Last checked at 20 Feb 2019 07:00
AFARAK GROUP: PROFIT WARNING FOR 2018
07:00 London, 09:00 Helsinki, February 20, 2019 - Afarak Group Plc ("Afarak" or "the Company")
AFARAK GROUP: PROFIT WARNING FOR 2018
Afarak has faced challenges in 2018 particularly from the Mogale operation in South Africa. Throughout the year, various plant specific conditions have negatively impacted results.
Several technical issues including breakdowns and temporary stoppages of processing equipment in our South African mining operations, weak geological formations with lower quality of ore, have caused reduced production outputs, ultimately affecting raw material supply to Mogale. In addition, increasing power and reductant cost, a strengthening of the rand and the forced closure of the P3 furnace all had a bearing on the results. In response, Afarak has been taking corrective measures on several fronts. The Mogale operation is today under a new management team which is focused on improving operations and cutting cost. As part of the turnaround strategy, Mogale is shifting production from charge chrome to high carbon ferrochrome which will achieve higher margins on the market. Mining operations are also being downsized with a resulting reduction in fix cost and capital expenditure. The Q4 2018 operative result of Mogale plant has been broadly in-line with the management’s expectations and we expect the corrective actions to address the issue. Nevertheless, a write-down of the asset’s book value must now be processed. The write-down has no effect on cash flow but will materially impact the result for the year.
Against a backdrop of even lower ferrochrome benchmark prices for quarter one 2019, Afarak is focused on improving the performance of its South African operations. However, it is not prudent to assume that these efforts will fully offset the poor market conditions in the short-term.
Due to this negative performance throughout the year, and continuing market pressures, the goodwill related to the Mogale business will be subject to an impairment write-down of EUR 6.5 million in quarter four.
Afarak will be publishing its full year results for 2018 on February 22, 2019.
The Board of DirectorsAfarak Group
For additional information, please contact:
Guy Konsbruck, CEO, +356 2122 1566, guy.konsbruck@afarak.comJean Paul Fabri, PR Manager, +356 2122 1566, jp.fabri@afarak.com
Financial reports and other investor information are available on the Company's website: www.afarak.com.
Afarak Group is a specialist alloy producer focused on delivering sustainable growth with a Speciality Alloys business in southern Europe and a FerroAlloys business in South Africa. The Company is listed on NASDAQ Helsinki (AFAGR) and the Main Market of the London Stock Exchange (AFRK).
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www.afarak.com