Chrome and ferrochrome company Merafe, which last week reported lower profit on higher production, has declared a record dividend that represents a distribution of 51% of headline earnings.

The ungeared company had net year-end cash of R281-million and the R200-million unsecured, three-year revolving credit facility with Absa Bank remained unused.

Merafe shares in 20.5% of the earnings before interest, taxes, depreciation and amortisation (Ebitda) of the Glencore-Merafe Chrome Venture.

The JSE-listed company declared a 16% dividend uplift to a record R351-million on 19% lower Ebitda of R1 345-million.

The 3% rise in ferrochrome output to 407 000 t made use of 85% of the installed capacity, with production records set at the Lion and Wonderkop smelters.

Pellet production records were also set at Tswelopele and Bokamoso in a year of no significant electricity disruptions and three-year wage agreements were concluded.

Revenue, through lower prices, was down 5% to R5 606-million and cash flow from operations decreased to R478-million.

After-tax profit fell 25%.

While ferrochrome revenue decreased 6% year-on-year to R4 849-million on 7% lower net prices and 1% lower sales volumes to 372 000 t, chrome ore revenue rose 3% to R747-million on 16% higher prices, partially offset by a 23% decrease in sales volumes to 248 000 t.

Corporate costs include corporate social investment expenses of R3.3-million on contributions to the Adopt-a-School Project, which is involved in the development and upgrading of infrastructure, as well as the social and academic skills of two schools in the areas in which Merafe operates.

Sustaining capital expenditure, coupled with the venture’s ongoing efforts to improve safety, costs and efficiencies across all operations, rose 2% to R412-million.

Merafe CEO Zanele Matlala said the venture was continuing to monitor the electricity situation through industry involvement with State electricity utility Eskom.

“Additionally, the venture continues to explore energy efficient means of producing our products. These various initiatives have contributed to the venture remaining the lowest- cost ferrochrome producer in South Africa.”

Macroeconomic factors were contributing to uncertainty and the volatile pricing environment, with growth in stainless steel production underpinning ferrochrome demand.

China’s dominant role in the stainless steel and ferrochrome markets was continuing, with solid sector fundamentals leading to continued growth in stainless steel production and ferrochrome demand. Ferrochrome production had responded to that demand, with chrome ore imports into China also increasing.

Regrettably, Merafe reported one fatality during 2018 and another in the current year and committed itself to continued safety campaigns and programmes.

Per-tonne production costs rose by 9%, on increased reductants prices, higher upper group two reef input prices, greater labour costs, upped electricity prices and rising royalty taxes on chrome ore.