Toshiba Corp, the 142-year-old conglomerate, yesterday warned it might not be able to continue as a going concern as it grapples with billions of US dollars in losses from its Westinghouse Electric Corp nuclear business.
The disclosure came as the Japanese company reported earnings for the third quarter after missing two previous deadlines for financial results.
Toshiba posted an operating loss of ¥576.3 billion (US$5.2 billion at the current exchange rate) for the nine months that ended on Dec. 31 last year and said it had negative shareholder equity of ¥225.6 billion, but, significantly, it was not able to get auditor PricewaterhouseCoopers Aarata to approve those figures.
Toshiba has been at odds with its auditors over Westinghouse, which last month filed for bankruptcy in the US.
The auditing firm submitted an independent review with Toshiba’s results that emphasized the risks to its future because of losses in the Westinghouse unit responsible for nuclear projects and breach of covenants on ¥284 billion in loans.
Toshiba’s inability to report earnings has also raised speculation of a possible delisting from the Tokyo Stock Exchange (TSE).
“Toshiba has done everything in its power to gain the understanding of the auditors,” Toshiba CEO Satoshi Tsunakawa said at a media briefing with about 200 reporters in Tokyo. “Without clear prospects for auditor approval, we could no longer inconvenience and worry our investors and other stakeholders and decided on this very unusual way of releasing results.”
Toshiba has missed financial filing deadlines even before the current crisis. The company pushed back earnings announcements twice amid an accounting scandal in 2015, delaying the release by about four months.
In theory, there is no limit on how many times the company can request an extension.
“How the TSE will take this is anyone’s guess now,” Ace Research Institute analyst Hideki Yasuda said. “This is just quarterly earnings. Now the question is whether the company can release the full-year statement in time.”
The bourse kept Toshiba on its list of securities on alert in a December announcement, after originally being included for overstating profits from 2008 through 2014.
The company last month submitted a report detailing plans to improve internal controls. If deemed insufficient, the company would face delisting.
“The disclaimer of opinion by the auditor is an additional item that we must evaluate and consider,” said Miwa Aonuma, a spokeswoman for Japan Exchange Group Inc, which runs the Tokyo Stock Exchange.
Even if Toshiba clears these hurdles, there is a longer-term threat to stakeholders. The nuclear business write-down has pushed Toshiba’s liabilities beyond its level of assets.
If the company cannot reverse the situation in the fiscal year that just ended, it could face demotion to the second section of the Tokyo Stock Exchange. That would in turn force an automatic sell-off by some index funds.
If the situation persists for two straight years, it would be delisted.
“The situation at Toshiba continues to make a mockery of TSE listing rules, as authorities have done their best to allow it as much time as possible for its auditors to approve its” third-quarter results, BGC Partners Ltd Singapore-based head of Japanese equity sales Amir Anvarzadeh wrote in a note prior to the announcement. “We think TSE will continue to remain supportive.”
Toshiba has responded by putting its prized memory chip unit up for sale and is narrowing down a list of bidders.
Hon Hai Precision Industry Co (鴻海精密), South Korea’s SK Hynix Inc and chipmaker Broadcom Ltd have all submitted preliminary bids for the Toshiba business valued at ¥2 trillion or more, people familiar with the matter have said.
Hon Hai has indicated it might pay as much as ¥3 trillion, in part to force Japanese management into negotiations, said one of the people, who asked not to be identified because the matter is private.
In the meantime, Toshiba has sought additional financial support from banks, offering stock holdings and real estate as collateral to lenders.
“Toshiba could move back into solvency depending on how it proceeds with the Toshiba Memory sale,” Credit Suisse Group AG Tokyo-based analysts Hideyuki Maekawa and Yoshiyasu Takemura wrote in a report. “We think the only major risk remaining is a possible delisting.”
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day