Afarak Group PLC (LON:AFRK) has warned that second-quarter earnings will be weaker than previously expected due to challenges at its Mogale smelter in South Africa.
The speciality alloys producer said the irregular supply of electricity and associated high costs has been a “major difficulty” to achieving a “reliable, profitable performance” at the Mogale smelter.
“These site and country-specific factors have been exacerbated by unfavourable macro conditions such as sustained weak ferrochrome prices, influenced by US-China trade uncertainties,” the group said.
Afarak said it has already taken steps to address the operational underperformance of the smelter and continues to implement efficiency measures.
The company now expects earnings (EBITDA) of €8mln for the second quarter.
It said it is assessing the impact of the issues at Mogale for impairments, which might lead to a possible writedown that could have a “material impact” on the results.
The acquisition of the group's joint venture partner’s share of Synergy Africa will, however, have a positive impact on the second quarter.
“The management continue to work hard to turn around the operational performance of the Mogale smelter and will keep its future viability under review,” Afarak said.