TOKYO (Reuters) - Toshiba Corp (6502.T) on Wednesday reported its highest quarterly profit in two years and said it will buy out three of its listed subsidiaries as the industrial conglomerate moves on from accounting scandals and a management crisis.
Toshiba’s energy and infrastructure divisions drove the profit increase, as the company cut costs and reined in low-margin projects. The group is still in a turnaround process after a crisis that led to the bankruptcy of its U.S. nuclear power business and the sale of its prized memory chip division.
“We’ve changed everything, from marketing, procurement to the ways we take orders and produce products,” Toshiba CEO Nobuaki Kurumatani told Reuters.
Kurumatani also expressed confidence in turning the sprawling conglomerate into a leaner company. “We are now compiling detailed strategies to boost the operating profit margin to 6% in three years (from 1% in the last fiscal year),” he said.
Toshiba reported a stronger-than-expected operating profit of 44.23 billion yen (£316.82 million) for the second quarter ended September, up from 6.25 billion yen a year prior and the highest profit since the July-September quarter of 2017.
That compared with a 25.97 billion yen average of 4 analyst estimates compiled by Refinitiv.
Toshiba maintained its profit forecast for the year ending March at 140 billion yen, versus 35.4 billion yen a year earlier, in line with the target the company set in its five-year plan.
The company also said it would launch tender offers to buy out plant engineering firm Toshiba Plant Systems & Services (1983.T), marine electrical systems maker Nishishiba Electric (6591.T) and chip-making equipment maker NuFlare Technology (6256.T) to convert them into wholly-owned subsidiaries.
The buyouts, which will cost a total of 200 billion yen ($1.83 billion), come as some activist shareholders have pushed for more action to overhaul Toshiba’s vast asset portfolio.
The Japanese government has also pointed out potential conflicts of interest between publicly traded parent companies and their listed subsidiaries and set corporate governance guidelines for those companies.
Since Kurumatani took the helm last year, Toshiba has overhauled its board to increase the number of external directors and include non-Japanese directors for the first time in 80 years, bowing to pressure from activist investors.
Its five-year plan aims for 8-10% operating profit margin for the year ending in March 2024 by focusing on energy, social infrastructure and service businesses.
Reporting by Makiko Yamazaki; Additional reporting by Noriyuki Hirata; Editing by Christian Schmollinger and Jane Merriman