Increased electricity prices depress Regnis sales

"We’re ready for growth when the market takes off’’: Hemaka

The Regnis annual report ran this photo to claim the company was as "solid as a rock".

 Regnis (Lanka) PLC, a member of the Singer group incorporated in 1987 to manufacture gas cookers, ceiling fans and refrigerators, has now completed 25 years of operation and become the number one white goods manufacturer in Sri Lanka.

The company’s Chairman, Mr. Hemaka Amarasuriya, has told shareholders in the recently released annual report that Regnis manufactures and assembles two of the best loved heritage brands in Sri Lanka marketplace – "Singer" and "Sisil" with Singer continuously reigning as number one in the A.C. Nielsen annual survey as the "Most Popular Brand" in the country.

Sisil had last year celebrated its 50th anniversary. The Singer and Sisil brands under, one umbrella, sells more refrigerators and sewing machines than any other single brand in the home market, Amarasuriya claimed.

"With electrification spreading rapidly across the nation, we anticipated growth in 2013. However a reason for markets not responding was the subsequent increase in tariffs for electricity," he noted.

"Customary sales spikes for holiday sales in April and December did not occur and slow holiday sales affected annual volumes."

He reported that refrigerator penetration levels in the country stood at around 60% and there was significant future market potential. Their plants were currently under deployed, he said.

The 7.2% GDP was not yet resonating in the market place and there was a possibility that drought conditions predicted locally may impact the country’s agriculture sector and spill over elsewhere.

"We can sum up the forecast by stating that our company is ready for growth when the market takes off, that is when consumer sentiment returns," Amarasuriya said.

He explained that to stay ahead in the market and ward off the present strong challenge offered by importers of Korean and Chinese brands, Regnis had to keep abreast of technology changes.

"With the introduction of the new series of Singer GEO Refrigerators, we have eliminated Hydrocarbon gases, replaced by energy efficient R600A gas and LED lighting. These models are substantially energy-efficient and built to last," he said.

Regnis had attempted to enter the lucrative air conditioner manufacture/assembly area but this has been aborted as a result of changes of tariffs and duties. With global warming and rising temperatures, it was inevitable that the AC market will grow exponentially in the second half of this decade, Amarasuriya said.

"Unfortunately there is a crusade today against ‘import substitution’ industries. We should have the foresight to change this nomenclature to ‘Value Added Industry,’ and recollect that the apparel industry which started as a so called ‘import substitution industry’ in the late fifties is today our leading exporter with over USD 4 billion in sales," he noted.

"With the development of the light metal and coil fabricating industry the government should encourage and support this product category (air conditioners) as a viable alternative (as they did successfully with washing machines some years back) to imports."

He reported that while revenue had remained flat in a year of sluggish market conditions, Regnis had grown its group net profit to Rs.107.8 million from Rs.87.3 million the previous year.

A rights issue of one new share for every six held in 2012 raised new capital, reduced finance cost and supported plant expansion. Tax benefits on expansion had also pushed down the company’s effective tax rate to 13.4% in 2013 from 19% in 2012 against a corporate tax rate of 28%.

CEO Asoka Pieris reported that their new generation of refrigerators introduced in the final quarter of 2012 used R600A. This gas does not result in global warming, has no impact on ozone depletion and is a gas used in developed nations and is also recommended for use in the future.

He reported that refrigerators and washing machine volumes had decreased 10% in the year under review with the production of high quality plastic chairs also down 12.5% due to lower demand in the market.

The group had discontinued assembly of refrigerators and air conditioners which came in semi knocked down form due to changes in tariff and tax structures and as a result volumes in these products had decreased.

Regnis has a stated capital of Rs.211.2 million, reserves of Rs.290.3 million and retained earnings of Rs.334.8 million at group level and Rs.272.4 million at company level in its books.

Total assets of the group stood at Rs.1.5 billion and total liabilities Rs.659.5 million while for the company total assets stood at Rs.1.4 billion and total liabilities Rs.616.8 million.

The net profit for the year was the highest in the decade and the company’s net assets per share had grown to Rs.74.22 from Rs.67.24 a year earlier.

The dividend per share for the year under review at Rs.2 per share was down from Rs.2.50 per share paid the previous year.

Singer (Sri Lanka) BV with 58.29% is the controlling shareholder followed by Almar Trading Company (2.31%) and Amana Bank (1.98%).

The directors of the company are: Messrs. Hemaka Amarasuriya (Chairman), Asoka Pieris (MD/CEO), S. Kelegama, G.J. Walker, V.G.K. Vidyaratne and P.L.D.C. Perera.

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