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Merafe FY earnings lower on impairment

Jan 31 2013 12:34 Reuters

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Johannesburg - South African ferrochrome producer Merafe Resources forecast a drop in full-year earnings on Thursday, citing an impairment loss on a potential sale of high-cost assets, lower output and weak demand.

Merafe said basic earnings per share for the year to the end of December were expected at between 1.7 and 2.0 cents, down from 4.7 cents the previous year. 

Headline EPS, which exclude certain once-off items, were seen at between 4.6 and 5.1 cents, down from 6.4 cents. 

The company, which operates joint ventures with London-listed Xstrata, said ferrochrome output fell 8% given weak demand and Merafe's participation in a power buy-back programme by state utility Eskom.

Under the arrangement with Eskom, firms agree to suspend part of their operations to help the utility manage a tight electricity supply. 

"The compensation received from Eskom for the electricity not consumed was adequate to cover the costs and lost profits on the associated volumes," the company said in a statement.

Merafe shares fell 2.27% to 86 cents, compared with a 0.24% fall in Johannesburg's All Share [JSE:J203] index.

Ferrochrome production cuts in South Africa, the world's second-biggest producer of the alloy used to make stainless steel, are likely to persist into the second quarter, boosting prices at a time of weak demand, traders said. 

Merafe said the average European benchmark ferrochrome price for the first quarter of this year was settled at $1.13 per lb, up 2% on the previous three months.

The company will release full-year results on March 5. 
 

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merafe resources  |  ferrochrome
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