Merafe signs off on a bumper year

Karel Zowitsky
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Merafe has released results and declared a dividend for the year ended December 2021. The company is firmly on the radar of many small cap enthusiasts, although it is far less of a small cap than a year ago. The share price has jumped over 130% in the past year and is now in mid-cap territory with a market cap of just below R4.5 billion.

Growth in stainless steel production and conditions in China were key to the strength of the ferrochrome market in 2021. That comes through clearly in Merafe’s numbers.

Merafe achieved a 43% increase in ferrochrome production and a 69% increase in revenue in 2021. Production costs per tonne fell by 5%. With numbers like that, it shouldn’t surprise you that EBITDA came in 14.5x higher than in the previous year!

The joy of operating leverage means that EBITDA margin increased from 3.5% in 2020 to over 30% in 2021.

The net effect on profitability is staggering, with a loss in 2020 of 0.8 cents per share now a distant memory after headline earnings per share (HEPS) of 67 cents in 2021.

Net cash increased from R278 million to R972 million, so Merafe was able to declare a final dividend of 22 cents per share after not declaring a dividend in 2020. This takes the full year total in 2021 to 29 cents per share.

Merafe expects a slowdown in global growth from the highs in 2021. Concerns around sustainability of the 2021 result have been the driver of Merafe trading at a Price/Earnings multiple of below 3x.

Other than focusing on efficiencies in its ferrochrome operations, the company is also busy with initiatives in platinum group metals (PGMs) with its partner Glencore.

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