Toshiba Corp is liquidating its British nuclear power unit and selling its U.S. liquefied natural gas (LNG) business, as the once-mighty industrial conglomerate seeks to unload troubled assets and regain investors’ confidence.
The plans are part of a new five-year business strategy Toshiba announced on Thursday, which also included 7,000 job cuts, or 5 percent of its workforce, over five years.
The company’s shares surged as much as 13.7 percent to near two-year highs after the announcement, helped also by a much anticipated move to repurchase up to 40 percent of its own shares starting Friday. They closed 12.7 percent higher.
Toshiba has been trying to win back the market’s trust after a 2015 accounting scandal uncovered widespread irregularities at the laptops-to-nuclear conglomerate for years.
The scandal forced it to recognize huge cost overruns at now-bankrupt U.S. nuclear unit Westinghouse, prompting it to sell its prized memory chip unit earlier this year to a consortium led by U.S. private equity firm Bain Capital and leaving it with few growth businesses.
“There had been reports about a possibility of selling non-performing business and job cuts so such moves had been expected at some point. But investors are taking heart,” said Hiroyuki Fukunaga, chief executive of Investrust, a financial advice firm.
“The share buyback announcement worth up to 40 percent of outstanding shares is definitely positive, too.”
Toshiba had already promised a share buyback of 700 billion yen earlier this year, but the timing had been undecided. Its announcement on Thursday appeared to outweigh a weaker profit forecast – the company said it now expects a full-year operating profit of 60 billion yen rather than a previous estimate of 70 billion yen.
Toshiba has been trying to shed troubled assets that could have exposed the Japanese company to future losses.
The decision to liquidate NuGen, however, would be a blow to Britain’s plans to build a nuclear plant that was meant to provide 7 percent of the country’s electricity. Reuters was the first to report last month that Toshiba was considering liquidating NuGen.
South Korea’s state-run Korea Electric Power Corp (KEPCO) has been in talks with Toshiba to buy a stake in NuGen. South Korea’s energy ministry said on Thursday it will closely coordinate with the British government on the NuGen project, while monitoring the liquidation process with KEPCO.
On the LNG project, Toshiba did not identify the buyer, saying that it was a foreign entity and will be announced later in the day. It will be paying the buyer $800 million to assume its commitment to purchase 2.2 million tonnes per year of the fuel from Freeport LNG in Texas.
The company has spent years trying to either sell the gas to power customers or offload the business after signing the 20-year contract to buy LNG from Freeport.
The Nikkei business daily reported on Thursday, without citing a source for the information, that the buyer is a unit of Chinese gas company ENN Group. An ENN Group spokesman said when contacted by Reuters that he was not aware of the deal.
Japan’s Central Bank Sitting On Assets Worth More Than The Country’s Entire Economy
An epic bond-buying spree by Japan’s Central Bank means it’s now sitting on assets worth more than the country’s entire economy.
Data released by the Bank of Japan on Tuesday show that its total holdings stand at about five-fifty-three trillion Yen that is 4.9 trillion Dollars. The figure is bigger than Japan’s annual Gross Domestic Product (GDP) at the end of the second quarter and more than five times the size of Apple’s market value.
The years of heavy stimulus have warped parts of Japan’s financial markets and left the central bank with dwindling options to juice growth if a new crisis hits. But the splurge is unlikely to end anytime soon.
The US federal reserve’s total assets are about one fifth of the size of US GDP, and the European central bank’s are around 40% of the Eurozone economy.
PDP Responds To Osinbajo’s Debt Claims
The People’s Democratic Party, along with former President Goodluck Jonathan, has broken its silence over comments made last week by Vice-president Osinbajo, assailing the party on the way they handled economy and on alleged corruption.
Osinbajo said on Tuesday that the former president ruined the Nigerian economy and left the country with huge debt and hardship as a result of alleged corruption under his watch.
One of Jonathan’s aides released a statement that such accusations should not come from Osinbajo whom he claims was recently indicted by the House of Representatives for an alleged corruption.
The statement says fingers should not be pointed at Jonathan whom he says is celebrated internationally for his efforts at achieving Nigeria’s best rating in Transparency International’s Annual Corruption Perceptions Index.
He accused the current government of increasing the nation’s debt because it lacked the discipline of the former President.
Mnangagwa Defends “Painful” Economic Reforms
Zimbabwean President, Emmerson Mnangagwa, has defended what he called painful economic reforms. He says the policies are necessary to get the country out of economic stagnation. He said, “yes, the medicine is harsh, but the patient requires it in order to live”.
Mnangagwa says his administration has identified privatisation of state institutions, broadening of the tax base and fighting corruption as key to turning the economy around.
He also defended a two percent levy imposed on electronic transactions which make up around ninety-six percent of all financial transactions. He said, that will enable them to reduce the budget deficit.
He highlighted increasing output in gold mines and privatisation of the agriculture sector as some of the positive developments in Zimbabwe since he came to power.
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