Higher costs halve Singer’s quarterly profit

Singer Bangladesh is back on track with rising sales of its popular home appliances and cooling products that helped the company come out of losses in the January-March quarter.

But the increased costs of production and operations have halved the listed multinational firm's quarterly net profit year-on-year.

According to the latest financial statement, Singer's turnover in the January-March period grew 4% to Tk391 crore from the same period a year ago, which was 56% higher than its early winter turnover over the previous quarter.

But the increasing cost of raw materials and semi-finished raw materials caused more than 210 basis points of year-on-year decline in its gross profit margin to 22.5%.

Gross profit is the difference between a company's revenue and the costs of production.

No company official responded to phone calls for details of the cost hikes or revenue growth.

However, analysts said the entire industry, since the second half of 2021, has been facing a cost hike as all sorts of raw materials have been getting pricier in the global market.

Not only did the factory level profits decline for Singer, but also a year-on-year rise in operational expenses, a decline in other income, sharp increase in finance costs together hit Singer's bottom line in the first quarter.

Net profit after taxes in the first quarter dropped to Tk9.12 crore, which was over Tk18 crore in the same period a year ago.

Its net profit margin dropped to 2.33% in the first quarter this year, while it secured 4.78% of its revenue as net profit after all expenses and taxes a year ago.

However, the first-quarter performance is a relief to Singer shareholders as it did not repeat the previous quarter's losses which dragged the company's 2021 annual profit to a six-year low amid sales and production disruption due to lockdowns.

The fourth quarter's loss dragged the company's share price on the Dhaka Stock Exchange down by more than 5% in February, but the anticipation of a turnaround in sales and profits helped the stock recover it all.

On Tuesday, Singer shares closed 1.3% higher at Tk171.9 each.

Singer, which began with sewing machines and later won in the home appliances market, has been present in the land for more than a century.   

It lost the refrigerator market crown to local competitor Walton in the 2010s – a great decade of localisation of the home appliances industry.

The company under its new lion shareholder Arçelik – an Istanbul-based global player in white goods – is increasing its investments in new facilities and technologies.

Right now local factories bring half of Singer's annual business and it is aiming at more localisation alongside exploring export opportunities from Bangladesh, Singer Director Cemal Can Dinçer told The Business Standard back in March.

Local manufacturing helps companies reduce prices as the government incentivises local factories by charging fewer taxes and duties.