Merafe Share Price Bearish on Lower Dividend in H1 2025 as Ferrochrome Sales Plunge
Merafe Resources’ half-year results reveal steep operational and financial declines, highlighting mounting challenges in South Africa’s...
Quick overview
- Merafe Resources reported significant declines in ferrochrome output, sales volumes, and revenue for H1 2025, leading to a 10% drop in stock value.
- The South African ferrochrome industry faces challenges from rising energy costs and competition from Chinese producers, impacting profitability.
- Ferrochrome sales volumes fell 55% to 76,000 tonnes, while revenue decreased by 47% to R2.52 billion compared to H1 2024.
- Despite recent setbacks, Merafe's long-term performance remains strong, with a 197% increase in share price over the past five years.
Merafe Resources’ half-year results reveal steep operational and financial declines, highlighting mounting challenges in South Africa’s ferrochrome industry.
Operational and Financial Setback
Shareholders of Merafe Resources Limited (JSE:MRF) have seen their optimism tested after the stock fell 10% in the final two weeks of July and extended its slide following the H1 2025 results release. The company’s performance for the first half of the year showed pronounced declines in ferrochrome output, sales volumes, and revenue, alongside a significant drop in profitability.
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Industry Headwinds Intensify
The South African ferrochrome sector continues to face strong headwinds, driven by surging energy costs and intensifying competition from Chinese producers. These pressures have been compounded by the prolonged downturn in the global ferrochrome market, which has weighed heavily on both sales volumes and pricing power.
Key Numbers Tell the Story
For the six months ending June 2025, ferrochrome sales volumes plunged 55% to 76,000 tonnes, dragging group revenue down 47% year-on-year to R2.52 billion. While the company managed to improve safety performance—reporting no fatalities and a reduced total recordable injury frequency rate—it also saw a marked decline in cash generation and earnings, prompting the board to slash its interim dividend from 20 cents to just 4 cents per share.
A modest bright spot emerged from the platinum group metals (PGM) segment, where sales volumes rose 9% year-on-year.
Long-Term Performance Still Strong
Despite the sharp mid-year downturn, Merafe’s long-term record remains impressive. Over the past five years, the share price has soared 197%, significantly outperforming many peers in the mining sector. However, in 2025, the stock’s momentum has reversed. After falling below key weekly moving averages earlier in the year, these technical levels have now become resistance, limiting upward price moves and reinforcing the prevailing bearish trend.
Merafe Resources H1 2025 Results Show Sharp Downturn
Operational & Safety Performance
- Zero fatalities reported in H1 2025 vs 1 in H1 2024.
- TRIFR (Total Recordable Injury Frequency Rate) improved by 35% to 1.50 (Dec 2024: 2.31).
- Ferrochrome production down 27% to 112kt (H1 2024: 154kt).
Sales & Revenue Trends
- Ferrochrome sales volumes slumped 55% to 76kt (H1 2024: 167kt).
- Chrome ore sales volumes down 14% to 217kt (H1 2024: 251kt).
- PGM sales volumes rose 9% to 7,112oz (H1 2024: 6,536oz).
- Revenue plunged 47% to R2.52 billion (H1 2024: R4.74 billion).
Profitability & Earnings
- EBITDA declined 56% to R500 million (H1 2024: R1.13 billion).
- Headline earnings per share (HEPS) fell 55% to 12.6 cents (H1 2024: 28.2 cents).
- Basic EPS dropped 68% to 9.3 cents (H1 2024: 28.8 cents).
Financial Position
- Net asset value edged up 0.7% to R4.91 billion (Dec 2024: R4.88 billion).
- Cash position declined 36% to R1.14 billion (Dec 2024: R1.80 billion).
- Operating activities used R159 million in net cash vs R852 million generated in H1 2024.
Dividend Declaration
- Interim gross cash dividend of 4 cents per share, sharply lower than 20 cents in H1 2024.
CEO Commentary on Results
Merafe Resources posted a profit decline of R233 million for the six months ended 30 June 2025, driven by sustained weakness in the global ferrochrome market. Rising energy costs, combined with intensified competition from China, forced the suspension of several smelting operations in Q2. Demand for chrome ore units also weakened, adding further strain to operations.
Outlook
The South African ferrochrome and chrome ore industries face a pivotal moment. While energy supply issues and global competition remain, recent government initiatives—such as policy support and beneficiation incentives—offer cautious optimism, particularly for the medium to long term. The chrome segment will need to adjust to changing domestic demand and closely track developments in China’s market.
Improved energy stability and the smooth rollout of regulatory changes could benefit both sectors. The Glencore–Merafe Chrome Venture continues to work with stakeholders to find sustainable solutions for the smelting business.
Management remains cautious for the rest of 2025, focusing on operational efficiency, preserving cash, controlling costs, and disciplined capital allocation.
Conclusion: Merafe Resources enters the second half of 2025 facing an uphill battle. Operational pressures, fierce global competition, and constrained profitability are weighing heavily on short-term performance. While its five-year gains highlight the company’s resilience and market standing, the current environment demands a strategic response to stabilise production, control costs, and protect shareholder value. Unless market conditions improve or operational efficiencies are achieved, the path ahead may remain challenging.
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