Shares of Toshiba Corp. fell 20 percent Wednesday, the most since 1974, after the company announced that it may need to write-down billions of dollars due to an acquisition U.S. nuclear power plant construction company – Westinghouse Electric. The U.S. unit was building the newest generation of reactors at two facilities, and as it turns out the projects are years behind schedule and billions of dollars over budget.
The U.S. power projects are handled by the CB&I Stone & Webster Inc., which the Japanese company has acquired last December from Chicago Bridge & Iron Company NV (CB&I). Toshiba has now announced that cost overruns would be greater than expected. The plan initially was to use nuclear and semiconductors businesses as pillars of growth while reducing reliance on less profitable electronics, like personal computers and TVs.
Toshiba Chief Executive Officer, Satoshi Tsunakawa, only took the job this June, right after the previous CEO undertook a restructuring procedure to fix up the company’s books. “We would have needed to boost our capital base anyway because our shareholders’ equity ratio is low,” Tsunakawa explained to journalists.
Tom O’Sullivan, founder of energy consultancy Mathyos Japan, said in a statement, “This will come as an additional shock to Toshiba’s institutional investors that may further undermine confidence in company management, as well as significantly weakening its international nuclear credentials.”