Singer profits down due to increased finance costs

Reeling from an increase in finance cost due to rising interest rates and inflation, Singer (Sri Lanka) Ltd saw a drastic decline in profits in 2007. “Continued double digit inflation must have an impact on cash flows of an organisation the size of ours. Growth in finance cost during 2007 is a cause for concern.

This led to an impact on our net income position, which declined in consequence,” Singer chairman / Managing Director, Hemaka Amarasuriya has noted in his annual review.

Singer posted a profit of Rs.310.6 million last year, down 27.4 percent from 2006’s Rs 427.7 million. Group net profit was at Rs.370.0 million against 2006’s Rs.490 million.

The net finance cost of the group rose to Rs.1045.3 million, an increase of 62.8 percent from 2006’s Rs 641.9 million. Singer’s net finance cost saw an increase of 58.2 percent last year to Rs.927.5 million from the previous year’s Rs.586.3 million.

“Singer Finance Ltd’s interest cost contributed mostly to the increase in finance cost at a group level due to high interest rates,” a company official told The Sunday Times FT.

He said Singer wants to control its inventories better to arrest the finance cost situation at a company level. “The Enterprises Resource Planning (ERP) software package introduced by Industrial Financial Solutions (IFS) is being implemented presently and by June we can see positive results with regards to this,” he added.

He said the company’s traditional product lines such as sewing related products, refrigerators, etc did not perform well mainly due to increases in government duties, which resulted in a price increase of these products by Singer.

“The average price increases on our products was nine percent year on year, because we had to factor in the duties the tax structure and prevalent inflation,” he explained.

He said significant growth was seen in communications equipment due to moving items such as Lanka Bell handsets, Dialog satellite dishes and computers. “We will continue to have such partnerships this year as well,” he said.

Furniture sales saw a 42 percent growth this year. “This was mainly due to our efficient channel distribution strategies at Modern Homes,” the official explained.

He said agricultural equipment saw a growth increase of 36 percent due to the increase of water pumps. “We can see an expansion in agriculture as a whole in the country and this was the reason for increase in water pumps sales,” he said.

The group revenue increased from Rs.12.2 billion to Rs.13.8 billion which is a 12.8 percent increase. The company revenue increased from Rs.12.1 billion to Rs.13.5 billion, which is an increase of 12 percent. “The revenue increase was mainly due to expansion of distribution, new products and price increases,” the official said.