Mustek has disclosed that it is expecting to announce an increase in turnover to R1,732-billion for the reporting period ended 31 December 2008.
During the period, the gross profit percentage increased to 18,6%, compared to 16,4% at 31 December 2007, and the operating margin is projected at 2,4%, compared to the previous year's 5,5%.
Included in operating profit is R84,7-million relating to realised and unrealised foreign exchange losses, which compares to a R8,1-million in foreign exchange profits a year ago.
"The majority of these losses have been recovered through higher selling prices during the period under review, as confirmed by the higher gross profit margins," reads a statement from the company. "Approximately R21-million is expected to be recovered during the subsequent period."
Mustek uses the rand:dollar spot rate at the beginning of the month to determine its selling price, with adjustments made during the month should the exchange rate change substantially. As a result of the sharp and sudden depreciation of
the rand against the dollar during October 2008, a substantial amount of inventory is accounted for at lower levels compared to where the rand has depreciated to. This results in higher gross profit percentages as Mustek recovers foreign exchange losses through higher selling prices.
"Accounting standards does not allow the fair valuation of inventory, but require the corresponding foreign accounts payable to be stated at the closing spot rate," the company states. "As long as this is the case and the rand remains as volatile as it currently is, reported earnings will remain in line with the volatilities of the rand."
As a result, Mustek's headline earnings per share is expected to be between 35% and 45% lower than the restated headline earnings of 36,22 cents per share of the previous corresponding period. Basic earnings per share is expected to be between 40% and 50% lower than the restated basic earnings of 38,25 cents per share of the previous corresponding period. Headline and basic earnings per share adjusted for foreign exchange losses expected to be recovered, is expected to be between 32 and 38 cents per share.