TOSHIBA SHEDS MORE ASSETS, CUTS JOBS TO REGAIN INVESTOR TRUST
Toshiba Corp announced on Thursday it is shedding assets, cutting jobs and buying back its stock starting this week, sending its shares up 13 per cent, as the once-mighty Japanese conglomerate aims to regain investor confidence.
The company announced it is liquidating its British nuclear power unit and selling its US liquefied natural gas (LNG) business to China’s ENN Group as part of a new five-year business strategy, which also includes 7,000 job cuts, or 5 per cent of its workforce, over five years.
Toshiba’s shares surged 12.7 percent to close near two-year highs after the announcement, helped also by a much-anticipated move to repurchase up to 40 per cent of its own shares starting Friday.
The 143-year-old company has been trying to win back the market’s trust after a 2015 accounting scandal uncovered widespread irregularities at the laptops-tonuclear conglomerate for years.
The scandal forced it to recognise huge cost overruns at now-bankrupt US nuclear unit Westinghouse, prompting it to sell its prized memory chip unit earlier this year to a consortium led by US private equity firm Bain Capital and leaving it with few growth businesses.
“There had been reports about a possibility of selling non-performing business and job cuts so such moves had been expected at some point. But investors are taking heart,” said Hiroyuki Fukunaga, chief executive of Investrust, a financial advice firm. “The share buyback announcement worth up to 40 percent of outstanding shares is definitely positive, too.”
Toshiba had already promised a share buyback of 700 billion yen earlier this year, but the timing had been undecided. Its announcement on Thursday appeared to outweigh a weaker profit forecast -- the company said it now expects a full-year operating profit of 60 billion yen rather than a previous estimate of 70 billion yen.
Toshiba had been trying to shed the troubled assets that could have exposed the Japanese company to future losses.
The decision to liquidate NuGen, however, would be a blow to Britain’s plans to build a nuclear plant that was meant to provide 7 percent of the country’s electricity. NuGen said 18 months of negotiations with a range of potential owners had failed to yield any deal, and that it was now up to the British government and the Nuclear Decommissioning Authority to determine the future of the Moorside site in Cumbria. South Korea’s state-run Korea Electric Power Corp (KEPCO) had been in talks with Toshiba to buy a stake in NuGen. South Korea’s energy ministry said on Thursday it will coordinate with the British government and monitor the liquidation process with KEPCO.
Toshiba had already promised a share buyback of 700 billion yen earlier this year, but the timing had been undecided