Higher finance costs, exchange losses push Singer 2Q into red
Singer Sri Lanka PLC turned a net loss for the quarter ended September 2018 (2Q19) as Sri Lanka’s consumer durables behemoth fell victim to lower disposable incomes and the weaker consumer sentiment prevailed during the period under consideration.
Singer Sri Lanka reported a loss of 38 cents per share or Rs.144.1 million for the quarter under review, compared to earnings of 27 cents per share or Rs.100.1 million reported for the corresponding period, last year, as exchange losses and net finance costs eroded the bottom line.
The company incurred an exchange loss of Rs.187 million for the quarter and the net finance cost rose from Rs.538.3 million to Rs.867.1 million. Although the company recorded a double-digit growth in the top line, such growth lacked the vigour to withstand the growth in direct costs and the higher finance cost. Singer top line grew by 13 percent yearon-year (YOY) during the three months to Rs.13.5 billion but the cost of sales rose by 14 percent YOY to Rs.9.4 billion.
The company reported profits of Rs.1.11 a share or Rs.418.8 million on sales of Rs.15.1 billion in the previous April-june quarter. There were some clear signs of weakness in sales in segments such as consumer electronics, furniture and sewing machines as consumers deferred their high value purchases amid weak disposable incomes.
Albeit weak, sales withstood somewhat in the group’s finance company, home appliances and IT products segments.
The consumer durables sector is highly susceptible to the market conditions and the demand for white goods sinks faster than the decline in the disposable incomes while the demand takes time to pick up when the economy recovers.
Singer also sells imported goods and the company earlier said it could not pass on the full impact of the rupee weakness due to slack market conditions.
Mahesh Wijewardena, who has been with Singer for 22 years, succeeded the longserving CEO Asoka Pieris, with effect from November 1. Wijewardena will have an uphill task in turning the company’s fortunes amid challenging economic conditions and settling borrowings.
Sri Lanka in October imposed restrictions on importation of several consumer durable electronic items and mobile phones in a bid to defend the falling rupee.
Meanwhile, for the six months ended September 2018, Singer Sri Lanka reported earnings of 73 cents or Rs.274.6 million, compared to Rs.1.29 a share or Rs.485.4 million reported in the year earlier period.
The sales for the period were Rs.28.6 billion, up 14 percent YOY. In September 2017, Hayleys Plc-led consortium of investors, backed by Sri Lankan business mogul Dhammika Perera, acquired up to an 82.81 percent stake in Singer Sri Lanka PLC, in a nearly Rs.15 billion deal, mostly funded by bank borrowings. With the complete exit of Singer Sri Lanka’s former parent Retail Holdings (Sri Lanka) BV by divesting its final 9.47 percent stake to Hayleys in October, the diversified group now holds over a 90 percent stake in the company.