Toshiba Corp., which averted an immediate risk of delisting from the Tokyo Stock Exchange when it released its annual earnings results with a “qualified” sign-off by its auditor in early August, more than a month past the regular deadline, still needs to quickly find a buyer for its semiconductor unit to pay off debts and eliminate its negative net worth by next March. A failure to do so would automatically result in the delisting of the once iconic Japanese manufacturing giant from the stock market.

Given the difficulties involving the chip unit sale and how little time is left to conclude the deal, which would then need to clear antitrust reviews by the relevant governments, Toshiba should prepare for an alternative scenario for its survival as a listed company, while doing all it can to wrap up the semiconductor unit sale in time.

The struggling electronics and machinery group reported that it incurred ¥965.6 billion in net losses — the largest ever for a Japanese manufacturer — in the year that ended last March, suffering ¥552.9 billion in debts in excess of assets. It took Toshiba weeks beyond the June 30 deadline to file the annual earnings report to the financial authorities — and only with a “qualified opinion” by its auditor, PricewaterhouseCoopers Aarata LLC.

Toshiba management’s difference with the auditor over the handling of the massive losses incurred by its nuclear power business in the United States — the reason the release of the financial report was delayed — was never resolved. PwC Aarata suggested that either all or a significant portion of the ¥652 billion loss posted in the latest business year over Toshiba’s U.S. nuclear unit Westinghouse Electric Co. should have been posted in the previous year — which raises the question as to whether Toshiba, which insisted that it learned of the Westinghouse losses only last December, might have been keeping the losses under wraps. The auditor also gave an “adverse opinion” on Toshiba’s internal controls over the matter, but still issued a qualified approval of the report overall.

If the auditor had judged the Toshiba report to be inappropriate, the company could have faced an imminent risk of being delisted. The outcome shows that Toshiba managed to avert the worst-case scenario by barely clearing the minimum rules required for a listed corporation. The Toshiba management says the governance problem has been resolved now that Westinghouse, which filed for bankruptcy protection in March, is now off the group’s consolidated accounting. But the company still needs to clear many hurdles before it can rebuild its management.

Toshiba shares have been placed on a TSE watch list since the company was mired in a profit-padding scandal in 2015. The company could still be delisted from the TSE depending on the outcome of an ongoing probe by the Japan Exchange Group, which operates the TSE, to determine whether the firm’s internal control has improved.

The TSE rules also mandates the delisting of companies that have a negative net worth for two business years in a row. Toshiba needs to pay off its excess debts by the end of March 2018 in order to remain listed. The company is eying proceeds from selling off its profitable semiconductor unit Toshiba Memory Corp., the world’s second-largest maker of flash memory, to cover the debt. Its negotiations with multiple parties for the sale, however, have become complicated and protracted due to intersecting interests of the bidders, with legal action filed by its U.S.-based partner in the memory business. With just over eight months to go before the end of next March, time is running short for Toshiba to conclude the deal and then be cleared in antitrust reviews by relevant governments.

Toshiba says it’s still possible to conclude the deal in time. But time is apparently not on Toshiba’s side. It’s probably time that Toshiba prepared a “Plan B” in case the sale of memory chip unit by the deadline becomes difficult.

Ultimately, however, remaining listed will not guarantee Toshiba’s revival. What triggered Toshiba’s current management crisis was the collapse of Westinghouse, which it bought in 2006 to expand its overseas nuclear power business. Toshiba needs to reflect on the judgment of its management on the nuclear power business — which was apparently influenced by the government’s policy of promoting nuclear power plant export as a key pillar of the nation’s infrastructure export business — even after the 2011 meltdowns at Tokyo Electric Power Co.’s Fukushima No. 1 plant cut back on overseas demand for nuclear power plants and inflated their costs due to tightened safety regulations.

The Toshiba group’s prospects will continue to remain uncertain after the memory chip unit, which currently earns a major portion of its profits, is sold off. Toshiba still has a long away to go.

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