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Toshiba Says It Will Book Huge Losses On Cost Overruns

28 December 2016

Shares in Toshiba dived more than 12 percent Tuesday on reports it is likely to record a huge special loss related to a USA subsidiary's acquisition of a nuclear power service company.

Mr Tom O'Sullivan, a former investment banker and founder of energy consultancy Mathyos Japan, noted the acquisition coincided with the finalising of a record fine by Japanese regulators for accounting irregularities at Toshiba.

The Japanese group said cost overruns at USA power projects handled by a nuclear construction business newly acquired from Chicago Bridge & Iron would be much greater than initially expected, potentially requiring a huge writedown.

With the restructuring efforts, Toshiba positioned the nuclear and chip businesses as core activities, but a huge loss in the nuclear arm may force further measures including capital injection, NHK and other reports said.

The electronics maker has likely been in talks with its main banks to explain its financial situation and the company may request assistance, the sources said.

But Toshiba could revise the positioning of its nuclear business if need be, said Tsunakawa, who has been credited with having shaped a medical equipment unit into a major earnings driver. CB&I and Westinghouse are involved in litigation over the calculation of working capital in the deal.

Shares in Toshiba were trading down 12 percent in late morning trade after plunging as much as 16 percent at one stage to its lowest in more than a month. The charges were flagged earlier in the day. Such a loss would eclipse the ¥168 billion in net income that analysts are projecting, on average, for Toshiba's current fiscal year through March.

Toshiba Corp (6502.T) said on Tuesday the conglomerate was considering to steps to raise capital as it could not rule out that a huge charge to its US nuclear business might wipe out its shareholders' equity. "It is possible that its NAND flash memory business would attract various buyout offers as there are few players in the market", he said.