PC maker Mustek`s policy to take out forward cover on US dollar exposure for imports, coupled with a strengthening rand, resulted in a sharp drop in interim profits despite solid growth in unit sales.
Revenue of R1.17 billion for the six months to end-December was 17.5% lower than the R1.42 billion for the same period a year earlier, which CEO David Kan says is attributable to the strengthening of the rand against the dollar.
The currency strength slashed the selling prices of Mecer PCs by 30%.
However, in calendar 2003, unit growth in SA increased by 13.8%, with the number of Mecer notebooks sold rising by 29%.
Kan says the group expects the notebook market to grow as the price differential between desktops and notebooks narrows. "Increased growth in PC demand in southern Africa and Africa continues to be positive," he says.
Kan says Mustek`s policy to take out forward cover on US dollar exposure for imports had a significant impact on earnings. Losses on forward exchange structures amounted to R62.3 million.
"Subsequent to the period end, Mustek disposed of the bulk of the contracts at exchange rates varying between R6.98 and R7.33 to the US dollar, realising a surplus of approximately R12 million."
He says the adoption of the AC133 accounting standard also had the effect of reducing gross profit by R27.8 million.
Profit before tax fell from R89.43 million to R5.89 million while the net profit for the period dropped from R50.08 million to R7.41 million. Headline earnings slipped from 75.43c a share to 8.34c a share.
Kan says the performance at the beginning of the current calendar year has been encouraging.
Mustek has been awarded 350 out of the total 1 070 schools that form part of the first two phases of the GautengOnline project and expects to gain a significant portion of the remainder of the contract.
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