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

Olympus Cameras | Olympus Digital Voice Recorders | Transcription Kits | Olympus accessories |Olympus Microphones | Olympus Headphones

Olympus loss-hiding scandal

The Japanese camera maker Olympus sued 19 current and former executives for their alleged role in a £1bn accounting cover-up. It was revealed when Michael Woodford, the former chief executive, got dismissed after expressing his concerns about the company's accounting practices. Mr Woodford had written six letters to directors questioning business methods at Olympus. He had raised a concern over Olympus' payment of $687m in fees to financial advisers during the acquisition of Gyrus - UK medical equipment company. Mr Woodford claims that there is a need to clear the situation completely in order to regain credibility. He is also calling for drastic changes in the board of directors.

The 19 sued executives initially denied their involvement in the cover-up, however they later admitted the company had been hiding losses. The firm has admitted to hiding losses of $1.7bn (£1bn) for twenty years. The lawsuit was filed on 8 January, it seeks up to 3.6bn yen (£30.3m) in damages. The case will mainly focus on current and former board members, including ex-president Tsuyoshi Kikukawa, former vice president Hisashi Mori, auditor Hideo Yamada as well as current president Shuichi Takayama. All of them already have or are planning to step down this month altogether with other board members. The company has announced it will be holding an extraordinary general meeting on 20 April, where Olympus shareholders will get a chance to confront its management about the accounting scandal.

Olympus has lost 50 per cent of its market value since the scandal became public in October. Shares, however were slightly boosted by talk of Olympus’ takeover and a report that this large company is unlikely to be delisted. 

Olympus Cameras | Olympus Digital Voice Recorders | Transcription Kits | Olympus accessories | Olympus Microphones | Olympus Headphones