Toshiba announces ”billions of dollars” loss in relation with US nuclear power acquisition

Tokyo-listed electronic manufacturer Toshiba Corp. announced it may need to log a loss amounting to several billion dollars in relation with a US nuclear power project. The news drove down the companys stock almost 12% on Tuesday, which has been the largest daily retreat since December 22nd 2015. According to the statement, cost overruns at US power projects may turn out to be much larger than initially projected, which would suggest a huge potential writedown.

Toshiba shares closed lower for a fifth consecutive trading session on Tuesday. The stock went down 11.62% (JPY 51.50) to JPY 391.60, after falling to as low as JPY 371.00, or a level not seen since November 10th (JPY 369.20). In the week ended on December 25th the shares of the Japanese group lost 3.15% of their market value compared to a week ago, which marked a second consecutive period of decline and also the steepest one since the week ended on November 6th. The stock has extended its slump to 7.90% so far during the current month, following four successive months of gains. In November Toshiba shares appreciated 11.60%.

The announcement comes at a moment, when the Japanese group, under the leadership of the new CEO Satoshi Tsunakawa, is trying to rebuild stakeholders trust in the company following the $1.3 billion accounting scandal and the writedown of over $2 billion in relation with its nuclear business during the preceding financial year.

The US nuclear acquisition also coincided with the finalization of a record-high fine imposed on Toshiba by Japanese regulator authorities for accounting abnormity.

“This indicates that corporate governance controls at one of Japans largest and most consequential companies may have been extremely weak”, said Tom OSullivan, a former investment banker and founder of energy consultancy Mathyos Japan, cited by Reuters. According to OSullivan, the developments from the case may further weaken confidence in Toshiba as well as its international nuclear credentials.

The electronic manufacturer has projected approximately JPY 145 billion in net profit during the current financial year, which would be a partial recovery from the JPY 460 billion loss in the prior period, as demand for flash memory chips from Chinese smart phone producers has been rising.

As of late September 2016, shareholders equity at Toshiba amounted at JPY 363 billion (7.5% of company assets), while in case of a considerable writedown, that figure could shrink tremendously.

Daily and Weekly Pivot Levels

With the help of the Camarilla calculation method, Wednesdays levels of importance for the Toshiba stock are presented as follows (in Japanese Yens):

R1 – 394.73
R2 – 397.85
R3 (Range Resistance – Sell) – 400.98
R4 (Long Breakout) – 410.36
R5 (Breakout Target 1) – 421.31
R6 (Breakout Target 2) – 427.59

S1 – 388.47
S2 – 385.35
S3 (Range Support – Buy) – 382.22
S4 (Short Breakout) – 372.85
S5 (Breakout Target 1) – 361.89
S6 (Breakout Target 2) – 355.61

By using the traditional method of calculation, the weekly levels of importance for Toshiba Corp. (6502) are presented as follows (in Japanese Yens):

Central Pivot Point – 449.70
R1 – 461.40
R2 – 476.70
R3 – 488.40
R4 – 500.10

S1 – 434.40
S2 – 422.70
S3 – 407.40
S4 – 392.10