Toshiba scraps dividend after finding accounting irregularities

Toshiba withdrew its earnings guidance and scrapped its year-end dividend payout on Friday, saying it had found improper accounting on some of its infrastructure projects.

The announcement came after the company said last month that it was looking into irregularities that had come to light in an internal probe. Since then, shares of Toshiba have fallen 5.7 per cent.

Toshiba, which owns nuclear power company Westinghouse, said it was setting up a committee composed of outside experts without any ties to the company. The investigation involves three of Toshiba's group companies and its subsidiaries in the areas of power systems, social infrastructure and community solution business, according to company officials.

The company declined to provide further details on which infrastructure projects were being questioned.

The group had previously projected a 136 per cent gain in net profit to Y120bn ($1.0bn) for the fiscal year that ended in March and a 3 per cent gain in sales to Y6.7tn.

The energy and infrastructure segment, which includes railroad systems, industrial equipment and thermal power plants, generated 11 per cent of Toshiba's operating profit and 28 per cent of its sales in the fiscal year that ended in March 2014.

In a statement, Toshiba said the investigation so far had found that construction costs for certain infrastructure-related projects were underestimated and that losses from the construction work were "not recorded in a timely manner".

"The company expresses its most sincere apologies to our shareholders, investors, and all other stakeholders . . . and will make its best efforts to restore your trust," it said.

Toshiba said it was not clear when the investigation would be concluded. It also said it would not be able to report its earnings until at least June, adding that financial results from earlier years may also have to be corrected.

The announcement came after Japanese markets closed but analysts said they expected it to hit share prices on Monday. "The market impact is expected to be significant, especially as the disclosure comes amid calls for proper accounting," said Masahiko Ishino, an analyst at Tokai Tokyo Securities.

The current accounting irregularities at Toshiba came less than two years after the company disclosed in late 2013 that its medical unit had overstated earnings over a six-year period.

Investor scrutiny on bookkeeping practices by Japanese companies has also increased following a $1.7bn accounting scandal at medical equipment maker Olympus in 2011.

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