JOHANNESBURG (miningweekly.com) – An extreme weakness in demand and prices for chrome mining and minerals producer Afarak’s products cut the dual-listed firm’s revenue by 25.6% to €39.5-million in the second quarter of this year.

Emerging from what Afarak CEO Alistair Ruiters described as one of the most challenging external environments in recent years, the group experienced an 89.8% plunge in earnings before interest, taxes, depreciation and amortisation (Ebitda) during the three months to June 30.

Ebitda decreased from €7.6-million in the second quarter of 2015 to €800 000 during the quarter under review, while profit for the period swung into the red from €5.7-million in the corresponding period last year to a loss of €1-million in the three months to June 30.

Revenue in the speciality alloys segment decreased 29.5%, while the ferroalloys segment registered a 21.9% drop in revenue.

“Selling prices continued to plummet and the South African rand continued its rally against the US dollar and the euro. These two factors have adversely impacted the industry at large with more firms going into business rescue,” Ruiters explained.

The dual-listed company reported a decrease in the sales of processed material, from both the German chromite concentrate processing plant Elektrowerk Weisweiler and South Africa’s Mogale alloy processing plant, to 28 214 t during the period under review.

“In the face of plummeting prices, we consciously stuck to our policy of not compromising our selling prices in favour of larger sales volumes and the downward price pressures hit our sales volumes particularly in the speciality alloy segment,” he added.

Further, Afarak’s mining volumes were lower during the quarter under review, following the depletion in November of opencast mining activity at the Mecklenburg mine, on the eastern limb of the Bushveld Complex.

According to the company’s website, Afarak is currently mulling underground mining opportunities at the operation.

However, the company assured that its balance sheet position remained healthy, while positive cash flow brought over from the first quarter enabled Afarak to reduce debt levels by €4.7-million and maintain a good cash position. The company’s liquidity as at June 30 was €13.2-million.

“Looking ahead, we are expecting our performance to improve in the coming months. Improved benchmark prices for charge chrome will favour Afarak and our decision to switch one of the silicon manganese furnaces at our Mogale plant to charge chrome should reflect positively in our returns from the ferroalloys segment,” Ruiters said.

Afarak is also expecting increased special grade ferrochrome business from the US.

In the interim, the company is evaluating its cost structures across the operations, with cost saving initiatives and the streamlining of business processes in focus to strengthen Afarak’s sustainability.

Afarak approved an additional capital redemption of €0.01 a share for the first half of this year.