ONE of the issues diplomatically raised at the annual general meeting (AGM) of investment company Niveus on Monday was that its potent mix of fast-growing alternative gaming assets (limited payout machines and electronic bingo) could be diluted by laggard liquor company KWV.
In the nine months to end-March, KWV swung R7.4m into the black on an after-tax profit basis, from a near R50m loss in the year to end June last year. Still, Niveus shareholders will be anxiously eyeing KWV’s upcoming interim results for the period to end-September.
Larger rival Distell’s recent financial report confirmed the wine and brandy markets remain fairly soft. And while KWV’s belated thrust into the competitive ready-to-drink category might manifest at top line, it’s too early to expect real fortification at profit level. But what caught the eye — strangely, this was not raised at the Niveus AGM — is that KWV, a major exporter of wine, has hedged its sales.
The Niveus annual report notes exchange rate losses of R16m on the currency hedge book, “of which R11m relates to future periods”. Shareholders need far more detail to assess how prudent the hedging policy may prove in years ahead. For now they are left to ponder the statement, signed off in mid-September, that the hedging policy “will result in mark-to-market losses if the rand continues to depreciate”, but that the group will be a net beneficiary if the rand weakens further.