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Toshiba's April-Dec. operating profit surges as cost cuts pay off

Toshiba Corp. logo is seen at the 4th Live Entertainment EXPO Tokyo at Makuhari Messe on May 31, 2017, in Chiba, near Tokyo. (Getty/Kyodo)

TOKYO (Kyodo) -- Toshiba Corp. said Friday its group operating profit rose more than sevenfold from a year earlier to 62.52 billion yen ($568 million) in the April-December period as it pushed ahead with cost-reduction efforts to offset weaker sales.

    The company also said an internal probe found its subsidiary Toshiba IT-Services Corp. was involved in fictitious transactions with other firms, inflating sales by 43.5 billion yen between November 2015 and July 2019.

    The Japanese conglomerate posted a group net loss of 145.63 billion yen in the nine months that ended Dec. 31, compared to a profit of 1.02 trillion yen in the same period a year earlier.

    The loss reflects a one-off loss stemming from the sale of its U.S. liquefied natural gas operation booked in the fiscal first quarter. Its group net loss narrowed to 480 million yen in the October-December quarter from 60.51 billion yen a year earlier.

    Group sales fell 7.1 percent to 2.46 trillion yen in the nine- month period after deconsolidating its memory chip business as part of restructuring in June 2018 and demand for electronic products such as hard disk drives weakened in China.

    "We believe our business had hit bottom and expect it to turn around toward our target of group operating profit at 140 billion yen in the current business year," Toshiba Chief Financial Officer Masayoshi Hirata said at a press conference.

    For the fiscal year through March, Toshiba kept intact the operating profit forecast while it slashed its group sales forecast to 3.43 trillion yen from 3.44 trillion yen.

    Toshiba is in the midst of restructuring efforts, exiting from unprofitable TV, personal computer and U.S. nuclear power businesses and slashing procurement costs. The company also sold profitable operations such as the memory chip and medical equipment businesses to generate cash and aims to reduce its workforce by 7,000 employees over the five years to March.

    Cost-reduction measures helped lift operating profit by 37.4 billion yen in the April-December period, the company said.

    However, the coronavirus outbreak in China could crimp its reform efforts, as the impact on its earnings remains uncertain.

    Hirata said the company previously expected sales of 100 billion yen in China for February and March but it is unclear whether it would be able to meet the estimate.

    Toshiba restated its earnings for the first half due to the improper transactions at the subsidiary, reducing sales and operating profit by 21.5 billion yen and 900 million yen respectively.

    The company said the transactions were not a company-wide act and the official in change was not aware of the involvement in the fictitious trading of eight companies outside the Toshiba group.

    The latest incident comes after Toshiba was hit by an accounting scandal in 2015 when it admitted that it had deliberately overstated profits for nearly seven years and the company pledged to strengthen governance.

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