Shigenori Shiga, chairman of Japanese electronics company Toshiba, is stepping down from his position after the firm announced today it would book an estimated $6.3 billion loss on its U.S. nuclear power business.
The company began the day by missing its own deadline for announcing earnings and detailing losses in its nuclear power business. They had been scheduled to release earnings for the nine months through December at noon Tokyo time. As a result, Toshiba’s shares dropped to a near 38-week low.
Toshiba’s problems date back to 2015, when a profit-padding scandal led to restructuring and record losses. At the time, CEO Hisao Tanaka resigned amid an accounting scandal that he called "the most damaging event for our brand in the company's 140-year history." It emerged that the company’s profits had been inflated by $1.2 billion over the previous seven years.
Speaking before Christmas, Toshiba had warned the writedown could reach several billion dollars. This triggered a share decline that has erased more than $7 billion in market value. As a result of the losses, Toshiba is forecasting shareholder equity to drop to negative 150 billion yen for the current year ending in March.
“The questions surrounding Toshiba are so numerous, where do you even begin,” said Masahiko Ishino, an analyst at Tokai Tokyo Securities. “Investors want to know what will happen to nuclear and chip businesses, whether elevator operations and some of Toshiba’s listed subsidiaries will be sold off. There is also the question of why the nuclear writedown happened in the first place.”
However, Toshiba said these numbers might change as it had decided to delay the release of its quarterly earnings for a month for further investigation into its nuclear business. It plans to release the financial results for the last quarter of 2016 on March 14.
The company is considering selling a majority stake in its memory chip business to help cover losses, according to a report from Reuters. Toshiba has said it will separate the chip unit by the end of March and hold a shareholders’ meeting that month. Strategic investors and foreign private equity funds are said to be among the potential bidders.
Toshiba’s flash memory operations have been the one bright spark in a troubling few years. Memory chips generated 50.1 billion yen in profit in the first half of 2016, accounting for more than half of total operating income profit in the period. The latest market research suggests the market for NAND flash memory will grow a further 9.69% by 2020.
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