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Arafak Q3 impacted by seasonal factors

17th November 2017

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

     

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JOHANNESBURG (miningweekly.com) – After delivering positive and robust first and second quarters, Nasdaq- and LSE-listed Afarak Group’s third quarter was hit by seasonal fluctuations.

The group on Friday posted strong revenue growth on the back of higher ferrochrome prices and strong market fundamentals; however, profitability had been impacted on by higher costs of production in line with seasonal effects and a sharp increase in the cost of raw materials.

Seasonal shutdowns, higher winter electricity tariffs in South Africa and higher raw material costs negatively affected profitability during the third quarter of the year, said Arafak CEO Guy Konsbruck.

“Afarak's third-quarter results reflect the yearly seasonal fluctuations. The summer period in Europe entails a weakening in demand and a related shutdown of many plants. Our plant in Germany was closed for just two weeks during the quarter.

“In South Africa, higher winter electricity tariffs typically lead to maintenance shutdowns during the same period. During the quarter, we extended the closure of our plant in Mogale to four weeks, as we wanted to perform major and necessary maintenance work,” he explained.

For the third quarter, Arafak posted a €3.9-million loss from continuing operations, compared with the loss of €3.2-million in the corresponding quarter the year before.

The third-quarter loss before interest, taxes, depreciation and amortisation was €2.2-million, narrowing from the €2.8-million loss in the third quarter of 2016.

Revenue increased strongly by 52.7% to €44.2-million, owing to higher sales volumes and prices, while processed material sold increased by 52.8% to 27 538 t on the back of strong demand in both the speciality and ferroalloys segment.

“I am confident that 2017 will be a positive year for Afarak not only from a results perspective but, more importantly, in making the organisation even more resilient, vertically-integrated and better placed to exploit market opportunities in the years to come,” said Konsbruck.

Arafak reported cash and cash equivalents of €13.6-million as at September 30, a rise on the €7-million reported a year ago.

Edited by Creamer Media Reporter

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