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CORRECT: FOCUS: Nippon Sheet Glass Shares Slide To Lowest Since Mid-1970s After CEO's Exit

Post Time:Apr 20,2012Classify:Company NewsView:325


While doubts swirl over exactly why Craig Naylor quit the chief executive officer post at Nippon Sheet Glass Co. (5202.TO), investors were keen to sell shares in Japan's second-biggest glass maker on Thursday, sending them sharply down to close at their lowest level since the mid-1970s.


In his first comments since his surprise resignation over what Nippon Sheet Glass called "fundamental disagreements" on turnaround strategy at the struggling company, the American executive, a former DuPont Co. (DD) veteran, told The Wall Street Journal in an emailed statement earlier Thursday that his decision to leave less than two years after taking up the job was "entirely my own."


While Naylor, who was one of a select band of only a few foreign CEOs leading Japanese companies, confirmed he and the company's board differed on strategy, he declined to elaborate on the nature or subject of the disagreement.


Nippon Sheet Glass was quick to discount any possible comparison with the case of former Olympus Corp. (7733.TO) CEO Michael Woodford, ousted last year after raising questions about past acquisitions that ultimately resulted in the uncovering of a $1 billion-plus accounting scandal. Speaking Thursday in Tokyo on the eve of an Olympus shareholder meeting, Woodford himself said he didn't believe there are any parallels between the two cases.


But investors have long been rattled by the company's decline, with the mood not improved by the firm's February forecast of a return to a net loss for the third time in four years in the 12 months ended March, accompanied by a restructuring plan to turn around ailing operations and a program of 3,500 job cuts globally.


Its share price slumped by nearly 50% during Naylor's time in office, and Thursday headed further south, shedding 7% to close at Y108 in heavy trading, at its lowest level in decades as investors also feared the fresh prospect of capital raising to bolster the company's weakened finances.


Booking nearly 90% of its revenue in the construction and auto glass sectors, Nippon Sheet Glass has been hit hard by economic weakness in Europe. According to data provider FactSet, the mean of 14 analysts' forecasts is for a net loss of Y3.7 billion in the 12 months ended March, widening significantly in the year through March 2013 to Y10.9 billion.


At a news conference to announce Naylor's departure Wednesday, Chief Financial Officer Mark Lyons said the company has no immediate plans to raise further capital, but added all options would be considered going forward.


"This CEO change was not only sudden but also stems from fundamental disagreements with the board, and thus is negative inasmuch as it highlights the instability of the top management," Morgan Stanley analysts wrote in a note to clients, welcoming the intent to carry out restructuring but saying the possibility of capital raising clouds prospects for investors.


Morgan Stanley has an underweight rating on the shares, with a price target of Y100.


Company Chairman Katsuji Fujimoto hinted Wednesday that the ex-CEO hadn't moved swiftly enough to tackle restructuring: "It is true that we were compelled to make the decision to replace [him] with someone who can act with speed in this tough environment," the Nippon Sheet Glass veteran said.


In the one-paragraph statement Naylor emailed to The Wall Street Journal, the American said, "I recognize that the board should have a CEO who is fully committed to the direction it sets. As a result, I thought it best if I were to tender my resignation."


But observers said that along with the lack of detail on any precise trigger for Naylor's departure, speculation on exactly how tough trading has been for the company could weigh on the shares pending Nippon Sheet Glass's disclosure of results for the 12 months ended March due May 10.


Credit Suisse analyst Jun Yamaguchi said in a client note that there "was not enough incremental information on the weak business environment and restructuring plan to confirm that all the bad news has been exhausted."


Credit Suisse has an underperform rating on the stock, with a target price of Y110.


Source: http://online.wsj.comAuthor: shangyi

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