Nippon Steel faces ¥84.6 billion loss

Kyodo

Nippon Steel Corp. said Thursday it will book a securities appraisal loss of ¥84.6 billion in its consolidated earnings report for the first three quarters of fiscal 2011.

The nation’s largest steelmaker is expected to revise downward its earnings estimates for the full year.

Business accounting rules require a company to book an appraisal loss if the market value of its shareholdings declines by at least 50 percent from the value at the time of acquisition.

The Nippon Steel announcement came after an overall stock market slump, indicating the market value of its shareholdings in its planned merger partner Sumitomo Metal Industries Ltd. has slipped below 50 percent of their acquisition cost.

As of Sept. 30, Nippon Steel was Sumitomo Metal’s second-largest investor with about 450 million shares, now estimated at ¥63.2 billion based on the closing price of ¥140 per share on Dec. 30.

The two steelmakers, which are cross-shareholders, plan to merge in October.

Share prices of steelmakers have fallen with the global deterioration in the balance of supply and demand for steel.

A substantial fall in Nippon Steel share prices led Sumitomo Metal to book a special loss in the first half of fiscal 2011.