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[Ferro-Alloys.com]Merafe Resources said on Monday that the weakening price of ferrochrome coupled with higher costs would hit basic earnings, resulting in a slump in its latest interim period.
The share price dropped by 4.76 percent on the JSE on news of the earnings slide to close at 80c a share on Monday.
For the half year to June, Merafe said it expected to report basic earnings a share of between 4.7c and 5.3c, which is a decrease of between 41 percent and 48 percent from the comparable period last year.
It forecast headline earnings a share of between 4.7c and 5.3c for the first half, 40 percent to 49 percent down on the prior comparative period.
“The decrease in headline earnings period on period is primarily attributable to the decrease in net ferrochrome prices and an increase in expenses (cost of goods sold, depreciation and net financing costs), which was partially offset by the increase in ferrochrome and chrome ore sales volumes and the weakening of the rand against the US dollar,” the company said yesterday.
Ferrochrome is produced through high temperature reduction of chromite to produce an alloy that is a key ingredient in the production of stainless steel and specialty steels for uses such as the manufacturing of tools and injection moulds.
JSE-listed Merafe is mainly focused on the Glencore-Merafe Chrome Venture in Limpopo, which it owns and operates together with diversified mining giant Glencore.
The venture owns several chromite mines and 22 furnaces with an annual capacity of 2.34 million tons of ferrochrome.
Merafe said its financial results for the half year to June were expected to include a net overdraft balance of R70 million, down from R162m in the six months to December.
As of June, it owed Absa R609m, down from R617m in the six months to December, while it had zero utilisation of its short-term inventory facility from R189m in the six months to December.
It said R50m of the R609m owed to Absa and Standard Bank was repaid on July 1.
In terms of production, Merafe’s attributable ferrochrome production from the Glencore-Merafe Chrome Venture increased to 195 000 tons of attributable ferrochrome in the period under review, up 16 percent compared with 168 000 tons in the comparable half-year period last year.
“This increase was primarily attributable to the additional production from the Project Lion II furnaces which ramped up to full capacity in the second quarter of 2015,” the company said in a statement.
The venture’s operating capacity utilisation for the first six months of this year was 92 percent.
Merafe exports chrome ore to China, which now accounts for more than 50 percent of the world’s global stainless steel production and 36 percent of global ferrochrome production.
China is now the world’s largest producer, having overtaken South African ferrochrome production for the first time last year, according to reports.
Merafe is scheduled to release its latest interim financial results on August 4.
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- [Editor:sunzhichao]
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