Chrome and alloys specialist with mines and plant in South Africa
Profits have been under pressure due to weak ferrochrome price and previous technical problems at Mogale alloys plant
New management installed at Mogale
Originally named Ruukki, the Finnish company is mulling a swtich of domicile to the UK to help with share illiquidity
A buyback of shares listed in Finland is underway, encouraged by major shareholder LNS
How it's doing
The company's first half losses ran to €21.6mln, significantly higher than the losses booked in 2018, as lower selling prices and lower volumes continued to impact the company.
In addition to Mogale, Arafak also runs the Stellite, Mecklenburg and Vlakpoort mines.
The company is also facing a fine from the Finnish regulator relating to disclosure issues.
What the boss says: Guy Konsbruck:
“We can always survive bad markets,” he says. "We have a unique product base when it comes to our alloys. We are one of the lowest cost miners of chrome, and we are still small enough that we can reduce our output if necessary.”
"Baseline for any given year is that the speciality business should deliver underlying profit (EBITDA) of around €10mln, and the South African business EBITDA of around €6.5mln."
But times continue to be tough.
“The challenges faced by Afarak during 2018, continued in the first half of 2019," he adds.
"In South Africa, the bad financial performance of the FerroAlloys segment continued, which heavily impacted the group’s results. The sales volumes were below those experienced in Q2 2018 as a result of the global economic slow-down. Extremely low charge chrome benchmark prices caused the revenue to decrease further. The irregular availability and the high cost of energy resulted in a major difficulty in achieving good, reliable performance in our Mogale smelter. As a consequence, we cut production by half and concentrated on production on the DC furnace, as well as the converter. We also changed key management and started a retrenchment process to lower fixed costs. The whole South African industry is suffering heavily from the high energy prices."
And the bad news didn't end there.
"The Speciality Alloy segment was also impacted by lower selling prices of low carbon ferrochrome," Konsbruck continued.
"During the quarter, management decided to extend the summer maintenance shut-down by two weeks at our EWW plant in Germany, to manage levels of inventory. The mines in Turkey continued to perform well."
Recovery in ferrochrome price
Remedial action at Mogale starts to improve performance
Completion of share buyback and switch of listing to London