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UPDATE 1-Barloworld says rand knocks H1 earnings

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JOHANNESBURG, May 20 (Reuters) - South African industrial brand management group Barloworld Ltd said on Tuesday a strong rand and the adoption of a new accounting method hit earnings for the first half of the financial year as it had warned.

Barloworld said headline earnings, which strip out exceptional items and their tax effects, dropped to 211 cents a share in the six months to March, 2003, from 270 cents in the same period last year.

The group, which warned in April its headline earnings for the period would be lower than the previous year, said it looked forward to reporting a better earnings performance in the second half compared to the first, subject to exchange rate stability.

"In the medium term, we will continue improving the quality of our existing operations to generate sustainable higher margins and profits," Barloworld said in a statement before the market opened.

"We will also expand our business through acquisition as we work to create a growing global organisation producing value for all shareholders," it said.

In terms of the new accounting standard, financial instruments must be recorded at fair value with the resultant mark-to-market gain or loss taken to income.