Toshiba’s Q1 sales, profits plunge

(Reuters) — Toshiba (TYO:6502) swung to a 1st-quarter loss on weak PC and TV sales, raising pressure on its new CEO to speed up a business revamp in addition to improving governance after a $1.3 billion accounting scandal.

The laptops-to-nuclear power conglomerate today reported an April-June operating loss of ¥10.96 billion ($91 million), compared with a ¥47.7 billion profit a year earlier.

Operating profits for Toshiba’s healthcare business slid -85.6% to just ¥87 million ($724,000) despite sales growth of 14.0% to ¥81.49 billion ($678.3 million). The company said the sales growth reflected “firm” revenues from medical imaging systems, especially CT systems in North America and emerging economies. Toshiba said the healthcare unit’s operating income slide was due to increased R&D spending on diagnostic imaging devices.

Toshiba confirmed last week it had overstated profits going back to fiscal 2008/09 by ¥155 billion. It also reported a -¥37.8 billion net loss for the last financial year through March to reflect more costs and conservative estimates on operations, including the South Texas Project, a U.S. power plant project.

An accounting probe found in July that Toshiba suffered from dysfunctions in governance, with employees discouraged from challenging unrealistically high targets set by superiors.

Previous CEO Hisao Tanaka and several other board members stepped down amid the scandal, and the company has promised to improve its governance by bringing in more outside directors.

New CEO Masashi Muromachi said today he was also considering an overhaul of its weaker operations. Analysts expect big cost cuts in weaker operations such as PCs and TVs.

“I’m currently considering various options for structural reforms that will be both drastic and without limitations,” he told a news conference, adding that he aimed to announce some details in late October or early November.

He also said he did not plan to stay in his CEO role for too long, and that he wanted to hand over to a successor after restructuring and preparing the company for future growth.

The quarterly results showed revenue fell 5% from a year earlier to ¥1.35 trillion. Net PC sales fell 31% to ¥116.8 billion  while TV sales roughly halved to ¥21.8 billion, it said.

Toshiba’s nuclear business also struggled, and its energy and infrastructure unit recorded an operating loss of ¥10.7 billion compared with a profit of ¥10 billion a year earlier.

With today’s announcement, Toshiba has finally caught up with its regular financial disclosures. It had twice postponed its full-year results due to the accounting investigation, raising fears the company could be delisted from the Tokyo bourse.

The bourse said today it placed Toshiba shares on a watch list and fined the company ¥91.2 million for betraying investors’ trust.

Financial regulators are widely expected to impose a separate and more serious fine.

Toshiba shares fell 2% today in Tokyo, ahead of the announcement of the quarterly results. They have tumbled around 38% since the company first disclosed the accounting problems in early April.

($1 = ¥120.14)

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