Toshiba To Split Into 3 Standalone Companies; Q2 Results Surge

Toshiba Corp. announced Friday its plan to split into three standalone companies aiming to tap the full potential of its businesses and maximize shareholder value. The decision comes as the Japanese conglomerate reported significant growth in its second-quarter earnings and sales.

Satoshi Tsunakawa, Interim Chair, President and Chief Executive Officer of Toshiba, said, “Over our more than 140 year history, Toshiba has constantly evolved to stay ahead of the times… In order to enhance our competitive positioning, each business now needs greater flexibility to address its own market opportunities and challenges.”

The Separation Plan utilizes a tax-qualified spin-off structure permitted under recent legislation and represents a first-ever spin-off scheme for a Japanese Company of Toshiba’s size.

Toshiba anticipates to complete the separation, which has been unanimously approved by its Board, in the second half of fiscal 2023.

The planned separation is expected to unlock immense value by removing complexity, significantly increase its focus and facilitate more agile decision-making and leaner cost structures.

Toshiba will continue to hold its shares in Kioxia Holdings Corp. and Toshiba Tec Corp. Further, Infrastructure Service Co. and Device Co. will be spun off, and stock of each of the two new companies will be distributed to Toshiba shareholders at the time of the spin-off record date.

The Infrastructure Service Co. will consist of Energy Systems & Solutions, Infrastructure Systems & Solutions, Building Solutions, and Digital Solutions and Battery businesses.

It is expected to have net sales of 2.09 trillion yen in fiscal 2021 and is projected to grow at a 3.3% compound annual growth rate, reaching 2.23 trillion yen by fiscal 2023.

Device Co. will comprise Electronic Devices & Storage Solutions business. The expectation is to have 870 billion yen in net sales in fiscal 2021, and to grow at a CAGR of 3.3%, reaching 880 billion by fiscal 2023, when excluding the memory resale portion.

Also, Toshiba plans to convert the shares of Kioxia into cash while maximizing shareholder value and return the net proceeds in full to shareholders.

In its second quarter, Toshiba recorded net income attributable to shareholders of 41.80 billion yen or $373.21 million, significantly higher than last year’s 14.84 billion yen.

Net sales for the quarter were 818.53 billion yen or $7.31 billion, 6 percent higher than 771.6 billion yen a year ago.

Net sales in Energy Systems & Solutions grew 21 percent from last year, and the growth was 5 percent in Building Solutions, 2 percent in Retail & Printing Solutions, and 17 percent in Electronic Devices & Storage Solutions.

Meanwhile, sales in Digital Solutions remained flat, and in Infrastructure Systems & Solutions fell 4 percent.

Among regions, sales in Japan declined around 2 percent, while overseas sales grew 17 percent with strong results in all regions.

In Japan, Toshiba shares closed Friday’s regular trading at 4,872 yen, down 1.32 percent.

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