Merafe: Resilience characterised chrome industry in 2023

Merafe achieved a record profit of R1 753 million despite a challenging economic environment. Demand for ferrochrome was weaker compared to prior years, which resulted in lower sales volumes and lower realised prices, whilst chrome ore sales volumes were significantly elevated and realised prices increased due to buoyant demand and supply constraints.

2023 FINANCIAL YEAR IN REVIEW

• 2 fatalities (2022: No fatalities)
• 3% decrease in TRIFR(1) to 2.34(2022: 2.40)
• 22% decrease in ferrochrome production to 300kt(2022: 384kt)
• 16% increase in revenue to R9 244 million(2022: R7 939 million)
• 28% increase in production cost per tonne(2022: 30% increase)
• 19% increase in EBITDA(2) to R2 545 million(2022: R2 141 million)
• Headline earnings per share of 60.1 cents(2022: 56.4 cents)
• Basic earnings per share of 70.1 cents(2022: 56.4 cents)
• 11% increase in net cash generated from operating activities to R1 879 million(2022: R1 698 million)
• Cash balance of R1 656 million(2022: R1 269 million)

Outlook

A slowdown will likely follow the resilience that characterised Merafe’s industry in 2023. The Glencore-Merafe Chrome Venture (“Venture”) has laid a foundation that should help it withstand looming headwinds.

The Negotiated Pricing Agreement aids with pricing certainty and ongoing work on green energy supports not only the reduction of its greenhouse gas emissions but also with some power stability. Continued operational efficiencies assist with managing costs. Our capital expenditure improves safety and efficiencies and lessens risks from mechanical breakdowns. Our team continues to explore the best ways to mitigate the logistics constraints.

With continued economic uncertainty in 2024, we expect commodity prices to come under pressure. Given the unrelenting inflationary pressures, our margins remain at risk of being squeezed in 2024.

The anticipated slowdown in 2024 demands that we remain focused on efficient operations, cash preservation, cost control and efficient capital allocation.