Olympus and the impact of the accounting scandal

Olympus predicts a significant net loss, but core business is expected to remain intact.

Olympus made a 33.09bn yen loss for the nine months to the end of December 2011 and it forecast that it would make a 32bn-yen loss for the full year to the end of March 2012. That is in comparison to a 3.87 billion yen net profit last year.

 

The Japanese maker of cameras and medical equipment has admitted to hiding losses of $1.7bn for 20 years and it remains under investigation by law enforcement agencies in Japan, Britain and the United States. The company is now preparing to question its former board members in April, the meeting is expected to be a lively one.

Despite the scandal the firm was allowed to keep its listing on the Tokyo Stock Exchange, however it has been fined 10m yen by the exchange. Furthermore, the scandal has caused Olympus' share price to fall by almost 50% since it became public in October last year.

Olympus has been considering alliance offers to shore up its finances after the accounting scandal severely harmed its assets. However, as Takayama told reporters, Olympus may be able to deal with the crisis independently by accumulating profit, without outside capital.

Yasuo Sakuma, a portfolio manager at Bayview Asset, claims that given the nature of the business, there are limited competitors and the scandal has not had a huge impact on the business. Operating profit in its medical systems business rose 7 per cent to 18.87 billion yen during the October-December quarter.

The scandal has shaken confidence in Japanese corporate governance and it will be very difficult for the company to fully recover.

Also see: Olympus loss-hiding scandal

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