Merafe Resources, the junior empowerment partner in a chrome joint venture with Glencore, lowered its dividend as the war in Ukraine and high inflation added to supply chain constraints, pushing up costs.
The total dividend of the company, valued at R3.4bn on the JSE, was 13.8% lower year on year at R625m for the year to end-December, while net profit fell 15.8% to R1.41bn.
“Given this operating environment, 2023 is likely to be a challenging year. There is [an] expectation that global recession will affect commodity prices negatively,” the company said.
The Covid-19 pandemic and the war in Ukraine has disrupted and caused volatility in the markets over the past few years, leading to energy insecurity and concerns of a global recession.
However, China reopening its economy and lifting zero-Covid-19 measures are positive developments as greater economic activity in Asia could lift the market.
“Forecast growth in stainless steel demand, underpinned by growth in Asia and Europe, is positive for the ferrochrome industry,” the company said.
Merafe’s revenue dipped 1.5% to R7.94bn.
Ferrochrome sales, which generated more than four-fifths of all sales, was 3.2% lower at R6.79bn as sales fell 11.2% to 350,000 tonnes. This was offset partly by rand weakness.
The production cost of Merafe’s venture with Glencore, in which Merafe owns a 20.5% stake and from which it generates most of its revenue, rose an “unprecedented” 30%.
“Our production profile will be influenced by several factors, including Eskom’s inability to meet the country’s electricity demand and rolling electricity outages as well as our stockholding levels,” the company said.
State-owned power utility Eskom has been subjecting power users in SA to some of the worst load-shedding yet. The load-shedding schedule does not affect industrial consumers such as mines and smelters. However, when the power utility suffers excessive breakdowns, it can ask industrial users to use less power.
The company’s share price was 1.5% up at R1.35 at close of trade on Monday.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.