Mustek delivered a dramatic turnaround in profitability for the six months ended 31 December 2025, with headline earnings per share surging 256% to 83.54c despite a decline in revenue.
This came as improved foreign currency management and aggressive cost control offset persistent margin pressures.
Responding to a question by TechCentral on the sustainability of these profit levels during an investor call on Wednesday, Mustek CEO Hein Engelbrecht said he is confident the group’s hedging strategy will help sustain profits in its distribution business, while projected increases in the service revenue of other business units within the group will contribute to higher earnings.
“I would like to believe these levels are sustainable going forward and we would hopefully like to improve them. Forex losses are a part of our business and while we don’t control that, we are managing it as best we can. There is flexibility because if the rand moves up or down, we can adjust pricing,” said Engelbrecht.
The JSE-listed technology distributor reported revenue of R3.5-billion for period, down 2.4% year on year from the restated R3.6-billion in 2024. However, headline earnings rose to R45.2-million from R12.7-million – a more than threefold improvement that pushed Mustek’s share price higher in early morning trading.
Engelbrecht attributed the revenue dip to a stronger rand relative to the dollar, which also had a corrosive effect on margins, especially in Mustek’s distribution business.
Forex gains
“Typically, when the rand strengthens, our gross profit margins drop, and when the rand weakens our gross margins increase,” said Engelbrecht.
The most significant contributor to the profit surge was a R63.8-million swing in the group’s foreign currency position, moving from a R28.3-million loss in the prior period to a R35.5-million gain. Management attributed the improvement to better alignment of currency exposures to trading cycles, though cautioned that R23-million of the gain remains unrealised and vulnerable to renewed rand volatility.
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“This R63.8-million swing was a meaningful contributor to profitability in the period and reflects improved currency outcomes and improved alignment of exposures to trading cycles. Management remains cautious given the potential for renewed volatility,” Engelbrecht and Mustek chief financial officer Shabana Aboo Baker Ebrahim said in commentary alongside the results.
Beyond currency gains, Mustek’s cost-cutting efforts contributed to higher profits. Operating expenses fell 4.1% to R364.9-million, reflecting what the company described as benefits from strategic initiatives implemented over the past year, including the “right-sizing” of its cost base.
Net finance costs fell 42.4% to R48-million, from R83.3-million, driven by tighter working capital management and modest reductions in local and US dollar interest rates. The group eliminated its bank overdraft entirely, compared to R5.7-million at the prior year-end.
“We will see a slowdown in the reduction in finance costs over the second half of the year. We will see improvements in our finance costs over the next half but not as significant as we have seen in the first half,” Ebrahim said on the investor call.
Cash generation remained solid, with R187-million generated from operations, though the group’s cash position of R346.9-million at period-end, while improved from R225.7-million at June 2025, will need to support ongoing working capital demands in what remains a competitive and price-sensitive market, said Mustek.
The positive profit story was tempered by significant margin compression. Gross profit margin contracted to 12.6% from 13.9%, with the company taking an approximately R62-million inventory-related provision as part of what it termed “prudent stock management and balance sheet discipline”.
Excluding the inventory hit, underlying margins were supported by favourable global supply and pricing conditions in certain components, particularly memory and storage, though management noted these markets remain volatile. Engelbrecht told investors that the global memory and storage crunch, driven by large-scale data centre builds and expansions internationally, should lead to margin expansion going forward.
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“We believe we should start seeing some margin increase now and the prices are continuously going up — anything from 30% to 50% in the pricing. These things work in cycles and right now demand outstrips supply and that is putting upward pressure on pricing,” said Engelbrecht. — (c) 2026 NewsCentral Media
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