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Toshiba appoints industry outsider as CEO after scandals and record losses

Bloomberg, Kyodo

Toshiba Corp. is bringing in an outsider to lead the electronics maker, which has been battered by accounting scandals, record losses and downsizing.

Nobuaki Kurumatani, representative director of CVC Capital Partners Ltd. and former vice president at Sumitomo Mitsui Banking Corp., will become chief executive officer and chairman of Toshiba Corp., the Tokyo-based manufacturer said in a statement Wednesday. Satoshi Tsunakawa will step down as CEO and become chief operating officer. The changes will be effective from April 1.

Toshiba is in the process of selling its crown-jewel memory unit to a consortium led by Bain Capital to avoid delisting after billions of dollars of losses in its nuclear energy operations. The incoming CEO will face the challenges of restoring confidence in the 143-year-old conglomerate and finding ways to achieve growth without the key engines of semiconductors and nuclear power.

“I will draw on all my experience and devote all my efforts to rebuilding Toshiba … by recovering and strengthening its financial base,” Kurumatani, 60, said in the statement.

Kurumatani, a graduate of the University of Tokyo, has spent his entire career in banking. He has also served as a board member at Sharp Corp. since June. Toshiba’s appointment of an outsider to a top leadership position is unprecedented for a conglomerate where executives typically spend decades working their way to the top.

Tsunakawa, a Toshiba veteran of almost 40 years, took over the leadership in June 2016 after an accounting scandal ousted three presidents, led to record losses and forced the company to sell assets. Half a year later, Toshiba discovered that construction delays and cost overruns at four atomic reactors in the U.S. had led to billions of dollars in additional losses. To pay its debt, Tsunakawa had to put its most profitable business — the chip unit — on the auction block.

Toshiba also announced that it expects a group net profit for the first time in four years for the full fiscal year through March, following the sale of claims and shares of its now-bankrupt U.S. nuclear unit.

The firm now projects a group net profit of ¥520 billion ($4.8 billion) compared with November forecasts of a group net loss of ¥110 billion. However, Toshiba cut its previous group operating profit estimates of ¥430 billion to ¥0. Sales were cut to ¥3.90 trillion, down from ¥4.97 trillion.

For the April to December period, Toshiba said it posted a group net profit for the first time in three years helped by its storage and electronic devices segment, which includes the brisk flash memory chip sector.

Toshiba posted a group net profit of ¥27.04 billion after falling into a net loss of ¥532.51 billion over the same period the previous year. Group operating profit fell 34.9 percent to ¥49.57 billion on sales of ¥2.80 trillion, down 1.2 percent.

The company was thrown into crisis last year, revealing massive losses stemming from its U.S. nuclear unit Westinghouse Electric Co., which filed for bankruptcy protection last March.

Toshiba had projected its negative net worth would stand at some ¥750 billion at the end of March, but raised ¥600 billion through a third-party allocation of new shares in December. It further improved its financial standing last month following the sale of Westinghouse-related claims and shares, effectively removing the risk of delisting.

The company is also looking to sell its chip unit, Toshiba Memory Corp., by the end of March to further improve its financial standing with the roughly ¥1 trillion proceeds.

In September, Toshiba picked a Japan-U.S.-South Korea group as the buyer for its chip unit to cover massive losses incurred by Westinghouse. Toshiba Memory is currently going through antitrust screenings in major countries.