Toshiba Cuts Annual Profit Outlook After 75 Percent Drop in Q2 Revenue

Toshiba on Friday cut its full-year operating profit outlook after a 75 percent drop in second-quarter profit — disappointing results that heighten uncertainty about its purchasing prospects.

The Japanese industry association said its earnings were hit by a number of factors including a slowdown in the hard disk drive market and a loss in value from the depreciation of shares in Toshiba’s printing unit.

It cut its profit forecast for the year ending March by almost a quarter to JPY 125 billion (about Rs. 7,240 crore).

Kioxia Holdings, which produces 40 percent of Toshiba’s memory chips, also said it would reduce production by about 30 percent starting in October.

The chip market has been hit hard as demand for smartphones and personal computers slide due to high inflation in many economies, regional tensions and the COVID-19 shutdown in China.

In the July-September quarter, Toshiba posted an operating profit of JPY 7.5 billion (about Rs. 430 crore). That was well short of Refinitiv’s consensus estimate of JPY 36.9 billion (about Rs. 2,140 crore) from four analysts.

The weak income outlook could have an impact on potential buyers of the conglomerate, as, according to sources, Japanese banks are wary of financing the purchase agreement.

A consortium led by private equity fund Japan Industrial Partners (JIP) has submitted an offer to buy Toshiba for about $15 billion (about Rs. 1,21,280 crore) without significant bank commitments, the Nikkei newspaper said on Monday, raising questions about whether the offer would succeed.

Government-backed fund Japan Investment Corp (JIC) is also preparing a proposal. The fund was in talks with US private equity fund Bain Capital and North Asian fund MBK Partners to form a separate consortium, the sources said.

JIP and JIC declined to comment.

Masayoshi Hirata, Toshiba’s chief financial officer, declined to comment on the details of the sale process, saying only that it was at an “important stage”.

© Thomson Reuters 2022

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