Toshiba logs surprise quarterly operating loss as costs surge

Toshiba Corp (6502.T) on Wednesday posted an unexpected operating loss in the first quarter as it grappled with a sharp rise in logistics and raw material costs as well as a global chip shortage.

Chief Financial Officer Masayoshi Hirata told reporters that the conglomerate’s first quarterly loss in two years came amid jumps in prices for steel, copper as well as components sourced 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 4.8 billion yen ($35.6 million) loss in April-June compares with a profit of 14.5 billion yen a year earlier and a Refinitiv consensus estimate for a 19.4 billion yen profit. Analysts had expected the conglomerate to benefit more from weakness in the yen.

Low margins for power-related projects also weighed on its earnings and while Toshiba makes some types of semiconductors, it needs to procure other types used in its electronics and other products from elsewhere.

Toshiba, however, stuck with its annual profit forecast for a 7% rise to 170 billion yen, saying it aims to pass on more costs in product prices.

The scandal-laden Japanese industrial conglomerate, which is exploring going private and other options, last month selected Bain Capital, CVC Capital Partners, Brookfield Asset Management and a consortium involving state-backed Japan Investment Corp and private equity firm Japan Industrial Partners to proceed to a second bidding round.

A buyout of Toshiba could value the firm at as much as $22 billion, sources have previously told Reuters.

Tensions between Toshiba and its activist investors culminated last year when a shareholder-commissioned investigation concluded management had colluded with Japan’s trade ministry – which sees the company’s nuclear and defence technology as a strategic asset – to block overseas investors from gaining influence at its 2020 shareholder meeting.

This year, shareholders rejected management-backed plans to split the company in two, prompting Toshiba to restart its strategic review.

In further news that reflects poorly on its oft-criticised governance problems, Toshiba also said on Wednesday it had found that an employee of a U.S. subsidiary, acting on fraudulent instructions from a third-party, had transferred $3.6 million to a bank account in Hong Kong. The case is currently under investigation.

($1 = 134.98 yen)