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Toshiba’s profit tumbles 99% on weak chips

  Japan’s Toshiba posted a 99% plunge in quarterly operating profit on Wednesday, dragged down by weakness in its mainstay chip operations, but it stuck to its recently revised outlook above expectations.

 

The world’s No.2 maker of NAND flash memory is fighting chronic falls in chip prices, which are leading to losses and consolidation throughout the sector as chip makers band together to survive. A slowdown in the global economy is dampening demand for NAND flash memory chips, used in music players such as Apple’s iPod and digital cameras. Quarterly profit fell at South Korean rival Samsung Electronics, while Hynix Semiconductor reported a loss.

Toshiba is re-examining its aggressive plans to ramp up capacity and catch up to Samsung as cash suddenly becomes all-important and rating downgrades raise concerns of higher financing costs for itself and its partner SanDisk. Toshiba, which also makes nuclear reactors, PCs, mobile phones and LCD TVs, expects to post an operating profit of ¥150 billion ($1.5 billion) in the year to March, down 37% from the previous year.

That is still above the consensus estimate of ¥117 billion by 12 analysts who lowered their estimates after the firm revised down its forecast in September.

Toshiba shares have shed about 59% since the start of the year, but jumped 11% on Wednesday before its earnings announcement as the benchmark Nikkei share average jumped 7.7%. Toshiba reported an operating profit of ¥707 million in July-September, down from a ¥61.3 billion profit a year earlier on a 7.3% fall in sales to ¥1.88 trillion.

It posted a net loss ¥26.9 billion, down from a profit of ¥25.0 billion the previous year. Prior to the results announcement, shares in Toshiba, which also competes with domestic peers Hitachi and Mitsubishi Heavy Industries in nuclear energy, closed up 11%, against the benchmark Nikkei average, which jumped 7.7%. Toshiba shares fell 42% in the three months to September 30 versus a 16% fall in the Nikkei. (Reuters)