Toshiba shares lose quarter of value after loss warning

TOKYO, Japan – Toshiba shares dived more than 25% on Thursday, December 29, their third straight double-digit plunge, following the company’s warning of a possible one-time loss of several billion dollars over its US nuclear business.

The troubled company’s stock plummeted as much as 25.55% during the morning session – virtually the maximum fall permitted Thursday — before paring losses to finish 15.43% down at 263.5 yen by the noon break.

On Tuesday, the troubled conglomerate said in a statement that costs linked to the acquisition last year by its US subsidiary of a nuclear service company will possibly come to “several billion US dollars, resulting in a negative impact on Toshiba’s financial results”.

The exact figure of the potential write-down is still being worked out, Toshiba President Satoshi Tsunakawa told reporters after the announcement.

He hinted at the possibility of seeking support from financial institutions to boost capital, while local media Thursday reported Toshiba has begun talking with its partner banks about the support.

Toshiba shares closed nearly 12% lower on Tuesday after media reports about the potential loss and dived more than 20% on Wednesday — the most they were allowed to fall that day.

“Those who were not be able to sell are selling today,” Nobuyuki Fujimoto, senior market analyst at SBI Securities in Tokyo, told AFP, referring to Wednesday’s decline to the daily limit.

Toshiba said the possible loss was related to the valuation of the purchase by subsidiary Westinghouse Electric of the nuclear construction and services business of Chicago Bridge & Iron.

Analysts have said uncertainty over the exact amount of the possible write-down was fuelling investor anxiety.

After the market closed Wednesday, Standard & Poor’s cut two of Toshiba’s credit and debt ratings by one notch each in response to the company’s announcement. S&P also placed the ratings on watch, suggesting they could be downgraded further, while a domestic agency also cut its rating.

‘Bigger problem’

SMBC Nikko Securities’ credit analysts Yutaka Ban and Kentaro Harada said in a report issued Thursday that the cut by Tokyo-based Rating and Investment Information in particular will “make it difficult” to raise cash through corporate bonds and other means.

Further, the possibility that banks may become reluctant to lend money is “a bigger problem”.  

Toshiba’s latest full-year forecast is net profit of 145 billion yen ($1.24 billion), up 45 percent from an earlier estimate, on sales of 5.4 trillion yen.

But Tuesday it said it would release a revised earnings forecast as soon as possible to reflect the coming write-down.

Toshiba’s nuclear woes are the latest blow to the once-proud pillar of corporate Japan.

It has been besieged by problems, most notably a profit-padding scandal in which bosses for years systematically pushed subordinates to cover up weak financial results.

In an intensive overhaul, the company has been shedding businesses and announced the sale of its medical devices unit to camera and office equipment maker Canon.

Investors had welcomed the makeover, with Toshiba shares having climbed 77.3 percent this year through Monday before the string of declines began. But the plunges have now reduced its gain for the year to just five percent. – Rappler.com