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Toshiba in Turmoil

Toshiba to sell US LNG business to China's ENN Energy

Electronics maker could take nearly $880m bath as it starts new restructuring

Toshiba has found a buyer for its LNG terminal in the U.S. state of Texas.

TOKYO -- Toshiba will sell its U.S. liquefied natural gas business to Chinese gas producer ENN Ecological Holdings by the end of this fiscal year, the Japanese conglomerate announced on Thursday. Toshiba is expected to incur a loss of nearly 100 billion yen ($880 million) on the deal.

Earlier estimates suggested the electronics maker was facing a potential loss of as much as 1 trillion yen from the LNG business, due to volatile prices of the fuel. The troubled company is trying to turn itself around, in part, by jettisoning loss-making operations.

"We are moving to a more stabilized business model by removing risk segments," Toshiba CEO Nobuaki Kurumatani told reporters in Tokyo.

In a rare move for an electronics maker, Toshiba in 2013 entered the LNG market in the U.S. state of Texas. The company has a stake in a business that turns U.S. shale gas into LNG. The operation is committed to selling about 2.2 million tons of LNG a year for 20 years, starting in 2019.

Now, though, Toshiba stands to record a 93 billion yen expenditure for fiscal 2018 to carry out the deal with the Chinese company.

ENN is a major private gas producer listed on the Hong Kong stock exchange. In China, the company supplies gas in cities, operates pipelines and engages in gas trading. Its total annual sales of natural gas, at 19.6 billion cu. meters, are nearly 30% larger than those of the largest Japanese gas company, Tokyo Gas.

ENN appears to be looking to diversify its supply sources by purchasing the Toshiba operations.

Toshiba also announced it would withdraw from a U.K. nuclear power plant construction project, after failing to offload the business. It will start the windup process of British nuclear arm NuGen in January 2019.

These dominoes are falling after Toshiba was forced to sell its profit-generating chip business in June, to cover massive losses from the bankruptcy of U.S. nuclear power subsidiary Westinghouse Electric. The rebuilding effort continues, with the company also saying on Thursday that it would push a restructuring plan that includes 7,000 job cuts globally over five years, along with a 15% reduction or reorganization of manufacturing bases.

The memory business used to drive the company's growth. "We were focusing massively on semiconductors in the past," Kurumatani said, "but not businesses which would certainly bring profit if we invested."

The CEO emphasized the company's determination to invest in long-term growth, including lithium-ion batteries for automobiles and trains, as well as internet of things-related endeavors. From fiscal 2019 to 2023, the conglomerate plans to invest 810 billion yen into such industries.

The company expects to generate more than 4 trillion yen in sales for fiscal 2023, with a 10% operating profit margin. "We have enough competitiveness as a physical platformer with various devices," Kurumatani said, "so we need to focus on digitizing our business model."

Alongside the restructuring plan, Toshiba on Thursday announced its results for the April-September period.

The company's net profit for the half totaled 1.08 trillion yen, thanks to gains from the sale of the semiconductor business. But operating profit came to 6.9 billion yen, falling 80% as the company struggled to adapt to life without the chip segment.

Sales were down 5%, at 1.77 trillion yen, with the energy business still weighing on performance.

The company anticipates a 14% jump in net profit for the full year through next March, to 920 billion yen. But that is expected to come with an 8.8% drop in sales, to 3.6 trillion yen.

Investors responded favorably as news of Toshiba's restructuring initiative spread. The stock jumped 6% from the previous day in early Thursday trading, and headed even higher after the noontime official announcement of the plan, the half-year results and a stock buyback. After that, the price was up nearly 14%, touching 3,810 yen.

Nikkei staff writers Eri Sugiura and Jada Nagumo contributed to this article.

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