Singer pulls off a challenging quarter; but debt pile goes up

Singer (Sri Lanka) PLC reported higher top and bottom lines in the three months to March 31, 2022 navigating  from what could be termed as one of the most difficult quarters in their history only to be met with even more challenging next 3 to 18 months as consumers expected to cut down on spending.

The consumer electronics proxy in the country with the largest market share reported revenues of Rs.21.5 billion for the January-March quarter, recording strong 19 percent growth over the same period in 2021.

Sri Lanka’s economy was pushed into a tailspin, specially since March 7 when the former Central Bank Governor let go of the rupee willy-nilly, pushing inflation over 30 percent, and running the country’s limited foreign currency reserves down to near zero levels, provoking angry crowds to take to the streets. 

Under these conditions when the majority of the people’s focus is only on fulfilling their basic needs, there could be massive pullback on discretionary expenditure and that could deal a severe blow to companies such as Singer, according to analysts. 

Singer reported operating profits of Rs.3.08 billion, up sharply from Rs.1.9 billion a year ago in a sign that the company still managed to maintain its operating margins. 

While the direct costs rose by 15 percent over the year to Rs.14.5 billion, slightly less than the sales climb, the company managed to keep a close tab on its overheads as selling and administrative expenses together rose by just 1 percent to Rs.3.6 billion. 

However, the surge in finance cost weighed somewhat on the earnings as it rose by at least four times to Rs.1.7 billion over the same period last year. 

The company had borrowed more in the financial year 2021/22 as its short term borrowings rose by Rs.8.1 billion to Rs.20.2 billion while the long term loans added Rs.5.0 billion to Rs.12.1 billion. 

As a result, the spike in interest rates could pressure the company’s profits in the coming periods unless it sheds at least part of its debt. 

The company reported earnings of 80 cents a share or Rs.906.5 million for the March quarter compared to earnings of 68 cents or Rs.761.9 million in the year earlier period. 

Meanwhile, for the full year, the company reported earnings of Rs.3.51 a share or Rs.3.96 billion compared to earnings of Rs.2.18 a share or Rs.2.45 billion. 

The revenues for the full year rose by 14 percent to Rs.76.8 billion.