting in a negative impact on the company's financial results.

Tsunakawa, who took the helm in June, has pledged to rebuild trust in the firm and has said he would prioritize beefing up Toshiba's capital base.

"Assuming the article to be accurate, we would expect Toshiba's weak financial standing to be damaged further", said Takeshi Tanaka, an analyst at Mizuho Securities Co.

  • Anthony Vega