Toshiba considering $5.3 billion capital injection

Toshiba considering $5.3 billion capital injection”

Toshiba reported robust second-quarter results with a 76 percent jump in operating profit driven nearly entirely by a strong performance from its memory chip unit.

Over the full year, Toshiba said it was projecting sales of 4.97 trillion yen, as well as a record operating profit of 430 billion yen. However, the factor that had the greatest impact on the results was the split of the branch dealing with memory chips, the most profitable unit of the company. (TOSYY.PK, TOSBF.PK) has started considering a capital increase of almost 600 billion yen or about $5.30 billion, including investment from other companies, in an effort to brace for the delay in the sale of its memory chip unit, Japanese public broadcaster NHK reported. Its chips and devices division accounted for 97 per cent of that profit. It needs to beef up its balance sheet by the end of the fiscal year in end-March to avoid a possible delisting.

In a statement, Toshiba repeated its stance that it was aiming to close the deal to sell its chip business by the end of March, saying in response to the NHK report that nothing specific had been decided regarding any funding plans. Cutting it fine, if the deal does not close before then, Toshiba - hurt by liabilities at is now bankrupt nuclear unit Westinghouse - is likely to end a second consecutive year in negative net worth, putting pressure on the Tokyo Stock Exchange to strip it of its listing status.

The deal also faces legal challenges from estranged business partner Western Digital, which argues no deal can proceed without its consent.

Toshiba is considering raising some 600 billion yen ($5.29 billion) of fresh capital, sources said Friday.

Net sales for the quarter grew to 1.24 trillion yen or $10.996 billion from 1.21 trillion yen in the previous year.

That does not reflect expected gains from the 2 trillion yen sale as the deal has yet to receive regulatory approval.

The global chip market boom has boosted demand for chip-producing equipment to the extent that equipment manufacturers are telling Toshiba to book orders early or will not be able to get the equipment in time, Hirata said.

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