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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.

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    • 99Pcent

      Another hate filled Japan bashing comment from Chinese/Korean hater. What a waste of space.

      • disqus_vBekJrf7g5

        Well. I still remember when Toshiba sold technology to the Russians so that the soviets could make super quiet submarine propellers for their ballistic missile submarines. Great ally we got here, not!
        Oh, and I’m not Chinese or Korean! I was an American, but now I’m a naturalized Japanese citizen.

      • 99Pcent

        Then maybe if you detest Japan so much as according to your daily comments, perhaps you should consider leaving Japan. It is obvious that you do not like the country you have decided to adopt as your home. Usually when people move to another country they do so always because they love that country. If you really are American then I am sure you will prefer America as your home. It is obvious that you are no help to Japan, all you do is criticize and put Japan down on every single story. I mean it gets a bit hard not to notice after having to see your hate filled comments on the bottom of each page.
        Don’t think of it as me attacking you, I am commenting on your inappropriate conduct and abuse towards a whole race of people whose country you claim have adopted as your home.
        I think JT should look more into your comments and find out where they are coming from. If you really are living in Japan you better find yourself a life because if not you are going to hear a knock on your door soon and you will end up in a Japanese police station having had your whole apartment ripped apart and your laptop analyzed.
        LOL ….I was an American….

      • disqus_vBekJrf7g5

        Ah, typical right-wing hate threat!
        I have screen shot (^-^)b

      • 99Pcent

        LOL how convenient…..right wing Japanese . Meanwhile they are arresting and detaining people in china and korea for free speech, what you going to do?
        Some how you make me want to become Japanese, even though you gave up your American citizenship to become a naturalized Japanese citiizen.
        After all, Abe is doing a great job.

      • Steve Jackman

        Really, 99Pcent, telling others to leave Japan? Is that the best you can come up with? I think disqus_vBekJrf7g5 cares about Japan much more deeply than you, since he has the honesty and courage to speak the truth.

      • 99Pcent

        So is that your evidence for all your arguments? Pretty much empty eh???

      • Steve Jackman

        Hey, 99Pcent, every one of your comments I have read so far, including this one, is in violation of The Japan Times’ commenting policy, which states the following:

        “Don’t make personal attacks or threats. As a rule, comments directed solely at the author will be disallowed. Focus on the ideas, not the individual.”

      • 99Pcent

        That does not mean you can blatantly abuse everything Japan and Japanese and get away with it. It really amazes me to see both you and @disqus_vBekJrf7g5:disqus just attack every report concerning Japan, even genuine positive non political, non bias stories are targets of your mockery. Actually this is a comment section to have reasonable dialog and raise relevant issues, instead some and same people here are using this forum as a hate filled smear campaign against Japan. I am sure the JT editors will ultimately decide who is doing the real “attacks and threats” as you put it.
        If you had any intelligence you would have the pride honor to raise real concerns and arguments. But you don’t and instead you are ruining any chance of dialog with your vitriol, therefore you are the one to be banned for your prolonged and unwarranted attacks against Japan.

      • disqus_vBekJrf7g5

        It’s not a smear if it’s true.

      • 99Pcent

        Sure truth has different meanings to different parties. According to your comment all Japanese companies are zombies and on the way out. Hello, can you explain why China with its no 1 economy status cannot yet make a proper car? How come the whole world would rather pay more for a good Japanese product over anything Chinese or Korean. I don’t think zombies on the way out do things like that?

      • disqus_vBekJrf7g5

        I did not say that ‘all Japanese companies are zombies’, I said that this company is a zombie. Please dial down your righteous anger and start reading everything slowly and carefully, so that you stop making mistakes.
        Korean cars are more reliable than Japanese cars; I guess you skip the stories about Takata ‘shotgun in the face’ airbags, and the Toyotas that won’t brake?

      • 99Pcent

        Hahahaha “KOrean cars” comment is funny. Personally I like all cars, especially Jeep and Chevys, but my favorite is trans Am.

        Really> Korean cars? LOL

      • Steve Jackman

        Must you display your ignorance and humiliate yourself so publicly? Since you’ve written, “Hello, can you explain why China with its no 1 economy status cannot yet make a proper car?”, let me provide you with a reality check in the hopes that you can open your eyes a little

        According to J.D. Power, which is the definitive source for auto quality, vehicles sold in China (almost all these cars are made in China) have higher quality than Japanese brands. Chinese made cars had only 105 problems per 100 vehicles in J.D. Power’s China initial quality study released recently vs. 112 industry average for the U.S. market. The quality of all Japanese brands is even lower than this average of all cars sold in the U.S, as shown by the following J.D. Power report.

        “J.D. Power, 17 June 2015 — With a significant year-over-year improvement, Korean brands continue to widen the quality gap with other automakers, while Japanese makes collectively fall below industry average for the first time in 29 years, according to the J.D. Power 2015 U.S. Initial Quality StudySM (IQS) released.

        Although Japanese brands overall experience a 2 PP100 improvement from 2014, this has proven insufficient to keep pace with the industry, causing Japanese makes overall to fall below industry average for the first time in the 29-year history of the U.S. Initial Quality Study. Only four of the 10 Japanese brands included in the study post an improvement.”

        It is worth noting that the list of ten worst brands for quality was full of Japanese brands, including, Honda (Acura, which is Honda’s luxury brand in the U.S), Toyota (Scion, which is one of Toyota’s brands in the U.S), Subaru and Mitsubishi. This is 2015, not 1985.

      • 99Pcent

        so what, is this story about that>???

      • 99Pcent

        Most of the tech in Korea and China owe their thanks to modern democratic Japan, like it or lose it.

      • 99Pcent

        Most of the tech in Korea and China owe their thanks to modern democratic Japan, like it or lose it.

      • Steve Jackman

        How about toning it down a little. No one has appointed you as the arbiter of truth about all things Japanese.

      • 99Pcent

        Whoa, is this the CCP working for harmony on global scale for the sake of Japan???

      • Steve Jackman

        Hey, 99Pcent, every one of your comments I have read so far, including this one, is in violation of The Japan Times’ commenting policy, which states the following:

        “Don’t make personal attacks or threats. As a rule, comments directed solely at the author will be disallowed. Focus on the ideas, not the individual.”

    • Steve Jackman

      There wouldn’t be too many companies left in Japan if all the zombie companies were allowed to die.

      • disqus_vBekJrf7g5

        LOL! True!

  • 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.