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Announcement:

Moody's changes Toshiba's rating outlook to stable

 The document has been translated in other languages

01 Dec 2010

Total amount of bonds rated is approximately USD 5,952 million

Tokyo, December 01, 2010 -- Moody's Japan K. K. has changed the outlook for the Baa2 long-term debt ratings and Ba1 subordinated bond rating of Toshiba Corporation (Toshiba) to stable from negative. The change in outlook reflects Moody's acknowledgement that Toshiba's overall credit metrics will continue to improve, given the company's recovered profitability and restructured business portfolio.

Moody's notes that Toshiba recovered positive operating profits in all its four major businesses -- Digital Products, Electronic Devices, Social Infrastructure and Home Appliances -- in the first six months (April -- September) of FYE 3/2011.

As a result, Toshiba posted a consolidated operating profit of JPY104.8 billion for this period, which is the highest in the last ten years.

Toshiba recovered its operating profit by cutting costs and restructuring its business, in addition to recovering operation volumes, which offset the negative impact of price decreases and unfavorable foreign exchange rates.

Moody's believes that Toshiba can maintain its profitability, given the company's enhanced cost structure and streamlined business structure.

Moody's has had concern about the profit volatility of Toshiba's Electronic Devices business, which mainly comprises semiconductor manufacturing. In an effort to improve and stabilize this segment's profitability, Toshiba implemented cost reductions as well as business restructuring.

Toshiba has sharpened its strategy to concentrate its capital expenditure in the Memory sub-segment, which has competitive advantages, while reducing its exposure to System LSI sub-segment by implementing a "fab-lite" (outsourcing) strategy.

As a result of these measures, Toshiba's Electronic Devices segment recorded JPY65.5 billion of operating profit in the six months (April - September 2010) of FYE2/2011, up JPY100.8 billion from a year earlier.

Moody's considers that Toshiba will be able to control the profit volatility of the segment, given the company's latest strategy and its strong market position in the Memory sub-segment.

Moody's also notes that Toshiba's Social Infrastructure business, another major profit source, is generating stable operating profits.

The segment's operating profit for the six months (April -- September 2010) was JPY32.2 billion, which increased from JPY24.2 billion for the same period in 2008, just before the global recession.

Toshiba's financial profile has therefore improved with the recovery in profitability. The booked external debt of Toshiba at end-September 2010 was JPY1,194.8 billion, a decrease of JPY205.2 billion compared to a year earlier.

Finally, Moody's Baa2 rating on Toshiba also reflects the company's stable relationship with its main banks, in addition to its strong ability to access the capital markets. This provides a two-notch uplift from its fundamental creditworthiness.

The current Baa2 rating incorporates gradual improvement in credit metrics over the next few years -- such that adjusted debt/EBITDA at around 4.0x and adjusted debt/capitalization at around 70%.

Upward rating pressure could emerge if Toshiba increased and stabilized its overall profitability by further enhancing each segment's competitiveness, evidenced by a booked operating profit margin at around 4.0%, and/or adjusted debt/EBITDA at around 3.5x, both at sustained levels.

On the other hand, downward rating pressure could emerge if the company's earnings weaken due to a significant decline in its market position, evidenced by adjusted debt/EBITDA over 4.5x, and/or adjusted debt/capitalization over 75%. Also, aggressive use of financial leverage for acquisitions or any drastic changes in financial policy would put downward pressure on the rating.

The last rating action with respect to Toshiba was on April 27, 2009, when the company's long-term debt ratings were downgraded from Baa1 to Baa2 with a negative outlook.

The principal methodology used in rating this issuer was "Global Manufacturing Industry," published on September 30, 2010. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on www.moodys.co.jp.

Toshiba Corporation, headquartered in Tokyo, is a leading integrated electronics company in Japan. Its consolidated sales in FYE 3/2010 were JPY6.4 trillion. The main business segments of the company are Digital Products, Electronic Devices, Social Infrastructure, Home Appliances, and others.

Tokyo
Kazusada Hirose
VP - Senior Credit Officer
Corporate Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Tokyo
Shinsuke Tanimoto
Senior Vice President - Team Leader
Corporate Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan

Moody's changes Toshiba's rating outlook to stable
No Related Data.
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