Blaming "the conundrum of the SA rand", electronics and telecommunications group Grintek announced a slump in its earnings for the six months to December.

However, the company said yesterday it was expecting a stronger second half, and announced that its order book had almost doubled to R1,8bn from R1bn a year ago.

"We are looking forward to posting our results for the second half," said CE Sybrand Grobbelaar.

"Foreign exchange will continue to play a role, and a weakening of the rand would help."

He noted that Grintek was not alone, and a number of other companies that are strong exporters had also experienced problems in the past year, as the rand recovered strongly from the low levels to which it plunged at the end of 2001.

Grintek suffered a R40,9m turnaround in its foreign currency position compared with the previous interim period.

If the yo-yoing rand could have been factored out, Grobbelaar said that Grintek's headline earnings a share "would have grown by more than 40%".

However, because of the stronger rand, headline earnings sank to 4,8c a share a 59% decline on the 11,9c reported for the previous interim period.

This was despite a 13% growth in revenue to R638m from R606m a year earlier.

Grintek's foreign exchange loss was R15,8m a reversal of the R25,1m foreign exchange gain for the six months to December 2001.

The company declared an interim dividend of 3c a share.

Although Grintek has developed a number of world-class defencerelated products, Grobbelaar said a war in the Gulf would not help the company, as it was locked into several long-term orders, and the business had a long time horizon. "And if the world goes into a tailspin (following a US-led attack on Iraq) that would not help us at all," he said.

Grintek's telecommunications division bucked the global turndown and reported a 10% growth in turnover compared with the six months to December 2001.

Orders from SA enterprises grew 20%, and there was a healthy expansion of sales to the rest of Africa.

Grintek's industrial electronics division enjoyed a 28% rise in turnover, while its defence operations grew 12%, "reflecting increased activity, albeit at unfavourable exchange rates".

Margins are being squeezed in Grintek's defence divisions, which export 56% of their turnover, because contracts are in dollars.

Grintek said that it was reaping the benefits of a number of partnerships with global players which had enabled it to sell into markets from which it traditionally had been excluded.

Commercial aviation-related electronic business is expected to rise in the Southern African Development Community region.

With acknowledgements to John Fraser and Business Day.