Sri Lanka consumer durables group profits plunge in December

Mar 04, 2014 (LBO) - Profits at Singer Sri Lanka Plc, a consumer durables retailer, fell 71 percent to 93 million rupees in the December 2013 quarter from a year earlier, but sales are no longer shrinking, the firm said.

The group reported earnings of 74 cents per share. For the full year to December it reported earnings of 3.67 rupees, on total profits of 454 million rupees which were down 64 percent.
The stock closed at 88 rupees up 90 cents Monday.

Chief executive Asoka Pieris told shareholders that revenue picked up 3.1 percent in the December quarter following three quarters of declines.

Sri Lanka is recovering from a balance of payments crisis primarily triggered by heavy state bank debt taken to subsidize energy sold by state-run energy companies which were ultimately accommodated by the Central Bank through printed money.

It was corrected by a hike in energy prices and higher interest rates.

The crisis saw the rupee falling to 130 to the US dollar from 110 slashing the real purchasing power of the people and their savings.

"The business environment continued to be difficult in 2013 - a trend that we saw from second half of 2012, with low demand by the customers and difficulty in collections," Pieris said.

"The consumer segments served by Singer were further affected by an increase in electricity charges in the current year on top of the increase last year."

Collections (Singer has an installment sales scheme) also became difficult but through a call centre and text messaging arrears were kept "under control" he said.
The weak economy also gave an opportunity to open showrooms at lower rents and new brands and agencies had become available he said.

"There is consensus that the medium-term prospects for Sri Lanka will be very good," Pieris said.

"Hence while on one hand we had to be mindful of the slowdown in the current environment, we also had to consider being ready for the medium- term growth.

"As a result, we did not stop our renovation of existing shops, expansion of shops, venturing into new areas, adding new brands and agencies and improvement of our infrastructure."

In the December quarter revenues rose 3 percent to 6.9 billion rupees, cost of sales rose at a faster 5 percent to 4.5 billion rupees with direct interest costs also rising 17 percent to 176 million rupees. Gross profits fell 3 percent to 2.25 billion ripees.

Selling and administration expenses rose 24 percent to 1.8 billion rupees, to which higher electricity charges and general inflation contributed, the firm said.

Net finance cost fell to 262 million rupees from 267 million rupees.

In the December quarter revenues from sewing related products fell to 675million rupees from 718 million and profits plunged to only 6.5 million rupees from 50.9 million.

Consumer electronics sales were slightly down to 1.62 billion rupees from 1.68 billion but profits fell to only 16.4 million rupees from 146 million.

While goods sales were down to 1.8 billion rupees from 2.0 billion with profits down to 12.3 billion from 115.9 billion rupees.

Kitchen related products showed a recovery to 481 million rupees from 450 million rupees but profits fell to 6.4 million rupees from 32.5 million.

Communications products were strongly up to 948 million rupees from 560 million rupees though profits fell to 8.2 million rupees from 34.2 million. Furniture and agro sector sales were also up, and transport was flat.

http://www.lankabusinessonline.com/news/sri-lanka-consumer-durables-group-profits-plunge-in-december/734629655

This is partly due to higher interest rates prevailled and high electricity charges both dampanning the demand side. Hope, that, with the easing of policy rates, they should be able to prop-up demand with electricity saving green devices & diversification into green areas in the future.