Financial Times

Amarasuriya slams "screw driver" assembly operations
Regnis only surviving consumer goods maker
Regnis (Lanka) Ltd, has been described by its chairman Hemaka Amarasuriya as the only surviving manufacturer of large scale consumer durables in the island as others were forced to close owing to pressures of globalisation.

An associate company of Singer XBV, Regnis now makes almost a quarter of all fridges sold in the local market and should return to profitability in 2005, Amarasuriya told shareholders in the company's annual report.

Amarasuriya, who was recently appointed as vice president of the multinational Singer N.V. and is also chairman of Singer (Sri Lanka), said the firm was expanding production capacity to meet booming demand for fridges and washing machines. He said Regnis continues to "stamp its mark as the only surviving organisation manufacturing large scale consumer durables in Sri Lanka in the wake of globalisation which resulted in closure of many other units of production."

Amarasuriya said there is now a new emergence of a "screw driver" category of assembly type operations, "masquerading as manufacturers to take advantage of a fragile tariff structure to lower their tax pay load."

But, he added, these are not genuine industries, "merely tax evasive mechanisms thriving in an unfair playing field." Regnis production volumes grew 40 percent during the year, following a growth of 45 percent in 2003 - a trend Amarasuriya said the community "must sit up and take notice of."

The average consumer now considers products such as fridges and washing machines as household essentials. Regnis has appealed to the government to repeal a new excise tax of 10 percent and considers its value addition of 56 percent enough to justify support for local industries. Increasing prices of raw materials and shortages of raw materials because of high consumption by China and India have caused significant hardships to the local industrialists. Steel prices rose by 69 percent per metric tonne.

Revenues at Regnis rose 33 percent to Rs 743 million, driven largely by increased sales of fridges and washing machines, but gross profit margins fell by three percent owing to raw material price hikes.

The company made a net loss after a tax of Rs. 33.75 million for the year which ended December 31, 2004 compared with a profit of Rs. 114.3 million the previous year but Amarasuriya said Regnis was "poised to return to net profitability in 2005".

Regnis plans to increase refrigerator capacity to 75,000 units from 40,000 in phase one of its current expansion plan and then to 125,000 in phase two. This will enable it to meet demands estimated at 50,000 units.

The company plans to increase capacity by three-fold in the five years between 2002 and 2006. A three-year collective agreement signed with employees belonging to the CMU branch increased salaries of all employees as well as their productivity, Amarasuriya said.

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