Singer second quarter profit tumbles

Singer Group, Sri Lanka’s largest consumer durable giants, reported a sharp 38.3 % decline in its net profit for the second quarter ended June 30, 2007. According to the latest interim financial statement released by the company the group recorded a net profit of Rs. 77.3 million for the second quarter ended June 30, 2007, down sharply from net profit of Rs 125.2 million a year ago.

Despite a marginal increase in sales to Rs 3.2 billion for the second quarter, heavy increases in finance and other operation expenses together with significant increases in administration and selling expenses contributed to the downward trends in profit in the second quarter of 2007. The group’s finance cost increased by 77 % to Rs 267.5 million compared to that of Rs 150.6 million a year ago. Administrative and selling expenses increased by 15.4 % to Rs 852.8 million compared to that of Rs. 739.2 million a year ago. Other operating expenses rose to Rs 38.5 million against Rs. 20.3 million a year ago, up 88.9 %.

Group turnover for the period was Rs. 3.2 billion compared to Rs 3.05 billion a year ago. The group’s marginal increase in sales was boosted by the sales of communication equipment, furniture and agro-related sector while a significant sales drop was noted in sewing related products, consumer electronics, white goods and kitchen appliances sector, considered the most revenue generating sectors of the group.

The group’s balance sheet is heavily represented by its hire purchase debtors and inventories as at the quarter ended June 30, 2007. The group’s trade and other receivables mainly consisting of the hire purchase debtors reached Rs 6.9 billion compared to that of Rs. 5.7 billion a year ago, up 21 %. Group inventory rose to Rs. 2.7 billion against Rs. 1.8 billion a year ago, a staggering 50 % increase. Financing of such huge hire purchase debtors and inventories would have had material impact in the group’s finance cost and the bottom line, the report said.

Group net assets per share as at June 30, 2007 was Rs. 44.85 compared to Rs. 49.89 a year ago, indicating a significant decline of 10.1 %. Interest bearing loans and borrowings too showed a sharp increase in the period. Outstanding loans and borrowings as at June 30, 2007 was Rs. 6.2 billion against 4.7 billion, up 32 %. This staggering increase in loans and borrowings increased the company’s finance cost considerably as mentioned elsewhere. The group utilized its interest bearings loans and borrowing to finance its ever growing hire purchase debtors and inventories.