Embattled Japanese conglomerate Toshiba said on Monday (Dec 21) it is expecting an annual loss of nearly 550 billion yen (US$4.53 billion) and will be cutting jobs in its loss-making consumer electronics business as it embarks on a bold restructuring plan in an effort to move beyond an accounting scandal.
The Tokyo-based company announced that it is slashing 6,800 jobs and will be selling its television manufacturing plant in Indonesia. With the inclusion of previously announced job cuts and those seeking voluntary early retirement, eventual job cuts could total up to 10,600, or about 5 per cent of Toshiba’s global workforce.
As a result of these restructuring costs, the conglomerate with businesses ranging from laptops to nuclear power, said it expected a record net loss of around 550 billion yen for the year ending March.
140-year-old Toshiba has in the throes of restructuring after revelations this year revealed that the electronics giant overstated earnings by US$1.3 billion as far back as fiscal 2008. The scandal and subsequent earnings restatements highlighted weaknesses in a range of Toshiba’s businesses. The company’s stock has since tumbled nearly 40 per cent since news of its accounting issues emerged in early April.
Analysts say the plans unveiled on Monday indicate “a step in the right direction”.
“They are moving to the right ball park given that consumer electronics is no longer core to Toshiba. I won’t be surprised if there’s more restructuring to come,” Mr Damian Thong, analyst at Macquarie Securities, said in a telephone interview.
Mr Peter Landers, Tokyo bureau chief of The Wall Street Journal, agreed: “They’ve been suffering losses of years in some of these consumer electronics businesses where China and South Korea are just so much more competitive. This is a positive sign to get rid of what’s not making money but the (question remains) whether they can boost what is making money.”
To be sure, challenges remain for Toshiba. For one, Mr Landers is skeptical of the prospects of the company’s nuclear business. “You see skepticism in nuclear power not just in Japan but also in the US. With natural gas below US$2 per unit, there’s very little prospect of new nuclear plants in the US where Toshiba is (banking) on.”
Ahead of the announcement, Toshiba shares plummeted 9.8 per cent to finish at ¥254.8, their lowest levels in three years. The broader Nikkei 225 Index slipped 0.4 per cent at 18,916.02 points.
According to Macquarie Securities’ Mr Damian Thong, the tumble in the stock on Monday does not necessarily reflect negativity towards the company’s restructuring plan.
“Most investors are in a wait and see mode. [The selloff] has more to do with uncertainty, rather than negativity about the restructuring plan,” the Tokyo-based analyst said in a telephone interview.
Mr Landers added that the stock could see a modest bounceback on Tuesday (Dec 22). “The worst of the news is out since Toshiba admitted that they are going to take a US$4.5 billion loss. People will somewhat be assured.”
news source & image credits: channelnewsasia.com