JOHANNESBURG (miningweekly.com) – LSE- and Nasdaq-listed Afarak Group has started the new financial year on a strong foot as the first quarter of the year delivered the highest quarterly gains in the company’s history.

Afarak reported “significant” improvements on the back of higher ferrochrome prices and strengthening market fundamentals, bolstered by productivity gains, sparking a recommendation for an “extraordinary” distribution of 2p a share from the invested unrestricted equity fund.

"Afarak has had a very strong start to the year. Our earnings before interest, taxes, depreciation and amortisation (Ebitda) improved significantly from last year. The strong market, particularly higher ferrochrome and ore prices, had a notable positive impact on our results,” said CEO Guy Konsbruck.

Ebitda for the first three months of the year increased to £12.7-million, up from the £3.3-million in the corresponding period the year before, while the Ebitda margin surged from 8% in the first quarter of 2016 to 22.4% in the quarter under review.

Arafak reported a surge in profit for the period from continuing operations, from £200 000 in the first quarter of last year to £4.2-million in the quarter under review, with cash flow from operations reaching £8.5-million and liquid funds of £16.2-million as at March 31.

During the first quarter of the year, revenue increased by 39% to £56.7-million owing to the higher ferrochrome selling prices.

The group’s sales from processing, which include all the products produced at the Mogale Alloys processing plant, in South Africa, and the Elektrowerk Weisweiler processing plant, in Germany, increased 3.5% to 27 892 t, while the tonnage mined increased 87.6% to 85 352 t.

“Sales volumes in the ferroalloys segment increased by 6.8%, mainly driven by an expansion in demand supported by the transition of the P2 furnace at Mogale Alloys to ferrochrome production from silicomanganese. The positive performance in the ferroalloys segment was reached in spite of an 8.8% contraction in the sales volumes in the speciality alloys segment.

However, Konsbruck warned that the high price levels for ferrochrome and chrome ore seen in the first quarter were not sustainable over the longer term.

While the bullish market had already started to dampen and with prices starting to reverse somewhat at the end of the first quarter, the company still expects an improved performance in the second quarter, albeit somewhat subdued.

“I am particularly satisfied that our internal initiatives have also contributed to further strengthening in working capital management, higher production volumes, productivity gains and considerable cost benefits,” he concluded.