Computer reseller Mustek has taken a beating due to the volatile rand. It expects to report lower earnings for the year later this month, despite expecting to claw back some previous losses in the second half of the year.
The listed company told shareholders that headline earnings per share and basic earnings per share are expected to be between 30% and 35% lower than last year. In the previous comparative period, the company reported headline earnings per share of 73.73c and basic earnings per share of 73.78c.
In a Stock Exchange News Service announcement, the company explains the fluctuating rand resulted in foreign exchange losses, which impacted earnings. In February, Mustek expected to recover R21 million in the second half of its financial year, after another foreign exchange beating in the first half of the year.
The company is familiar with foreign exchange fluctuations and has made losses on several occasions. In 2005, Mustek lost R62 million in trade and a further R41.3 million in 2006. Last year was the first of many where the company came out on top of foreign exchange, with R8.1 million.
Irnest Kaplan, MD of Kaplan Equity Analysts, says the company has had problems with foreign exchange movements in the past. He explains there is a lag between when the company buys stock from the East in dollars and when it sells items locally in rands.
Kaplan explains that Mustek hedges some of its foreign exchange activity, but not enough to counter big moves in the local currency. He says the currency losses need to be stripped out to understand how the underlying business is doing.
JSE rules require that a company informs shareholders as soon as it is aware that earnings will differ by 20% or more from the previous period.
Mustek's year-end results are expected to be published around 28 August.
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