Tata Steel reports Rs6,500-cr Q4 write-down on goodwill impairment

Tata Group flagship company Tata Steel expects to take non-cash goodwill impairment charge of Rs6,500 crore ($785.3 million) due to the loss of value of operations in Europe, Canada and Mozambique in 2014-15.

Tata Steel said the non-cash write-down chiefly related to its loss-making long products business in the United Kingdom.

Tata Steel, Europe's second-largest steelmaker, has been forced to slash costs and jobs following its 2007 entry into the European market, where steel demand continued to decline on the back of cheaper Chinese imports.

The company said last year it was in talks to sell its long products division, including mills in northern England and Scotland to Geneva-based Klesch Group.

''The review was undertaken taking into account the external economic environment and macro-economic conditions in each of the geographies, underlying demand-supply imbalance facing the global steel industry, significant volatility in iron ore and coal prices in the last twelve months and the current view of long term forecast of steel and its raw material prices,'' said Tata Steel in a BSE notification.

Tata Steel entered Europe through its $13-billion acquisition of Corus, formerly British Steel, just before the financial crisis.

The impairment also includes a write-down of investments in overseas raw materials projects in Mozambique, Ivory Coast and a taconite project in Canada because of low commodity prices, Tata Steel said.

The company's profitability has been hit in recent quarters after a slowdown in China and a devaluation of the Russian rouble led to a surge of cheaper steel products entering international markets, pressuring steel prices and squeezing margins.

Tata Steel's domestic production in India has also been hit by a raw material shortage following a string of mining stoppages, causing its plants to operate below capacity.

Tata Steel said the total impairment charge for the year ended 31 March would be around Rs6,500 crore, adding that the impairment will not affect the company's liquidity position.