Afarak Group PLC (LON:AFRK) is to take a €6.5mln write-down of its metal alloys plant at Mogale due to ongoing tough conditions in the steel additive market.
Mogale, in South Africa, has been affected by technical problems including stoppages and low-quality ore while the price of ferrochrome has continued to decline.
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“In addition, increasing power and reductant cost, a strengthening of the rand and the forced closure of the P3 furnace all had a bearing on the results,” said the group.
A new management team has been installed at Mogale with the emphasis on improving operations and cutting costs.
Production is also shifting towards high carbon ferrochrome, which will achieve higher margins, while mining operations are also being scaled back.
In addition to Mogale, Arafak also runs the Stellite, Mecklenburg and Vlakpoort mines.
As a result of the recent actions Mogale’s performance stabilised in the fourth quarter but Afarak is cautious about predicting a sustained improvement in the tough conditions currently.