Toshiba to Take $2.3 Billion Write-Down on Nuclear Business
April 26 2016 - 03:50AM
Dow Jones News
TOKYO-- Toshiba Corp. said it would write down the goodwill
value of its nuclear power-plant business, including its U.S.
subsidiary Westinghouse Electric Co., after years of criticism that
the company's outlook on the business was too optimistic.
After reviewing the value of its nuclear arm, the electronics
giant said Tuesday that it would book the one-time loss of ¥ 260
billion ($2.3 billion) in light of the business's earnings
prospects and Toshiba's financial standing.
The impairment charge will be reflected in results for the
fiscal year that ended on March 31.
Toshiba also revised its earnings guidance for the fiscal year,
forecasting a larger operating loss of Y690 billion compared with
its previous view of ¥ 430 billion due to the nuclear unit's
write-down. The group's net loss, however, would be narrower than
previously expected, at ¥ 470 billion instead of ¥ 710 billion, as
Toshiba said it would be able to book a one-time profit of ¥ 380
billion from the sale of its medical-equipment arm to Canon Inc.
last month.
Analysts for years had expected the 140-year-old Tokyo-based
Toshiba to write down Westinghouse's goodwill value.
Toshiba said Tuesday it remains hopeful about the Westinghouse's
outlook.
Toshiba had planned to use the money from the sale of its
medical-equipment arm to Canon to cover restructuring costs and to
fund investments in Westinghouse and its memory-chip businesses.
But the ¥ 260 billion nuclear-business write-down makes Toshiba's
ability to seek additional funds for future investment more
difficult.
The Tokyo Stock Exchange put Toshiba on its watch list last year
making the firm virtually unable to raise cash from new stock
offerings and bond issuance.
"We don't believe its sale of its medical unit will provide
sufficient breathing room as its competition in NAND [chip
technology] is becoming increasingly fierce," said Amir Anvarzadeh,
head of Japan equities at BGC Partners.
Toshiba plans to spend more than ¥ 860 billion over the next
three years to beef up its NAND business, but Mr. Anvarzadeh said
it remains unclear where the money would come from.
Toshiba fell into financial trouble after revealing in 2015 it
had been overstating financial results for years.
Under interim Chief Executive Masashi Muromachi, Toshiba has
pared its business portfolio. It has cut more than 7% of the
group's labor force, spun off its Japan-based personal-computer
unit and sold some noncore businesses, including its
medical-equipment arm and part of its semiconductor-manufacturing
operation.
Toshiba acquired a majority stake in the U.S. nuclear
power-plant constructor a decade ago for $5.4 billion. Analysts at
the time had questioned the cost of deal and the U.S. firm's
profitability. That view gained further traction in March 2011,
when Japan's Fukushima nuclear-plant disaster clouded the
industry's outlook.
Westinghouse itself wrote off some of its goodwill—a type of
intangible asset—in 2012 and 2013 because of sluggish new orders,
but Toshiba retained the value of the U.S. subsidiary as a whole,
saying its other businesses—such as reactor maintenance—would
guarantee sufficient revenue.
Still, Mr. Muromachi, who plans to step down in June, according
to people familiar with the matter, had remained confident in the
nuclear business's value, saying Westinghouse's flagship AP1000
nuclear power plant would receive tens of new orders from China and
India over the next 15 years.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
April 26, 2016 03:35 ET (07:35 GMT)
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