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Barloworld Limited
(Registration number 1918/000095/06)
JSE code: BAW
ISIN code: ZAE000026639
("Barloworld")
Impact of strength of Rand and the application of IAS 39 on Barloworld results
International industrial brand management company Barloworld Limited will
release its interim results for the six months ended 31 March 2003 on Tuesday 20
May 2003.
At the Annual General Meeting (AGM) of the company held on January 30 2003
chairman Warren Clewlow said, "trading conditions in most of the regions in
which we operate are proving to be in our favour and the group"s operating
profits for the first quarter are well ahead of those of last year and they also
exceed our plans. Indications are that this trend will continue but perhaps at a
lower rate. The recent rapid appreciation of the Rand affects the translation of
international profits. International Accounting Standards require certain
adjustments to inventories as well as marking foreign exchange contracts to
market values. These required adjustments would currently offset some of the
good gains made at the operating level."
Operating profits remain well above the prior year. Since the end of January the
Rand has strengthened further and as a consequence the company wishes to provide
an update on the impact of the application of IAS39 on its interim results.
In terms of IAS39 (Recognition and Measurement of Financial Instruments), which
was applied for the first time in the 2002 financial year, financial instruments
must be recorded at fair value with the resultant mark-to-market gain or loss
taken to income. The major impact for the period under review is in the Capital
Equipment business in South Africa where, due to the strengthening of the Rand
against the US dollar, forward exchange contracts taken out in order to cover
machine and parts purchases have given rise to significant negative fair value
adjustments. The quantum of these adjustments in this segment has been reviewed
by our auditors and amounts to R292 million (2002: R9 million gain). Taking
into account this impact and despite the growth in the group"s operating profits
referred to by the chairman at the AGM, headline earnings per share, which
include the impact of IAS39, will show a reduction for the half year compared to
the first half of last year.
Commenting on this announcement Barloworld CEO Tony Phillips said: "IAS39 has
introduced a new element of volatility into our earnings which was not there
previously. Fair value adjustments on financial instruments are now a
significant component of our headline earnings calculation under International
Financial Reporting Standards. We felt it was important to provide information
on its impact on the half year at the earliest possible time. The scale of the
impact on our full year results is difficult to forecast and will depend on the
direction and extent of the movement of the Rand."
Thursday 17 April 2003
For background information please contact Mark Drewell, Head of Corporate
Communication at Barloworld Limited on (011) 445 1204 or visit
www.barloworld.com
Sponsor
Cazenove
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