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Olympus Projects $412 Million Annual Loss, Missing Estimates

Olympus Projects $412 Million Annual Loss, Missing Estimates
Operating profit will probably decline 6.2 percent to 36 billion yen while revenue may increase 0.8 percent to 854 billion yen. Photographer: Kiyoshi Ota/Bloomberg

Olympus Corp., the Japanese camera maker that admitted a 13-year accounting fraud, predicted an annual loss that was worse than analysts’ estimates as it wrote off equipment damaged by Thailand’s record floods.

President Shuichi Takayama, whose management team may be forced out in an April 20 shareholder meeting, said the company may seek an alliance to bolster capital. The net loss in the year ending in March may total 32 billion yen ($412 million), Olympus said in a statement today, while analysts from Barclays Capital and Deutsche Bank Group estimated a 25.5 billion-yen average shortfall.

Olympus shares have plunged 48 percent since Michael Woodford publicly questioned inflated takeover costs after being ousted as chief executive officer. Fujifilm Holdings Corp., a camera maker with plans to expand in health care, has proposed a partnership. Sony Corp. also is considering an investment, the Nikkei newspaper reported.

“The biggest problem for Olympus is its equity capital,” said Yoshihiro Okumura, who helps manage the equivalent of $365 million at Chiba-Gin Asset Management Co. in Tokyo. “The current balance sheet is agonizing. The company needs to increase its capital as soon as possible.”

Operating Profit

Takayama said today that Olympus isn’t involved in any talks on capital alliances and may choose not to sell shares since it secured its listing with the Tokyo Stock Exchange in the aftermath of the fraud. The company rose 0.4 percent to 1,282 yen in Tokyo trading today, before the earnings announcement.

The scandal, which involved a $1.7 billion cover-up of losses, had no major impact on business, Olympus said. The company wrote down 14.05 billion yen to reflect a drop in the value of its inventories after Thailand’s worst floods in 70 years swamped factories and warehouses.

Operating profit will probably decline 6.2 percent to 36 billion yen while revenue may increase 0.8 percent to 854 billion yen. The revenue forecast matched estimates, and the operating-profit forecast missed the average of 41 billion yen.

New Management

Olympus is considering ways to boost capital after taking a $1.3 billion cut in net assets in December. The world’s biggest maker of endoscopes plans a special shareholder meeting on April 20 for investors to vote on a new management. The new management will make any “large” decisions, Takayama said.

“The focus now is who will head the company next and who will be the strategic partner,” said Ichiro Takamatsu, a portfolio manager at Tokyo-based Bayview Asset Management Co. “The company needs to form an equity alliance” because its capital structure is weak, he said.

TPG Capital, the private-equity firm based in Fort Worth, Texas, and run by billionaire David Bonderman, is considering whether to join with a strategic partner to invest as much as $1 billion, a person familiar with the matter said last month.

Terumo Corp., Olympus’s top supplier and the 10th-largest shareholder, also is considering ways to strengthen the partnership, it said last month.

The Tokyo exchange last month allowed Olympus to keep its stock market listing after fining the company 10 million yen and telling it to submit reports on efforts to improve management.

Criminal Investigations

The exchange put Olympus on a watchlist last year following the company’s admission it inflated fees to advisers on the $2.1 billion acquisition of London-listed Gyrus Group Plc in 2008 and overpaid for three Japanese companies.

The 92-year-old company still faces criminal probes and shareholder lawsuits against executives, including Takayama, even after purging ex-Chairman Tsuyoshi Kikukawa and other executives it found to be involved in the scheme. The fraud to conceal soured investments dating back to the 1990s raised concerns among investors and lawmakers over Japan’s corporate governance rules.

Founded in 1919 as a microscope and thermometer business, Olympus produced its first camera in 1936 and a predecessor to the modern-day endoscope in 1950, according to the company’s website. Endoscopes are instruments that doctors use to look inside the body cavity and can help detect diseases such as colorectal cancer.

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