Merafe warns of profit drop amid price pressure

Merafe Resources, the junior empowerment partner in a chrome joint venture with Glencore, has warned of a sharp drop of profits in its half year to end-June, when mines and smelters were shuttered.

The group expects headline earnings per share to fall between 81% and 86% from the prior period’s 6.6c, while net cash has fallen to R263m from R354m previously, the group said in a trading update.

The expected decrease is primarily driven by substantially lower chrome ore and ferrochrome prices and lower sales volumes, which were partially offset by a weaker average rand to dollar exchange rate, the group said.

Ferrochrome is used in production of steel, with Merafe saying previously it was under increasing operational pressure in SA, including due to “unsustainable electricity pricing.”

In June the group announced the venture was moving to cut jobs.

This affected the Lydenburg Smelter, Wonderkop Smelter, Boshoek Smelter and Lion Smelter. The process will also affect the Eastern and Western Chrome Mines.

gernetzkyk@businesslive.co.za