Tata Steel to write down `6.5k crore UK, Mozambique investments

Tata Steel said it is likely to write down a total of Rs 6,500 crore for the 2014-15 fiscal mainly due to impairment of a unit in the UK, a part of its European operations and a coal project in Mozambique.

“The total impairment charge for the FY 2014-15 would be around Rs 6,500 crore in the consolidated financial results,” the company said in a BSE filing.

The company expects to recognise a non-cash write-down of the goodwill and assets in the consolidated financial results in the fourth quarter for the year ended March 31, 2015 of approximately Rs 5,000 crore, mainly relating to the Long Products UK business in Tata Steel Europe which will now be fully impaired, it added.

The impairment also includes a write down of investments in overseas raw materials projects in Mozambique, Ivory Coast and Taconite project in Canada because the economic viability of these projects remains uncertain at the current level of commodity price, it added.

“Additionally, the company undertook a non-cash impairment charge of Rs 1,577 core in the first quarter of the FY 2014-15 towards its investment in the Mozambique Coal Project,” Tata Steel said.

The company said it has substantially completed its year-end impairment of goodwill, property, plant and equipment review for the consolidated financial statements for the financial year ended March 31, 2015, as required under the Indian Accounting Standards.

The review was undertaken taking into account the external economic environment and macro-economic conditions in each geography of operation, among others.

It also factored underlying demand-supply imbalance facing the global steel industry, significant volatility in iron ore and coal prices in the last 12 months and the current view of long term forecast of steel and its raw material prices, the company added.

Tata Steel in a regulatory filing on May 4 had said its board will consider financial results for FY2014-15 on May 20. Earlier in May 2013 Tata Steel had said that it expected non-cash write down of goodwill and assets of around $1.6 billion due to poor macroeconomic condition in Europe, among others.

“...the company expects non-cash write down of the goodwill and assets in the consolidated financial statements for the year ended March 31, 2013 of around $1.6 billion,” it had said in a statement.

The impairment, it had said, was primarily due to a weaker macroeconomic and market environment in Europe where apparent steel demand has fallen significantly in 2012-13 by almost 8% “which in aggregate results in almost 30% since the emergence of the global financial crisis in 2007.” Shares of the company closed up by 1.70% at Rs 365.65 on BSE.

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