ArcelorMittal, the world's biggest steelmaker, is writing down the value of its European business by $4.3 billion, underscoring its gloom about prospects for the region's recession-hit manufacturers.
The group, formed in 2006 when the steel business of India-born Lakshmi Mittal bought Europe's Arcelor for about $33 billion, said on Friday steel demand had fallen about 8% in Europe this year and there was no sign of a quick recovery.
As a result, it was writing down the goodwill - the value of intangible assets like a brand rather than physical assets like machinery - of its European operations by 87%.
"It is negative, but it shouldn't really be a big surprise that the book value of its European business was too high," said a London-based analyst who asked not to be named.
The $500-billion-a-year steel industry, a gauge of the global economy, has slowed sharply this year from last as a moderation in China's economic growth has compounded weak demand from austerity-ravaged Europe.
ArcelorMittal, which makes about 6-7% of the world's steel, said steel demand in Europe had fallen about 29% since 2007, when the financial crisis started.
But it highlighted better trends in the United States, where it said demand was up almost 8% this year and is now about 10% lower than in 2007.
The writedown represents over a third of ArcelorMittal's overall goodwill of $12.5 billion reported at the end of last year.
It said the writedown would be a non-cash charge in its fourth quarter results and would not affect net debt or core profit.