Information technology group Mustek on Wednesday reported a sharp decline in net profits for the six months ended December, with profits dwindling from R50-million to R7,4-million.
Headline earnings per share shrank from 75,43 cents to 8,34 cents for the half year.
Mustek said that group revenue has decreased by 18% from R1,4-billion to R1,2-billion as a result of the effect that the strengthening rand has had on the selling prices of personal computers (PCs) and computer components.
“The rand has strengthened by 29% compared to comparative period and this drove the average selling price of Mecer PCs down by 30%. The gross profit percentage increased to 16,7% [2002: 16,2%]. Without the implementation of GAAP Statement AC133, the gross profit percentage would have been 19,1%.
“Mustek’s policy to take out forward cover on United States dollar exposure for imports had a significant impact on earnings. Losses on forward exchange structures amounted to R62,3-million [2002: nil] [Mecer: R27,9-million and Rectron: R34,4-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. In addition to the above, GAAP Statement AC133 had the effect of reducing gross profit by R27,8-million due to the valuation of embedded derivatives in foreign payables, which arose mainly as a result of the strengthening rand, and the corresponding credit went to operating expenses.”
Looking ahead, Mustek said: “In calendar year 2003, unit growth in South Africa increased by 13,8% and the group anticipates accelerated growth with government’s education initiatives being rolled out. Further impetus to growth will come from increased PC demand from the home user market, as computer literacy rises.
“The number of Mecer notebooks sold increased by 29% and Mustek expects this 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.
“Mustek continues to explore opportunities, investments and partnerships in other regions, particularly in the rest of Africa and other emerging markets as part of its globalisation strategy.
“Performance at the beginning of 2004 has been encouraging. Earnings remain sensitive to the strength of the rand against the US dollar.” — I-Net Bridge