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Toshiba sheds more assets, cuts jobs to regain investor trust

Reuters  |  TOKYO 

By Yamazaki

TOKYO (Reuters) - Corp announced on Thursday it is shedding assets, cutting jobs and buying back its stock starting this week, sending its shares up 13 percent, as the once-mighty Japanese conglomerate aims to regain investor confidence.

The company announced it is liquidating its British nuclear power unit and selling its U.S. liquefied natural (LNG) business to China's as part of a new five-year business strategy, which also includes 7,000 job cuts, or 5 percent of its workforce, over five years.

Toshiba's shares surged 12.7 percent to close near two-year highs after the announcement, helped also by a much anticipated move to repurchase up to 40 percent of its own shares starting Friday.

The 143-year-old company has been trying to win back the market's trust after a 2015 accounting scandal uncovered widespread irregularities at the for years.

The scandal forced it to recognise huge cost overruns at now-bankrupt U.S. nuclear unit Westinghouse, prompting it to sell its unit earlier this year to a consortium led by U.S. private equity firm and leaving it with few growth businesses.

"There had been reports about a possibility of selling non-performing business and job cuts so such moves had been expected at some point. But investors are taking heart," said Hiroyuki Fukunaga, of Investrust, a financial advice firm.

"The share buyback announcement worth up to 40 percent of outstanding shares is definitely positive, too."

had already promised a share buyback of 700 billion yen earlier this year, but the timing had been undecided. Its announcement on Thursday appeared to outweigh a weaker profit forecast - the company said it now expects a full-year operating profit of 60 billion yen rather than a previous estimate of 70 billion yen.

STEMMING LOSSES

had been trying to shed the troubled assets that could have exposed the Japanese company to future losses.

The decision to liquidate NuGen, however, would be a blow to Britain's plans to build a nuclear plant that was meant to provide 7 percent of the country's

said 18 months of negotiations with a range of potential owners had failed to yield any deal, and that it was now up to the and the to determine the future of the Moorside site in Cumbria.

South Korea's state-run (KEPCO) had been in talks with Toshiba to buy a stake in South Korea's said on Thursday it will coordinate with the and monitor the liquidation process with KEPCO.

Toshiba said it will sell the business to ENN Ecological Holdings, a unit of Chinese company

It has spent years trying to either sell the to power customers or offload the business after signing a 20-year contract to buy from in a venture announced in 2013. Asian prices have plunged 42 percent in the past five years, raising fears of future losses.

Toshiba will be paying the buyer $821 million to assume its commitment to purchase 2.2 million tonnes per year of the fuel from LNG in - a cost booked as a charge for the current financial year.

The company said its exit from the troubled businesses, along with the job cuts and other restructuring moves, will help it bolster its profitability in the longer run. It forecast an operating profit of 240 billion yen in fiscal 2021 compared to 60 billion yen in the current year.

(Reporting by Yamazaki; Additional reporting by Ayai Tomisawa; in BEIJING and Jane Chung in SEOUL; Writing by Ritsuko Ando; Editing by Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, November 08 2018. 14:49 IST
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