Toshiba vows ‘bold’ revamp after reporting annual loss

Toshiba executives bow during a news conference

Toshiba Corp. Pre-­sident Masashi Muromachi said the industrial group planned a “bold restructuring” of its chip-making and lifestyle divisions after reporting an annual loss and restating six years’ worth of earnings.
The net loss was 37.8 billion yen (USD318 million) in the 12 months ended March, compared with revised net income of 60.2 billion yen a year earlier. Muromachi said he would outline the revamp within the year, while the Tokyo-based company didn’t give dividend or earnings forecasts for fiscal 2015.
Adjustments because of accounting irregularities wiped out net income from businesses that span nuclear reactors, memory chips and laptop computers. Muromachi, who was named president after top executives resigned over earnings misstatements, repeated apologies to investors at a yesterday evening news briefing. The company’s shares had risen after it reported earnings.
“The announced fiscal year loss is within the range of what investors have been expecting, so investors are buying back the shares,” said Mitsushige Akino, an executive officer at Ichiyoshi Asset Management Co. in Tokyo. “But in the long run, it is unclear how Toshiba will change.”
Toshiba’s chip business has been its most profitable, with the electronic devices and components division accounting for more than 100 percent of operating income in the year ended March 2015. Its lifestyle segment, which includes PCs, televisions and home appliances, accounted for an operating loss of about 110 billion yen in the year.
The company nominated Shinzo Maeda, former president of cosmetics maker Shiseido Co., as chairman of the board. It will also reduce the number of directors to 11 from 16 and will appoint at least half of its board from outside the company, according to a statement yesterday.
Toshiba also outlined steps to reform a corporate culture blamed for pressuring managers to meet unrealistic targets, and to reinforce the audit committee’s supervisory function.
Japan’s Chief Cabinet Secretary Yoshihide Suga said yesterday investigations into Toshiba’s accounting irregularities will continue and that the company’s failure to provide correct information was “a big problem.”
The country’s financial regulator has said it’s probing the company, which issued almost 1 trillion yen of stocks and bonds when it was inflating earnings statements, leaving it exposed to possible fines and investor lawsuits.
Toshiba set aside 8.4 billion yen to cover possible fines, according to the company’s statement yesterday.
Under Japanese law, the Securities and Exchange Surveillance Commission can recommend fines against a company that sells securities based on a material misstatement.
No charges have been filed and the regulator has yet to impose any fines.
Separate provisions in the Financial Instruments and Exchange Act carry criminal penalties for false financial reporting. People who submit false financial statements may face as long as 10 years in prison or maximum fines of 10 million yen. Companies can be fined as much as 700 million yen.
Toshiba rose 1.8 percent to 352.7 yen yesterday in Tokyo. The shares have dropped 31 percent this year, compared with a 2.7 percent gain for the Topix index. The company will hold an extraordinary general meeting on Sept. 30, it said.
Writedowns to net income from the years ending March 2009 to March 2014, plus the first three quarters of the next year, totaled 155.2 billion yen, according to yesterday’s statement. The biggest was a 64 billion yen reduction in profit for the year to March 2013 to 13.4 billion yen. Takashi Amano and Grace Huang, Bloomberg