Toshiba Corp (OTCMKTS:TOSYY) shares are plummeting as the company announced a massive write-down related to a recent acquisition.
The Japanese company is expecting a gargantuan loss that will hurt earnings amounting to billions of dollars. The move is related to subsidiary Westinghouse Electric.
Late last year, Toshiba agreed to buy nuclear construction and integrated services units related to Chicago Bridge & Iron Company N.V. (NYSE:CBI). The move was designed to help expand Westinghouse’s nuclear plant assets.
The deal would reportedly cost the company a $87 million write-down that the company would be able to absorb. It required Westinghouse to assume project operations and plant contracts in the U.S. and China, including cranes, equipment and at least 11 facilities in the two nations.
In 2015, Toshiba reported a loss of 460 billion yen, or $3.9 billion. This announcement followed news that the company had doctored its financial result for many years, resulting in a $1.2 billion accounting scandal.
The beginning of the current fiscal year began smoothly, with Toshiba raking in earnings of $977 million. However, this week’s news sent company shares plummeting, leaving investors wondering when will the recovery happen.
“Westinghouse has found that the cost to complete the U.S. projects will far surpass the original estimates, mainly due to increase in key project parameters,” Toshiba said in a statement.
TOSYY shares plummeted 20.6% Wednesday. However, the stock has managed to stay above ground year-to-date, rising 38.2% throughout the course of the year.