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Toshiba in turmoil

Toshiba posts $1.31bn net loss for April-June quarter

Toshiba Memory's poor performance and sale of LNG business were big contributors

Production at Toshiba Memory Holdings' plant in Yokkaichi, Mie Prefecture, was partially suspended due to a power failure in June.   © Reuters

TOKYO -- Toshiba reported a net loss of 140.2 billion yen ($1.31 billion) for the April-June quarter, the company said on Wednesday, blaming an extraordinary loss resulting from the sale of a U.S. liquefied natural gas business and a poor performance at Toshiba Memory Holdings.

Toshiba's operating profit increased thanks to improvements at its social infrastructure business and other units, but its overall earnings remain beholden to the semiconductor business.

Toshiba's sales fell 3% on the year to 813.1 billion yen, while operating profit jumped almost 10.7 times on the year to 7.8 billion yen. The consensus among respondents to a QUICK survey was for a quarterly operating profit of 11 billion yen.

The 140.2 billion yen net loss was mainly due to a loss of about 90 billion yen that resulted from the sale of a U.S. LNG business to French energy giant Total. The sale was announced in June.

Toshiba Memory Holdings' earnings were dragged down by a decline in prices for its mainstay NAND flash memory chips and by the partial shutdown of the company's Yokkaichi plant in Mie Prefecture due to a power outage.

Investors appear to have pretty much factored in the results. After the announcement, which was made during trading hours, the company's share price increased and decreased before settling close to the pre-announcement level.

Toshiba has positioned social infrastructures -- elevators, water supply facilities, sewage systems -- as the core of its new five-year medium-term management plan, which began with the current fiscal year.

The company is maintaining its forecast of a 140 billion yen operating profit for fiscal 2019, up 3.9 times from the previous year. But it also expects its earnings to continue to be greatly affected by Toshiba Memory on a bottom-line basis despite having cut in its equity stake in the chipmaker to 40%.

Market projections put Toshiba's operating profit at 124.1 billion yen, lower than the company's target, as analysts point out continuously weak earnings of system-on-a-chip semiconductors.

These chips, adopted by Sony's PlayStation, used to be a cash cow for Toshiba. But the company has failed to capitalize on new demand from data center operators and other businesses. As a result, the semiconductor division, pressured by high fixed and development costs, remained in the red for the April-June quarter.

In May, Toshiba announced an additional workforce cut at its chip business. It plans to raise the ratio of operating profit to sales to more than 5% by the end of fiscal 2020 by focusing operations on autonomous driving and other growth sectors.

But analysts remain skeptical. Hisashi Moriyama of JPMorgan Securities Japan said Toshiba will be unable to chalk up stable profit if it fails to develop "highly distinctive areas" because of intense competition among chipmakers.

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