Toshiba may book big loss on U.S. nuclear acquisition, shares plunge

By Makiko Yamazaki

TOKYO (Reuters) - Toshiba Corp said it may book a goodwill impairment loss of several hundreds of billion yen on a U.S. nuclear power acquisition - a shock warning that sent it stock tumbling 12 percent and rekindled concerns about its accounting acumen.

Toshiba did not specify a figure in its statement, which relates to the acquisition of Chicago Bridge & Iron's (CB&I) nuclear construction business in December last year for $229 million by its Westinghouse division.

Potential losses reported by domestic media have ranged from 100 billion yen to 500 billion yen ($850 million to $4.3 billion).

Huge losses would be another slap in the face for a sprawling conglomerate hoping to recover from a $1.3 billion accounting scandal as well as a writedown of more than $2 billion for its nuclear business in the last financial year.Tom O'Sullivan, a former investment banker and founder of energy consultancy Mathyos Japan, noted the acquisition coincided with the finalising of a record fine by Japanese regulators for accounting irregularities at Toshiba.

"This indicates that corporate governance controls at one of Japan's largest and most consequential companies may have been extremely weak," he said, adding the developments may further undermine confidence in Toshiba and significantly weaken its international nuclear credentials.

Toshiba said a board meeting would be held on Tuesday and any necessary announcements would be made after that.

Since the completion of the deal with CB&I, the two firms have clashed over calculations for working capital and who should shoulder potential liabilities related to cost overruns at two delayed U.S. nuclear power plant projects, with CB&I suing Westinghouse after Westinghouse said it was owed more than $2 billion.

Shares in Toshiba, which remains on the Tokyo bourse's watchlist due to concerns about the firms' internal controls, finished 12 percent lower. At one stage they plunged as much as 16 percent to their lowest level in more than a month.

Toshiba, led by new CEO Satoshi Tsunakawa, has positioned its nuclear and semiconductors businesses as key pillars of growth while seeking to scale down less profitable consumer electronics units such as personal computers and TVs.

It has forecast a full-year net profit of about 145 billion yen this financial year, a turnaround from a loss of 460 billion yen, thanks to strong demand for flash memory chips from Chinese smartphone makers.

But any big losses are likely to force Toshiba to boost a capital base that has been weakened by range of restructuring steps taken in the wake of the accounting scandal.

As of the end of September, Toshiba had shareholders' equity of 363 billion yen, or just 7.5 percent of assets, which could fall close to zero if the company is forced to log significant losses.

Tsunakawa, who took the helm in June, has pledged to rebuild trust in the firm and has said he would prioritise beefing up Toshiba's capital base.

Masahiko Ishino, an analyst at Tokai Tokyo Research Center, said the focus may soon shift to whether Toshiba will divest some of its businesses if the latest loss wipes out its shareholders' equity.

"There will be a lot of companies that want to buy Toshiba's businesses," Ishino said. "It is possible that its NAND flash memory business would attract various buyout offers as there are few players in the market," he said.

($1 = 117.4200 yen)

(Reporting by Makiko Yamazaki; Additional reporting by Aaron Sheldrick, Ayai Tomisawa, Yoshiyuki Osada and Chris Gallagher, in Tokyo and Aparajita Saxena in Bengaluru; Editing by Edwina Gibbs)