Sri Lanka’s 2015 consumption boom which fuelled an economic crisis, unlikely to continue this year
The consumption boom in Sri Lanka last year is unlikely to continue throughout 2016 as the country is now facing a tight economic situation, reserves and emerging balance of payments problem, the CEO of a leading consumer goods company said. “However, given Singer’s brand name and market standing, we are very optimistic about maintaining a growth momentum which however, would be lower than 2015,” Singer Group CEO Asoka Peiris told the Business Times.
He said this optimism is triggered by a number of factors including the increase of the purchasing power of Sri Lanka’s expanding middle class segment in the country, enabling more than 95 per cent of Sri Lankans to gain access to electricity. He said that the company also has better control of supply systems and do the needed adjustments to face the challenges ahead. Meanwhile Singer (Sri Lanka) PLC, having consolidated after acquiring majority stakes in its associate companies, says that it is gearing for expansions and lean operations this year.
In January and February 2016, Singer Industries (Ceylon) PLC and Regnis (Lanka) PLC were acquired from their common parent, Singer (Sri Lanka) B.V. making these subsidiaries of Singer (Sri Lanka) PLC. Mr. Peiris further told the Business Times that this deal was worth Rs. 1.3 billion and that it was a conclusion of a long process which commenced in mid-2015 and included an independent valuation of these companies and the approval from various regulating institutions. Singer Industries (Ceylon) PLC was acquired for Rs. 664.1 million, with a gain on the bargain purchase of Rs. 162.2 million.
While earnings of Singer Industries (Ceylon) PLC have been low for many years, the consideration is on the value of the assets of the company, especially the land which the company intends to put to better use, he said. The nearly three acre land at Ratmalana is prime property and analysts say that it will be developed. “They may get into the property sector,” an analyst said. Regnis (Lanka) PLC was acquired by Singer for Rs. 722.5 million and at a goodwill of Rs. 73.8 million. According to Mr. Peiris, Regnis has good prospects and they will expand its factories.
The company is also focusing on a leaner operation, he said. “Last year we spent Rs. 25 million on the labour retrenchment through a Voluntary Retirement Scheme (VRS) and it’s an ongoing process. This year too, Singer hopes to spend a similar amount on this scheme.” The company’s staff strength is under 100 at present.