Merafe Resources has reported a significantly lower profit at the halfway stage of the financial year amid sustained pressure from the prolonged economic downturn in the global ferrochrome market.
The group’s revenue declined 47% to R2.52bn in the six months ended June after a 55% fall in ferrochrome sales volumes to 76,000 tonnes, it said on Tuesday.
Profit declined to R233m from R719.6m a year ago while headline earnings per share (HEPS) fell 55% to 12.6c. An interim dividend of 4c per share was declared.
Merafe’s revenue and operating income are primarily generated from the Glencore-Merafe Chrome Venture, which is one of the global market leaders in ferrochrome production, with a total installed capacity of 2.3-million tonnes of ferrochrome per annum. Merafe shares 20.5% of the earnings before interest, tax, depreciation and amortisation (ebitda) from the venture.
Challenges faced by the ferrochrome industry in SA, including high energy costs and increased competition from China, led to the suspension of several of Merafe’s smelting operations in the second quarter. There was also reduced demand for chrome ore units in the first half.
Ferrochrome revenue decreased 60% from the prior period to R1.36bn, while chrome ore revenue declined 17% to just more than R1bn.
Merafe’s attributable ferrochrome production decreased significantly from 154,000 tonnes in June 2024 to 112,000 tonnes due to the suspension of smelting operations in response to adverse market conditions. Operations at the Boshoek and Wonderkop smelters were suspended during the second quarter following the business review process.
In addition, the Lion smelter operations have been suspended to allow for scheduled maintenance and planned rebuilds.
Merafe’s saleable chrome ore production decreased 8% period on period due to trackless mobile machinery and conveyor breakdowns.
Merafe said the SA ferrochrome and chrome ore sectors were at a crucial juncture.
“While challenges related to energy supply and global competition persist, the recent proactive measures by the SA government to support the ferrochrome industry through policy interventions and incentivising beneficiation present a cautiously optimistic outlook, particularly for our ferrochrome business in the medium to long term,” it said.
“Our chrome business will need to adapt to potential shifts in domestic demand, while continuing to monitor the significant influence of the Chinese market. Both sectors of our business will benefit from further stability in energy supply and the effective implementation of proposed regulatory changes,” it added.
The Glencore-Merafe Chrome Venture will continue to engage with stakeholders towards finding sustainable solutions particularly for its smelting business.
“We remain cautious in our approach to the remaining six months of the financial year and will continue to focus on efficient operations, cash preservation, cost control and efficient capital allocation,” it said.
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