Toshiba Corp. lost a fifth of its market value Wednesday after the Japanese conglomerate warned it might have to take a multibillion-dollar write-down related to its nuclear power business in the US.
The drop followed a 12 percent share-price decline on Tuesday after initial reports of the write-down, the Wall Street Journal reports.
Toshiba said the problem stemmed from cost overruns at its US nuclear subsidiary, Westinghouse Electric Co., which it acquired in 2006 when prospects for the nuclear industry looked bright.
Westinghouse is building a new generation of power reactors but has been beset by construction difficulties that have increased project costs everywhere.
Westinghouse has been working on new reactor projects in Georgia and South Carolina with CB&I Stone & Webster Inc., a US company that it acquired in December 2015 for US$229 million. Toshiba said this week it discovered unexpected inefficiencies in the labor force at the subsidiary that along with other factors were driving up costs.
It isn’t clear if Toshiba’s financial difficulties will have an impact on the eight reactors it is trying to complete in the US and China, but its disclosure suggests the situation is worse than previously understood.
“It’s an unexpected development at a time when concerns had been receding,” said Yoshinori Ogawa, strategist at Okasan Securities. Toshiba shares had surged since February on optimism about its semiconductor business and expectations for solid net profit in the current fiscal year ending March 2017.
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