Merafe Resources interim results


Merafe Resources interim results


Published Date: 2017-08-08 | Source: Stephen Gunnion | Author: Stephen Gunnion

Merafe Resources interim results

Merafe cautions on volatility as earnings soar

The company has slashed its debt pile, saying a strong balance sheet will help it ride out any volatility in the cycle.

Merafe Resources has had a strong first half, helped by improved production and ferrochrome prices. The company has also made a big dent in its debt, which it says will stand it in good stead in an uncertain global environment. While Chinese demand for stainless steel remains positive, the company says short-term volatility across commodities remains. As such, it's focused on building operational flexibility and balance-sheet strength to help it ride the cycle.

Total net debt has been slashed to R207.8 million from R409.3 million, helping cut its net financing costs by 25% to R23.8 million. It says it's paid the majority of its head-office debt to Absa and Standard Bank.

Merafe gets the bulk of its revenue and operating income from its 20.5% stake in its ferrochrome joint venture with Glencore. It says global ferrochrome demand increased by 5% to 5.8 million tonnes over the period - with China accounting for just over 60% of global demand. Chinese imports of South African chrome jumped 27% to 4.5 million tonnes.

Merafe's share of revenue from the Venture increased by 7% from the prior period to R2.58 billion. Ferrochrome revenue increased by 6%, primarily as a result of an increase in prices. Profit surged 749% to R486.5 million and its lifted its interim dividend by 277% to R75.3 million.

However, Merafe cautions that after a big recovery in ferrochrome prices in the second half of last year, the second quarter of the new year has seen a marked pull back in the market. It says the volatility is symptomatic of the current need for a flexible approach, with a focus on operational efficiency and strict cost discipline.


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