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by Saruchi Dissanayake

The History of Singer can be traced back to founder Isaac Merrit Singer inventing the sewing machine in 1951. Over the years, Singer has expanded its offerings well beyond sewing machines, it now offers a wide range of household consumer product. Singer Sri Lanka is one of Sri Lanka's biggest consumer products companies and has one of the biggest distribution networks within the island.

Singer products were introduced to Sri Lanka in 1877 through a store in Pettah. Singer Industries (Ceylon) Industries was established in 1963. Singer Sri Lanka was set up in 1982. The company manufactures and assembles a range of appliances such as sewing machines, washing machines, ovens, cookers, microwave ovens, televisions, refrigerators, furniture, tractors and water pumps. The Singer network in Sri Lanka includes over a hundred retail outlets, more than 100 Singer exclusive dealers and around 300 independent dealers.

Chairman and Chief Executive of Singer Hemaka Amarasuriya said investors should put their faith in the company because there has been continuous growth in revenue and profit. According to Amarasuriya, Singer continues to expand their distribution network therefore there is reason to expect even better growth. He was confident that the company would return good dividends this year as well but when questioned about the company's growth expectations, Amarasuriya said it was at present too premature to reveal the levels of growth the company expects to achieve this year. He said however that Singer was targeting fourteen percent growth in revenue following the Rs. 4.9 billion revenue recorded last year which was the highest ever in the company's history. Mr. Amarasuriya said the main challenge faced by the company at present was the threat of cheaper appliances from the unbranded sector adding that such unbranded products only hinder consumers. Speaking of the company's plans for expansion, Amarasuriya said there were plans to expand the distribution network and the Singer Mega channel which has achieved much success.

Singer also plans to expand the dealer network and according to Amarasuriya, will continue to offer their multi brand proposition which involves a range of other well-known brands, such as Hitachi and Whirlpool being sold through Singer outlets in addition to Singer products. Singer has several features that helps the company stand out from the competition, Amarasuriya said.

He identifies these features as the widest distribution network had in the country, the very popular Singer easy payment scheme which is available over the counter and does not involve any banks or finance companies and the customer friendly nature of the company. He also pointed out that Singer's after sales service and marketing expertise were accepted as the best in the consumer appliance field. Being involved in manufacturing and assembly, labour relations are crucial to the company.

Amarasuriya said the management enjoys a very good relationship with the workforce and added that there was a good mutual understanding. Speaking of the company's activities in the North and East, Amarasuriya said Singer was gearing to reenter the markets of the North and would be setting up stores there very soon. Singer has maintained a presence in the east for seventy-five years. It did not pull out of the area in the past two decades of conflict despite most companies closing down their businesses in the east.

In the 2001 financial year, Singer achieved its highest ever turnover of Rs. 4.9 billion. Net profits were Rs. 136.7 million, 20% lower compared with the Rs. 171 million recorded in 2000. The company however noted that the performances came despite the rapid decline of the economy, volatile interest and inflation rates, the falling value of the rupee and a shrinking consumer durables market. The share of profits from associate companies was Rs. 30.8 million compared to Rs. 15.9 million in 2000. Dividends of Rs. 3.70 per share were paid in 2001.

In the first half of this year, Singer recorded a revenue of Rs. 2.5 billion compared to Rs. 2.4 Billion in the same period last year the revenue was described by the company as satisfactory in the context of the existing economic conditions but below the company' expectations. Amarasuriya said that diffident consumer buying patterns in the home appliance market had made it increasingly difficult to drive sales growth in the traditional manner. In his mid year review, the chairman noted that the promise of a second half response will be related to the economy gathering momentum as the year progresses.

He said however that falling interest rates had enabled Singer to reduce finance cost and said the removal of the income tax surcharge had helped increase net profits. Profit before tax was 5% higher at Rs. 294.6 million while profit after tax was 12% higher at Rs. 105.8 million. Expenses were 8% higher at Rs. 2.3 billion. The profit share of associate financial service companies had also grown rapidly. The affiliate companies had pumped in Rs. 34.5 million compared to Rs. 11.9 million in the same period last year.

Suren Liyanage of Lanka Securities describes Singer as a steady company. He said the company's stock is good as a long term buy. He also encourages investors to hold onto the Singer shares they own at present. Cooray said the prospects for Singer Sri Lanka are good with economic revival but noted that as Singer's main market is the middle income group - it might take time for the economic recovery to reach that segment. Another concern he expressed was that if there is an increase in demand, Singer might not be able to increase supply accordingly. Cooray said the falling interest rates should level off the company's high borrowing costs, adding that the company can take advantage of the lower borrowing costs and opt for funding at a lower cost in order to minimise finance costs. Cooray said top line growth prospects are around 8-9% while he expects bottom line growth of 12-13%. He said that shareholders would receive a good dividend this year. A Research analyst at First Capital securities agreed that the growth prospects of the company were good, especially with the opening of the north and east.

He predicted slow growth of around 10% at present. According to First Capital, the company has potential to do well, but is not among their most highly recommended the stocks. They also suggest that Singer's marketing should target rural areas more as there would be more potential customers in those areas. Fitch Ratings Lanka last year assigned SL- A national long-term credit rating for the 2002/2005 Rs. 300 million unsecured redeemable debenture program of Singer Sri Lanka. Fitch says the SL A rating denotes a low expectation of credit risk and reflects strong capacity for timely payment of financial commitments. The rating was based on Singers leading market position in its key product lines, strong islandwide distribution network and its ability to provide in-house customer financing facilities maintaining low arrearage levels.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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