Encouraging results reported by KWV
2005-03-31
AN increase in group turnover, good brandy sales in the local market and growing income from associate companies support the positive performance by KWV Limited in the first six months of the company’s financial year.
The sustained strength of the South African rand, together with worldwide surpluses and weak demand from the company’s most important markets, however, continue to exert pressure on profits. The period just before Christmas, in particular, was characterised by quiet markets.
Two other factors which had a significant impact on the results were the sale of the group’s interest in Ceres Fruit Juices and the financing of the KWV Employee Empowerment Trust as part of KWV’s black economic empowerment transaction. The latter took the form of an interest free loan, in respect of which R19,1 million (R13,4 million after taxation) has been written off in the income statement as an impairment adjustment as required by AC133.
If this impairment adjustment is excluded, operating profit shows an increase of 6,8% compared to the six months for the prior year, which is in line with the increase in turnover.
“The interim results have confirmed that KWV’s entry into the local market has been a success. Sales of brandy and branded products have shown healthy growth,” says Dr Willem Barnard, chief executive officer of KWV Limited.
Although export markets may show a resurging demand in the short term, Dr Barnard expects trading conditions to remain under pressure.
He does confirm, however, that the company is exploring strategic initiatives to strengthen KWV’s competitive position.
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