Toshiba Corp TYO: 6502
Toshiba Corp shares fell over 3 percent after the Nikkei newspaper reported the tech company may not be able to continue.
The company will announce a write down totaling at least $6.1 billion for its nuclear power business. Cost overruns at a U.S. unit and struggles in its atomic-energy operations. Pundits expect a net loss topping 400 billion yen for the previous nine months. That amount will eliminate shareholder equity.
The results will cover the nine months through December 2016. Toshiba Corp warned the public late last year of the write down. Market value dropped over $7 billion since. The stock fell nearly 3 percent in Tokyo trading.
The company bet big on its $5.4 billion buyout of Westinghouse in 2006. In effect, Toshiba Corp put a lot on money on nuclear power. Officials saw the business as a way to even out its chip operations’ ebb and flows.
The Fukushima nuclear plant meltdown changed all that. Demand for nuclear power fell. Plus, the company’s new nuclear reactor tech presented challenges. Even deals with international partners have been torn asunder.
For example, Toshiba wants to pull out of NuGen — the group building the power plant. The financial crisis at Toshiba forced the tech giant to review its overseas nuclear holdings. Toshiba’s nuclear deals are at risk. Toshiba worked with French utility company Engie to create three nuclear reactors.
But news of a potential $20 billion investment forced Toshiba to back away. The company cannot pay its share of the cost. The tech giant has a 60 percent stake in NuGen. It would not make any decisions until it sold its chip making business.
The company must resolve its problems.
Toshiba Corp employs over 190,000 employees. Reuters believes Toshiba is too big to fail right away. The company may endure pain for a while.
The company’s CEO will inform investors of its current status tomorrow.
As we reported previously, Toshiba’s situation is dire.
The sell-offs are due to a several billion dollar write down for its U.S. nuclear operations. Some believe the charge may reach as high as $10 billion. Toshiba shall reveal the amount on February 14. That is the date of the company’s third quarter earnings call. Investors wait with bated breath to learn more. After all, a large charge may impact shareholder value and investments.
Toshiba Corp Stares Down Write Down
Toshiba will prevent any future write downs. The company must raise the money it needs in less than two months. It is even more pertinent, given that shareholder equity is just $3 billion. An accounting scandal wiped out shareholder’s stake about two years ago.
The chip making business could bring in up to $13 billion. Top Toshiba officials told creditors the latest info in January. It also reported its plans to sell more of its businesses. Nevertheless, the nuclear business weighs heavily on Toshiba’s mind. But increased expenses make staying in the business impossible for the company right now. Therefore, it will cease doing general contracting for nuclear plants.