Toshiba posts ¥90.5 billion operating loss for April-September period, sues executives over scandal

Kyodo, Bloomberg

Toshiba Corp. on Saturday reported a group operating loss of just under ¥90.5 billion ($734 million) for the first half of fiscal 2015, as its home appliance and other mainstay businesses struggled amid an accounting scandal.

It is the first time in six years that Toshiba has marked an operating loss for the April-September period. Toshiba said it sued its former management — three former presidents and two chief financial officers — over the improper accounting practices spanning roughly seven years, and is seeking a total of ¥300 million in damages. Those being sued include Hisao Tanaka, Norio Sasaki and Atsutoshi Nishida, who stepped down in July to take responsibility for improper accounting. Toshiba also said it will reprimand 26 executives over the accounting scandal Monday.

For the year through March 31, Toshiba did not announce earnings forecasts as it is still trying to lay out restructuring plans to emerge from the crisis.

Coupled with sluggish sales of its home appliances, a write-down of ¥69.6 billion in its point-of-sale system business also hurt earnings.

Still, Toshiba managed to post a group net profit of ¥37.29 billion, down 29.1 percent from a year before, due mainly to a profit from selling shares in companies such as Finnish elevator company KONE Corp. Sales dropped 4.5 percent to ¥2.97 trillion.

“A swift restructuring of our lifestyle unit is absolutely needed,” said Corporate Senior Vice President Masayoshi Hirata. “Otherwise, we will continue to see a loss in the latter half of the year,” he told a press conference.

The earnings results give fresh evidence that the industrial conglomerate faces a tough road ahead in returning to profitability after years of systematic padding of profits delayed the restructuring of loss-making businesses.

The lifestyle division, a unit in charge of personal computers and televisions, saw an operating loss of ¥42.5 billion, while the electricity and social infrastructure business that deals with nuclear power recorded ¥6.3 billion in operating losses. The semiconductor business, however, handed the company an operating profit of ¥38.8 billion.

One of the worst corporate scandal in years forced Toshiba to revise its profits from April 2008 to December 2014 downward by ¥155.2 billion on a net basis, raising the need for it to proceed with restructuring.

In October, Toshiba said it will sell its image sensor business to Sony Corp. and withdraw from the white light-emitting diode business.

Toshiba has vowed to win back trust from the public as the scandal tarnished its image and undermined the value of its shares.

An individual shareholder had been urging Toshiba to file a damages suit against former presidents and others for failure to rectify the problem despite being aware of it.

Toshiba’s damages suit comes as a panel set up in September concluded that the five sued should be held responsible for negligence. The panel is due to release a report on Monday.

  • disqus_vBekJrf7g5

    The Walking Dead; Japan style!
    Please let this zombie company die.

  • Editor_in_Charge

    Toshiba is really a great Japanese company, they still make awesome products and just look at their historical manufacturing.

  • GBR48

    300m Yen is about US$2.4m. Divide by five gives you less than half a million dollars each. I suspect a CFO or president of Toshiba gets more than that for their Christmas bonus. Chicken feed for those being sued, but a pay day for the lawyers and extra costs for Toshiba. The court cases are just a bit of PR.

    The cost of the corruption was put at 155 billion Yen. That’s quite a sum, but may not take into account the consequent financial benefits that Toshiba accrued over the years thanks to the corruption.

    Falsely inflated profits will have led to a falsely inflated share price. If they then made acquisitions with those shares, they will have purchased those assets at a discount. Add any preferential rates they obtained by appearing more lucrative (and less of a risk) than they were, and the knock-on benefits of the corruption considerably reduce the figure given.

    By reporting simply the falsified figure and ignoring the consequent (and perhaps impossible to determine) knock-on benefits over the years, Toshiba may have obtained an excessive reduction in their tax bill as an extra bonus.

    It may be impossible to determine the difference, but if the consequent knock-on benefits of the corruption over the years was high enough, combined with the excessively reduced tax bill, they may still come out better off for the corruption. In the corporate world, crime can pay.

    Toshiba aren’t Sharp, but if they don’t rapidly dump the loss-making divisions, they eventually will be.