SSAB writes down $160m on Ruukki acquisition
Swedish steelmaker SSAB will write down SKr1.3 billion ($160 million) in its results for the fourth quarter of 2014 following an end-of-year review of its assets, it said on Tuesday January 20.
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The writedowns relate “to goodwill in the Ruukki Construction business area and to expected capital losses arising from units to be divested as a result of the European Commission’s conditions for approval of the combination with Rautaruukki [Ruukki]”.
Shareholder loans to part-owned component manufacturer Fortaco are included in the writedowns.
The impairment charges will negatively affect SSAB’s fourth-quarter pre-tax results, but not cash flow, as SKr700 million ($86 million) will be written down from the operating result and SKr600 million ($74 million) from the financial items.
Excluding items affecting comparability, the operating result for the October-December period will be a profit of SKr100-150 million ($12-18 million), based on the steelmaker’s preliminary estimates.
SSAB will publish its fourth-quarter and 2014 annual accounts on February 10.
SSAB finalised the purchase of Finnish steelmaker Ruukki on July 29 last year through a share exchange offer.
Based on an end-of-year calculation of the value of SSAB’s net assets, the goodwill arising from the acquisition has amounted to SKr5.2 billion ($641 million). The writedowns will reduce this by SKr300 million ($37 million).
A key motivation for the combination of SSAB and Ruukki was to achieve annual cost savings through synergies.
SSAB has so far achieved SKr300 million ($37 million) in annual savings, which will show in the first-quarter results of 2015 and thereafter. It expects to achieve annual savings of SKr350 million ($43 million) in 2015.
“The current assessment is that it will be possible to carry out the cost synergies more quickly than announced earlier,” SSAB said on Tuesday, “and that [we] will be able to achieve annualised savings of SKr1.4 billion [$173 million] from the second half of 2016 onwards, which is one year faster than announced earlier.”