Write­down fears maul Toshiba rally

Con­glom­er­ate claims suf­fi­cient fund­ing on hand, but nu­clear busi­ness risks sig­nal trou­ble

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG

Toshiba Corp’s im­pend­ing multi­bil­lion-dol­lar write­down has trig­gered one of the worst-ever share de­clines for a ma­jor Ja­panese com­pany, with rat­ings down­grades and in­vestor pes­simism eras­ing almost all of its 87 per­cent rally this year.

Shares in the elec­tron­ics and in­dus­trial con­glom­er­ate fell 17 per­cent to 259 yen at the close on the Tokyo Stock Ex­change on Thurs­day. Toshiba said it may write down bil­lions of dol­lars of an ac­qui­si­tion made by US unit West­ing­house Elec­tric, fu­el­ing a share de­cline this week that has wiped out about 800 bil­lion yen ($6.8 bil­lion) in mar­ket value.

Moody’s In­vestors Ser­vice, Rat­ing and In­vest­ment In­for­ma­tion Inc and S&P Global Rat­ings all re­sponded by cut­ting Toshiba’s credit rat­ings.

“In­vestor con­cerns are peak­ing, given that there are fig­ures run­ning into the sev­eral hundred bil­lions of yen and no idea of what the ac­tual losses are,” said Masahiko Ishino, an an­a­lyst at Tokai Tokyo Se­cu­ri­ties.

“Amid the un­cer­tainty, the share prices re­flect the search for an ap­pro­pri­ate level of value.”

Toshiba can’t seem to get past its ac­count­ing prob­lems. The Tokyo-based com­pany was re­cov­er­ing from a prof­it­padding scan­dal last year that claimed the jobs of three pres­i­dents led to record losses and prompted the com­pany to cut staff and sell off busi­nesses.

per­cent

Toshiba was nar­row­ing the scope of its busi­ness lines and count­ing on its nu­clear re­ac­tors, which make up about a third of rev­enue, to fuel growth. A dis­pute over the value of a nu­clear con­struc­tion busi­ness ac­quired by West­ing­house Elec­tric may re­sult in a loss of as much as $4.3 bil­lion, ac­cord­ing to broad­caster NHK.

“We can’t help but de­ter­mine that the risk of a loss close to the re­ported fig­ure is pos­si­ble,” Yuk­i­hiko Shi­mada, an an­a­lyst at SMBC Nikko Se­cu­ri­ties Inc, wrote in a re­port.

Toshiba said ear­lier this week that the write­down would ex­ceed an ini­tially an­tic­i­pated amount of $87 mil­lion, and would prob­a­bly be in the bil­lions. It didn’t elab­o­rate fur­ther. Still, such a loss would eclipse the 168 bil­lion yen in net in­come that an­a­lysts were pro­ject­ing, on av­er­age, for Toshiba’s cur­rent fis­cal year through March.

Hirokazu Tsuki­moto, a spokesman for Toshiba, said on Thurs­day that the com­pany has suf­fi­cient fund­ing on hand. “There is no rea­son to think that there will be an im­me­di­ate im­pact on our fi­nanc­ing,” he said.

The con­glom­er­ate makes ev­ery­thing from re­frig­er­a­tors, chips and com­put­ers to nu­clear power equip­ment. The po­ten­tial write­down is re­lated to a dis­pute over the value of CB&I Stone & Web­ster, a nu­clear con­struc­tion and ser­vices com­pany that West­ing­house bought in Jan­uary. It was in­volved in the build­ing of ad­vanced nu­clear re­ac­tors at two US fa­cil­i­ties, which are be­hind sched­ule and over bud­get.

Toshiba’s fi­nan­cial stand­ing could come un­der fur­ther strain, ac­cord­ing to a state­ment from S&P. The risk that emerged in its nu­clear busi­ness may neg­a­tively im­pact the eval­u­a­tion of the com­pany’s risks, R&I said. The agency added that it can’t ig­nore the fact that be­ing on the Tokyo Stock Ex­change’s alert list would limit Toshiba’s means to in­crease cap­i­tal.

the de­cline in the shares of Toshiba Corp on Thurs­day

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