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Toshiba Reports A Surprising Quarterly Operational Deficit Due To Rising Costs

Toshiba Reports A Surprising Quarterly Operational Deficit Due To Rising Costs
Toshiba Corp reported an unexpected operational loss in the first quarter on Wednesday, blaming it on rising logistical and raw material costs, as well as a global chip shortage.
Masayoshi Hirata, the conglomerate's chief financial officer, told reporters that the company's first quarterly loss in two years was caused by price increases for steel, copper, and components acquired from suppliers.
"We have been able to only offset about half the impact of higher materials and logistics costs with price hikes," he said.
Its April-June loss of 4.8 billion yen ($35.6 million) contrasts to a profit of 14.5 billion yen a year earlier and a Refinitiv average expectation of a profit of 19.4 billion yen. Analysts expected the group to benefit more from yen weakness.
Low margins for power-related ventures impacted  its earnings, and while Toshiba manufactures some types of semiconductors, it must source others for use in its electronics and other products.
Toshiba, on the other hand, maintained its annual profit prediction of a 7 per cent increase to 170 billion yen, stating that it intends to pass on more costs in product prices.
The scandal-plagued Japanese industrial behemoth chose Bain Capital, CVC Capital Partners, Brookfield Asset Management, and a consortium comprised of state-backed Japan Investment Corp and private equity firm Japan Industrial Partners to move to a second bidding round last month. 
Sources have told the media that a purchase of Toshiba may be worth up to $22 billion.
Tensions between Toshiba and its activist investors reached a climax last year when a shareholder-commissioned investigation concluded that management conspired with Japan's trade ministry - which views the company's nuclear and defense technology as a strategic asset - to prevent overseas investors from gaining influence at its 2020 shareholder meeting.
Shareholders rejected management-backed plans to split the business in half this year, causing Toshiba to relaunch its strategic assessment.
Toshiba also revealed on Wednesday that an employee of a U.S. subsidiary, acting on fraudulent instructions from a third party, had moved $3.6 million to a bank account in Hong Kong, highlighting the company's frequently criticized governance issues. The case is being investigated at the moment.

Christopher J. Mitchell

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