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Oki Says Spain Unit Account Overstatement Will Cut Profit

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Sept. 11 (Bloomberg) -- Oki Electric Industry Co., the Japanese telecommunications-equipment maker put on delisting watch, said the overstatement of accounts by its Spanish unit will reduce net income by 30.8 billion yen ($395 million).

The accumulated impact on earnings is from the overstatement, unrecognized debt and money set aside for potentially uncollectable accounts at Oki Systems Iberica in the six years and three months through June 30, the company said today in a statement in Tokyo, where it’s based. Oki plans to correct its earnings Sept. 14.

Oki, with customers including International Business Machines Corp., will review ways to oversee its units and rebuild its internal control, according to the statement. The company was put on watch for a possible delisting by the Tokyo bourse last month after the company said its Spanish unit overstated accounts receivables, prompting the biggest one-day decline in shares in at least 37 years.

“I’m worried that this may prompt overseas investors to lose confidence in the Japanese equity market further,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. “They already have some doubts over corporate governance.”

The stock fell 2 percent to 100 yen in Tokyo trading before the announcement.

Legal Action

The company fired the head of its Spanish unit and will consider legal action, Hideichi Kawasaki, president and chief executive officer, told reporters in Tokyo. Kawasaki didn’t name the head of the Spanish unit.

“It is possible that he tried to achieve the budget amidst the shrinking printer business in order to maintain his charismatic position,” the company said in the statement. Oki didn’t find misconduct at its 24 other overseas sales companies, it said.

Last month, the company said the overstatement by the Madrid-based unit will trim earnings by about 8 billion yen.

Net income will probably total 11 billion yen for the year started April 1, Oki said in May. Oki’s profit is projected at 9.1 billion yen for the year ending in March, according to the average of four analysts’ estimates compiled by Bloomberg.

The accounting overstatement “will have almost no impact” on full-year earnings, Senior Executive Vice President Naoki Sato told reporters today.

Oki has no plans to sell shares to boost assets, Kawasaki said.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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