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Toshiba's future at risk as financial results reported

Toshiba's future at risk as financial results reportedToshiba Corp., the 142-year-old conglomerate, warned it may not be able to continue as a going concern as it grapples with billions of dollars in losses from its Westinghouse Electric nuclear business, The Bloomberg reported on Tuesday.

The disclosure came as the Japanese company reported earnings for the third quarter after missing two previous deadlines for financial results. Toshiba posted an operating loss of 576.3 billion yen ($5.2 billion) for the nine months ended December 31 and said it had negative shareholders equity of 225.6 billion yen at the end of the period, although the earnings statement hadn’t been approved by auditor PricewaterhouseCoopers Aarata.

Toshiba has been at odds with its auditors over internal controls at Westinghouse, which has filed for bankruptcy in the U.S. The company said Tuesday it found instances of “inappropriate pressure” internally to push through the acquisition of a U.S. construction firm specialising in atomic plants, but that had no bearing on financial results. Toshiba’s inability to report earnings has raised speculation of a possible delisting from the Tokyo Stock Exchange and pushed the shares 20 percent lower this year.

Toshiba has missed financial filing deadlines even before the current crisis. The company pushed back earnings announcements twice amid an accounting scandal in 2015, delaying the release by about four months. In theory, there is no limit on how many times the company can request an extension.

The TSE kept Toshiba on its list of securities on alert in a December announcement, after originally being included for overstating profits from 2008 through 2014. The company last month submitted a report detailing plans to improve internal controls. If deemed insufficient, the company will face delisting.

Even if Toshiba clears these hurdles, there is a longer-term threat to stakeholders. The nuclear business writedown has pushed Toshiba’s liabilities beyond its level of assets. If the company can’t reverse the situation in the fiscal year just ended, it could face demotion to the second section of the Tokyo Stock Exchange. That would in turn force an automatic selloff by some index funds. If the situation persists for two straight years, it will be delisted.

Toshiba has responded by putting its prized memory chip unit up for sale and is narrowing down a list of bidders. Taiwan’s Hon Hai Precision Industry Co., South Korea’s SK Hynix Inc. and chipmaker Broadcom Ltd. have all submitted preliminary bids for the Toshiba business valued at 2 trillion yen or more.

In the meantime, Toshiba has sought additional financial support from banks, offering stock holdings and real estate as collateral to lenders.
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