* Output cut to reduce 10/11 group profit by Y2 bln
* Quake has no impact on merger talks with Nippon Steel
* Kashima plant to return to normal operations by end-May (Adds details, quote)
TOKYO, April 14 (Reuters) - Sumitomo Metal Industry , Japan's third-biggest steelmaker, said on Thursday in would take a 60 billion yen ($715 million) charge for the year that ended on March 31 due to damage resulting from last month's devastating earthquake and tsunami.
Its 8.3 million tonne-a-year Kashima plant was the closest of Japan's mills to the quake's epicentre and its two blast furnaces, cokes gas holders, ports and cranes were damaged.
The blast furnaces were back on line by March 26 but reduced shipments from the Kashima mill, which produces automotive steel sheets, thick plates and construction steel, cut profit by 2 billion yen in the 2010/11 year, Fumio Honbe, executive vice president, told a news conference.
The plant, which accounts for 60 percent of Sumitomo Metal's entire crude steel output, is now operating at less than 50 percent capacity, he said.
Sumitomo Metal, a world's top maker of seamless steel pipes used in gas projects, plans to merge with Nippon Steel Corp , the world's No.4 steelmaker, by October 2012.
"The quake has no impact on our merger talks," Honbe told reporters.
Before the quake, Sumitomo had planned to swing back into the black, booking 25 billion yen in net profit for the year ended March on a 12 percent rise in revenues of 1.44 trillion yen.
Sumitomo aims to return the Kashima steel works to normal operations by the end of May.
Honbe said the company had not yet decided on its year-end dividend payout for the 2010/11 business year. ($1 = 83.890 Japanese Yen) (Reporting by Yuko Inoue; Editing by Edwina Gibbs)