Aim-listed Kropz has begun an urgent operational review and restructuring process at Kropz Elandsfontein, in South Africa.

The company says the operation has continued to face significant financial pressure in recent months, predominantly as a result of the conflict in the Middle East.

The disruption to key inputs has adversely affected global fertiliser production and demand for phosphate rock, resulting in downward pressure on sales prices.

Simultaneously, increases in fuel, chemical and freight costs have significantly affected the operating costs of the Elandsfontein operation.

Over the past five months, Kropz says, the combined effect of lower realised sales prices and increased operating costs, together with the production ramp-up being challenging, has resulted in Elandsfontein continuing to not achieve operational profitability.

The company says these conditions have necessitated an urgent operational review and the implementation of a restructuring process, which will result in a reduction of revenue generated from phosphate rock (phosrock).

During the first five months of the financial year ending on March 31, 2027, Elandsfontein produced 150 246 t of phosrock and sold 149 907 t.

Going forward, phosrock revenue is expected to be generated primarily from the sale of existing stock on hand, with no further phosrock production currently planned.

The business will instead focus on the development and growth of the nanophos market.

While nanophos sales volumes are expected to be lower than the historical volumes achieved from phosrock, Kropz says the strategy is intended to establish a more sustainable operating model with a lower cost base.

Nanophos is a natural sedimentary soft rock phosphate that is rich in phosphate minerals, calcium and silica and used as a slow-release organic fertiliser to improve soil phosphate levels and promote long-term plant productivity.

Unlike synthetic fertilisers, which can cause water pollution and soil degradation, soft rock phosphate is a natural product that supports sustainable farming practices. Its slow-release properties minimise the risk of nutrient leaching into water bodies, helping to protect precious natural resources.

"The restructuring and operational downsizing process will be challenging and we understand the impact it will have on employees and their families and other stakeholders and are deeply saddened.

“The decision to undertake these actions has not been taken lightly and certainly not been easy.  However, considering the continued financial pressures facing the Elandsfontein operation over several years, this initiative is necessary to establish a more sustainable operating model,” says Kropz CEO Louis Loubser.

While nanophos represents a new and developing market, Kropz says sales to date have been constrained by production and material handling limitations.

As a result of the operational review and restructuring process, management intends to increase its focus on nanophos market development.

Revenue is, therefore, expected to gain greater momentum over the coming months, subject to normal seasonality and the successful growth of the nanophos customer base and market. Subject to board approval, phosrock operations will restart once market conditions have normalised.

The company says it believes that nanophos has the prospect to be a significant contributor to the phosphate market in South Africa and provide a much-needed solution to the needs of South African farming communities.

The management team is committed to developing this prospect.

"While the transition will be challenging these actions are in the best interest of the business and its stakeholders.

“This long-term vision ultimately necessitated difficult decisions in the short term and the company will manage the process responsibly and provide the necessary notices in terms of the Mineral and Petroleum Resources Development Act to the Minister of the Department of Mineral Resources and Petroleum. Kropz will continue to provide updates on material developments as appropriate,” says Loubser.