Toshiba CEO plans to overcome supply chain woes in H2

Toshiba CEO plans to overcome supply chain woes in H2

Tokyo: Japan’s Toshiba Corp said on Thursday it expects its operations to recover in the second half of this financial year after being hit by supply chain disruptions in the wake of the 11 March earthquake and tsunami.

Corporate confidence in Japan recorded its biggest ever plunge in a Reuters poll published on Thursday, as the aftermath of the disaster continued to hobble supplies of parts, materials and power.

But chief executive Norio Sasaki said he expected the impact on Toshiba to be relatively short-lived and that the company’s infrastructure division would likely profit from the rebuilding of the disaster zone.

“Even if there is an effect in the first and second quarters, I think we can return to normal in the second half of the year," he told reporters.

He said the company had secured a certain amount of alternative supplies of parts and materials for its products, including silicon wafers for its chip business.

Sasaki also said he sees limited impact on earnings for the year ended 31 March from the disasters, adding that sales and operating profit were likely to be slightly less than forecast, but that there was a possibility net profit could be higher than guidance.

Shares of the sprawling conglomerate turned positive after his comments and ended up 2%, outperforming a flat broader market.

Toshiba’s shares have fallen nearly 18% since 11 March, as investors watched the crisis at the Fukushima nuclear plants and worried about the company’s involvement in the nuclear industry.

Rival conglomerate Hitachi’s shares have fallen by the same amount.

Toshiba has forecast an operating profit of ¥250 billion for the financial year that ended in March, compared with an analyst consensus of ¥254 billion, based on a survey of 22 analysts by Thomson Reuters I/B/E/S.

The company is due to release results on 9 May.

Sasaki, a former nuclear engineer, said he still saw nuclear power as a good option, given concerns about energy security and global warming, but that it was difficult to make assessments about Toshiba’s nuclear business until the Fukushima crisis was resolved.

Toshiba says it is Japan’s biggest supplier of nuclear reactors. It was the main contractor for two of the reactors at the Fukushima Daiichi nuclear plant, and joint contractor for two others, and has 1,400 staff helping with the effort to bring the plant under control.

In 2006 it acquired a majority stake in Westinghouse of the United States for $5.4 billion in a bid to become a global player in nuclear power.

Toshiba’s nuclear power business had targeted annual revenue of ¥1 trillion and orders for 39 nuclear reactors by the financial year ending in March 2016.

“The actual start of construction could be delayed. But clients’ attitude will depend to a large degree on how and when the Fukushima problem is resolved," Sasaki said.

He said no potential clients had informed Toshiba that they were giving up on nuclear reactors, but added that safety regulations would likely be tightened.

Sasaki said there was almost no risk of impairment of goodwill at its Westinghouse unit, despite potential delays to contracts as public opinion in some countries turns against nuclear power.

“As things stand, there is almost no risk of impairment," he said. “The actual source of profit is existing plants and fuel, so even if new plants are somewhat delayed, that will not lead to impairment," Sasaki said.

Both Toshiba and Hitachi have submitted proposals for decomissioning the damaged Fukushima reactors.