Singer Sri Lanka profits soar on higher revenues, easing interest rates

• However, costs have expanded

Singer Sri Lanka PLC reported some solid top and bottom line performances in the three months ended in December 2023, as the company saw the demand for many of its consumer durable product lines returning quite strongly while the softening interest rates helped the company to lower its finance cost.
Singer Sri Lanka, the country’s largest consumer durables retailer, reported revenues of Rs.26.77 billion in the October-December quarter, the company’s third fiscal quarter, up 84 percent from the same period in 2022.

It wasn’t immediately clear if either the volume sales or higher prices led the topline in the foregoing quarter. In any case, there has clearly been an increase in the volume sales in the period, as the consumers gradually began spending again, as inflation cooled and the borrowing costs eased.
Fitch Rating in November projected the sales volumes of the company to rise in the low single digits in the ongoing financial year ending in March 2024, on the back of weak consumer spending, especially on non-essentials in the next 18 to 24 months.
Despite inflation coming down to mid-single digits from its recent highs of 70 percent, the consumers remain far worse off as their incomes are far from adjusting to the sharply elevated cost of living while the repeated taxes have also dented their purchasing power.
Fitch expects the double-digit volume sales to return only from the next financial year, supported by the gradual recovery in income supported by the revival in the agricultural sector, which accounts for 30 percent of the population, salary increments announced for the public sector and full-year impact of the pent-up demand coming from the removal of the ban on consumer durable imports in October 2023.
Except for furniture and sewing machines, which recorded some modest declines, all other categories from consumer electronics to home appliances and IT products reported higher sales.
For instance, the IT products segment, which predominantly stocks mobile phones and computers, saw its revenues soaring by 202.6 percent in the quarter to Rs.8.62 billion over the same period in 2022.
This may perhaps be attributable to the increase in the prices, due to the impending increase in the Value Added Tax (VAT) and lifting of mobile phones from the VAT exemptions and frontloading of demand for such items, to avoid paying even higher prices after the VAT was imposed from January.
Meanwhile, the sales of consumer electronics and home appliances also rose by 116.2 percent and 65.7 percent, respectively to Rs.2.94 billion and Rs.7.19 billion.
The income from its financial services subsidiary Singer Finance Lanka PLC brought added revenues of Rs.2.89 billion, up 10.7 percent from a year ago.
Despite the sharp rise in revenues, the direct cost rose by a staggering 131 percent to Rs.18.97 billion in the quarter from a year ago.
The rise in direct costs, which outstripped the revenue, could be due to the markdowns by the company of its high-cost inventory procured when the rupee was at the rock bottom, resulting in narrower margins.
The company reported an operating profit of Rs.2.15 billion for the quarter, up 28 percent from the same period in 2022.
The company meanwhile reported earnings of 89 cents a share or Rs.1.00 billion for the quarter, compared with eight cents a share or Rs.92.24 million in the corresponding period in 2022.
The earnings were also helped by the sharp decline in the net finance cost to Rs.532.93 million, from Rs.1.56 billion in the year earlier period, which was possible mainly from the easing interest rates.
By December 2023, businessman Dhammika Perera-controlled Hayleys group held a 90.42 percent stake in Singer Sri Lanka, while Perera separately held another 1.85 percent stake in the company.