Tata Steel to write down $1.6 bn of goodwill and assets
New Delhi: Tata Steel on Monday said it expects non-cash write down of goodwill and assets of around USD 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 USD 1.6 billion," it said in a statement.
The impairment, it said, is primarily due to a weaker macroeconomic and market environment in Europe where apparent steel demand has fallen significantly in 2012-13 by almost 8 percent "which in aggregate results in almost 30 percent since the emergence of the global financial crisis in 2007".
"The above underlying condition is expected to continue over the near and medium term, and has led to the downward revision of cash flow expectations underlying the valuation of the European business," it said.
"The impairment also includes the effect of write down of assets in the ferro chrome business in South Africa and the mini blast furnace in Tata Steel Thailand which has been impacted by the high cost of raw material feedstock," it added.
The company, which is scheduled to announce its financial results for the year on May 23, however, said the non-cash write down is not expected to affect its financial covenants.
Financial covenants are part of the conditions of a loan agreement, these covenants are the promises by the management of the borrowing firm to adhere to certain limits in the firm's operations.
Tata Steel Group is among the top ten global steel companies with an annual crude steel capacity of over 26.5 million tonnes per annum (mtpa). It has operations in 26 countries.
The Tata Steel Group, with a turnover of USD 26.13 billion in FY'12, has over 80,000 employees across five continents.