TOKYO (Reuters) – Japan’s Toshiba Corp shocked investors on Tuesday with a last-minute delay to a long-awaited financial update, saying it needed more time to probe its Westinghouse nuclear business.
Toshiba had been expected to release third-quarter earnings on Tuesday, including the exact size of a writedown for its U.S. nuclear business that is expected to top $6 billion due to hefty cost overruns at two projects, as well as planned remedies.
Instead, the TVs-to-nuclear conglomerate said by email minutes after earnings had been due that it was “not ready”, sending its shares sharply lower.
Toshiba said it was seeking approval from regulators to delay its third-quarter earnings release to March 14, as it further investigated Westinghouse, the U.S. nuclear business it bought a decade ago.
Internal reports suggested controls at Westinghouse had been “insufficient” and it needed to look into whether senior managers at Westinghouse exerted “inappropriate pressure” to advance a U.S. deal to buy the company at the heart of its cost overruns, it said.
“We judged that it would take about a month for external lawyers … to conduct these further probes and for the independent auditors to review the results,” Toshiba said.
A source briefed on the matter said Toshiba had not been able to immediately secure the approval of its auditor, PricewaterhouseCoopers Aarata. The source asked not to be identified because he is not allowed to talk the media.
PricewaterhouseCoopers Aarata declined to comment, citing client confidentiality. Toshiba declined to comment on the audit process.
Tuesday’s last-minute hitch rattled a market that has already halved the value of Toshiba stock since mid December. Its shares finished down 8 percent and the cost of insuring against default rose as investors fretted over the conglomerate’s future.
“The delay shows that the company is in a mess,” said Makoto Kikuchi, chief executive of Myojo Asset Management.
Under Japan’s securities laws, delaying the release of its third-quarter earnings beyond Tuesday would put Toshiba under the bourse’s supervision for possible delisting. It is already on the stock exchange’s watchlist that limits its ability to issue shares.
The Kanto Local Finance Bureau, an arm of the finance ministry, has not yet commented on whether Toshiba will be granted more time to report.
Tuesday had been seen as a day of reckoning for Toshiba, which first warned of a nuclear writedown in December, a year after the group weathered a $1.3 billion accounting scandal that led to a management shakeout.
Sources familiar with the matter have said the nuclear charge will be as high as 700 billion yen ($6.2 billion) – a sum that would wipe out the group’s shareholder equity.
Chief Executive Satoshi Tsunakawa had been expected to use Tuesday’s earnings to address investor concerns. That includes the prospects for its nuclear business, where Toshiba is expected to withdraw from nuclear plant construction, and its efforts to raise capital, for example with the sale of a stake in its memory chip business in Tokyo.
Among the questions for Toshiba’s nuclear business is the future of its stake in British nuclear venture NuGeneration Ltd, which it is expected to market to potential buyers including Korea Electric Power Corp (Kepco).
Asked about the Nikkei report, a Toshiba spokesman earlier declined to comment. A Kepco spokesman declined to comment, as “Toshiba’s nuclear business plan has not been crystallized yet”.
Reuters reported earlier this month that Toshiba was seeking at least a partial exit from the venture, a blow to Britain’s nuclear plans.
(Reporting by Makiko Yamazaki, Taiga Uranaka, Taro Fuse, Ayai Tomisawa and Naomi Tajitsu in Tokyo, Jane Chung in Seoul and Rishika Sadam in Bengaluru, Umesh Desai in Hong Kong; Writing by Tim Kelly; Editing by Clara Ferreira Marques and Edwina Gibbs)
Update: Toshiba to post $6.28 billion writedown.