Corporate Finance

Toshiba to Write Down Nuclear Business by $2.3B

Analysts had long expected the big decrease in the operation's goodwill.
Katie Kuehner-HebertApril 26, 2016

After years of criticism that the company’s outlook on the business was too optimistic, Toshiba on Tuesday said it would write down the value of its nuclear-power-plant business, including that of the company’s U.S. subsidiary, Westinghouse Electric Co.

The Tokyo-based electronics firm said it would book the one-time loss of ¥ 260 billion (about $2.3 billion) to reflect a change in the business’s earnings prospects and Toshiba’s financial standing.

“The forecast for Toshiba’s financial condition has deteriorated significantly, bringing changes to Toshiba’s funding environment, including rating downgrading,” the company said in a release.

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The impairment charge will be recorded in results for the fiscal year that ended on March 31, due to be reported May 12.

The writedown also lowered Toshiba’s earnings forecast for the recently ended fiscal year to an operating loss of ¥ 690 billion ($6.19 billion), from ¥ 430 billion ($3.86 billion). However, the company’s net-loss forecast was narrowed to ¥ 470 billion ($4.22 billion) from ¥ 710 billion ($6.37 billion), due to a gain from last month’s sale of its medical-equipment arm to Canon.

The writedown of Westinghouse’s goodwill value was long expected by analysts, according to The Wall Street Journal.

“Indeed, when it paid $5.4 billion for its majority stake a decade ago, analysts questioned the cost of deal and the profitability of the U.S. builder of nuclear power plants,” the WSJ wrote. “The questions only grew louder after the March 2011 earthquake and tsunami wrecked Japan’s Fukushima nuclear plant, clouding the industry’s outlook.”

Toshiba’s securities are now in danger of being delisted on Tokyo Stock Exchange due to the writedown, another setback after the company last year admitted it had been overstating financial results for years. Current chief executive Masashi Muromachi, appointed to a one-year term after after his predecessor resigned in the wake of the accounting scandal, is ready to step down when that period expires in June, sources told the WSJ.

Muromachi didn’t confirm his impending depature at a new conference on Tuesday but said that if a successor is appointed it will be announced at the earnings briefing next month.