2011 Budget switches off Singer Industries’ TV assembly venture

Monday, 28 March 2011 00:41 -     - {{hitsCtrl.values.hits}}

Singer Industries (Ceylon) Plc, one of the few remaining consumer electronics manufacturing entities in the country, has discontinued TV assembly venture within a year of its commencement.

Senior officials of the company said that the move was after the Government’s 2011 Budget in November imposed an unfavourable tariff structure.  However prior to discontinuation the revenue from TV assembly operations was Rs. 322 million whilst it generated a profit of Rs. 8.6 million. Pre-tax profit was Rs. 17 million.

“The reduction in VAT rates caused the newly set up TV plant to be non-viable,” Singer Industries Chairman Hemaka Amarasuriya said in the Company’s 2010 Annual Report.

“Having previously experienced ‘yo yo’ effect of tariff adjustments we were cautious in out-sourcing this operation to safeguard investments from a consistently changing tariff structure. Therefore the loss on closure will be Rs. 2.3 million for fixed assets while remaining assembly components will bear a provision against further losses if any,” Amarasuriya told Singer Industries shareholders in his review.

The Company has also decided to discontinue the business activity relating to trading in televisions.

Whilst Singer Industries’ TV assembly venture got a hit with 2011 Budget moves, its parent Singer (Sri Lanka) Plc benefitted from the sale of TVs due to lowering of taxes.  

Singer Sri Lanka saw a 29% growth in TV sales in 2010 whilst revenue from consumer electronics rose to Rs. 3.6 billion from Rs. 2.7 billion in 2009 whilst pre-tax profit rose from Rs. 62 million to Rs. 246.5 million in 2010.

Though Singer Industries exited TV assembly, its sewing machines business had fared better in 2010 which was attributed to revenue increasing by 37% to Rs. 664 million. Sewing machines heads rose by 27%.

Increased production volumes of sewing machines also saw Singer Industries gross profit from continuing operations at Rs. 13.5 million as against a loss of Rs. 10 million in 2009. Profit before tax was Rs. 127.7 million, as against a loss of Rs. 56 million in the previous year.  However excluding the change in fair value of current investments Singer Industries incurred a pre-tax loss of Rs. 8 million. The company got a Rs. 135.8 million gain in 2010 from the change in fair value of current investments. The 1.68% stake amounting to 1.05 million shares in Singer Sri Lanka was previously recognised as a long term investment and re-classified as a current investment. The Singer Industries Board has resolved to dispose the shares hence revalued at market price.

Net profit of Singer Industries in 2010 was Rs. 118.2 million, as against a loss of Rs. 33.8 million. Together with the profit from discontinued operations the profit for 2010 amounted to Rs. 126.8 million.

However without the gain from revalued investments, the company incurred a loss of Rs. 17.6 million in 2010.

Calls for flexible labour laws

Singer Industries (Ceylon) Plc has called for more flexible and less legalistic labour laws for the manufacturing sector to remain competitive.

“While we continue to seek a balance between employee security and productivity enhancement, we are surmounted by a highly legalistic and sometimes inflexible labour law governance. We seek flexibility with regard to contractual arrangements, workforce size and functions within a basic legal framework for labour protection,” Singer Industries Chairman Hemaka Amarasuriya said.

“While we respect worker protection, this needs to be viewed with the goal of higher productivity as the Government and the country is committed towards accelerating development and achieving enhanced GDP growth rates,” he added in Singer Industries’ 2010 Annual Report.

According to Amarasuriya, who is also Chief of Singer Sri Lanka and a top business leader, labour relation systems prevailing should be consistent with and not regressive with employment development and evolvement of entrepreneurship and self-employment.

“Where our company is concerned we need the right combination of experience and apprenticeship in our labour force to be able to maintain competitiveness as the economy opens once again to lowered tariff barriers and entry cost,” Singer Industries Chief said.

“To remain a market leader we have to recognise the advent of competition within our own sphere and also from the sphere of other household appliances as the preference for household hierarchical needs change with the dynamics of our times,” Amarasuriya added.

Singer Industries which manufactures sewing machines among others as at end 2010 had 143 employees, down from 149 a year earlier.

An open-ended Voluntary Retirement Scheme remains open at Singer Industries and last year only one employee took it as opposed to 26 in 2009.

1.68% stake in Singer

Sri Lanka to be sold

Singer Industries (Ceylon) Plc has resolved to divest its 1.68% stake amounting to 1.05 million shares in its parent Singer (Sri Lanka) Plc.

By virtue of this stake, Singer Industries is the second largest shareholder in Singer Sri Lanka, 86.1% of which is held by Singer Sri Lanka BV.

To prepare for the divestiture the Company had reclassified the stake as current investment from hitherto long-term investment.

The revaluation resulted in Rs. 135.8 million gain which was booked in the 2010 accounts boosting the bottom line of Singer Industries.

At last week’s closing price of Rs. 210, the stake is worth Rs. 220.5 million. Singer Sri Lanka closed gained by Rs. 7.50 last week from the previous week’s close of Rs. 202.50. End 2010 closing price was Rs. 195.

Analysts said the sale would certainly boost liquidity of Singer Sri Lanka shares in the market.  Last year only 1.8 million of Singer Sri Lanka shares traded via 2,138 transactions generating a turnover of Rs. 228.7 million up from 1.28 million worth Rs. 74 million via 1,721 trades.  Public holding of Singer Sri Lanka shares is only 12% whilst it has 2,673 shareholders with most (1,818) owning less than 1,000 shares. With a market capitalisation of Rs. 13.1 billion Singer Sri Lanka was ranked as the 40th most valuable stock in the Colombo Bourse.