Toshiba reports 75% plunge in Q2 operating profit

Toshiba Corp on Friday cut its full-year operating profit outlook after a 75% slump in second-quarter profit – dismal results that heighten the uncertainty surrounding its prospects for a buyout deal.

The Japanese industrial conglomerate said its earnings were being hit by a slew of factors including a slump in the hard disk drive market and an appraisal loss on a drop in printer unit Toshiba Tec Corp’s share prices.

It cut its profit forecast for the year ending in March by roughly a quarter to 125 billion yen ($885 million).

Kioxia Holdings Corp, a memory chip maker some 40% owned by Toshiba, has also said it would cut production by about 30% from in October.

The chip market has been hit hard as demand for smartphones and personal computers slides due to sharply higher inflation for many economies, geopolitical tensions and COVID-19 lockdowns in China.

For the July-September quarter, Toshiba posted an operating profit of 7.5 billion yen ($53.2 million). That was far short of a Refinitiv consensus estimate of 36.9 billion yen from four analysts.

The weak earnings outlook could have implications for would-be buyers of the conglomerate, given that, according to sources, Japanese banks are cautious about financing a buyout deal.

A consortium led by private equity fund Japan Industrial Partners (JIP) submitted a bid to buy Toshiba for around $15 billion that lacks key commitments from banks, the Nikkei newspaper said on Monday, raising questions about whether the offer can succeed.

State-backed fund Japan Investment Corp (JIC) is also preparing a proposal. The fund has been in talks with U.S. private equity fund Bain Capital and north Asia fund MBK Partners to form a separate consortium, sources have said. Reuters