Thailand operating results for the Third Quarter 2008

H.T. SET.017/2008 Date : November 14th, 2008 To : President The Stock Exchange of Thailand Re : Singer Thailand operating results for the Third Quarter of Y 2008 For the quarter,the Company has generated a net loss of Baht 38.5 Million, which represents a significant improvement compared a net loss of Baht 105.0 Million for Q.3 2007. For nine months, the Company had a loss of Baht 15.2 Million vs a loss of Baht 418.1 Million for the same period in Y2007. During the third quarter of Y2008, the major highlights were:- - The Company has generated a positive operating cash flow for Q.3 equal to Baht 51.1 Million and a positive cash flow for Q1.-Q.3 equal to 251.8 Million - From the positive operating cash flow, the Company had been able to pay outstanding loans for Q.3 amounting Baht 40.3 Million, and for Q.1-Q.3 amounting Baht 201.1 Million. - From the end of December 2007, long-term loans have been reduced by Baht 220.0 Million from Baht 683.3 Million to Baht 463.3 Million whereas short-term loans slightly increased by Baht 18.8 Million from Baht 653.2 Million to Baht 672.0 Million giving a total reduction of borrowings of Baht 201.1 Million. - At the end of September 2008, the Company had a total of 202,553 installment accounts out of which 26,462 motorcycle accounts represented 13.1% of total portfolio, and the inventory of used motorcycles was reduced to 1,845 units. - At the end of September 2008, the percentage of paying accounts which is measuring how many accounts are paying from the total portfolio has been improving by 4.38% compared with the end of December 2007. - The Company managed to significantly reduce its absolute arrears value by Baht 56.7 Million since June 2008. - The Accounting Change of the calculation of interest from installment sales from sum of the digit to effective interest rate to comply with the Thai Accounting Standard (TAS # 29) - An increase in provision for the Company's Legal Severance Plan based on an Actuarial Valuation Report issued by Watson Wyatt. To take advantage of the opportunity of a huge replacement business, the Company still highlights a multi brands, multi products trade-in strategy with the promotion in line. The Company has confirmed successful U-Turn converting a core business based on motorcycles into a core business based on electrical home appliances as shown in total gross sales for the third quarter of Y2008, in which the motorcycle business represented only 2.9% of the total Gross Product Sales for the Quarter. In order to create a complete, updated and consistent customer and guarantor contact information and streamline the credit approval process including with improving the account checking function, the Company continues to re-engineer the Credit Process and Customer Database Enhancements which is expected to complete by the end of Y2008. Comments to Key Financial Numbers: Income Statement The operating performance for Q.3 2008 is indicating that the Company has generated net loss of Baht 38.5 Million compared to the losses of Baht 105.0 Million for Q.3 2007. The revenue increased from Baht 530.2 Million for Q.3 2007 to Baht 571.5 Million or an increase by 7.8% mainly due to net product sales increased by 10.0%, which was caused by a significant increase of gross home appliances sales by 31.4% or equal to Baht 101.3 Million, whereas gross motorcycle sales decreased by -82.8% or equal to Baht -61.5 Million, interest from installment sales decreased by 2.0% or equal to Baht 2.4 Million due to the deduction amounting Baht 11.4 Million caused by the Accounting Standard to recognize the calculated interest from installment sales changed from Sum of Digit to Effective Interest Rate to comply with the Thai Accounting Standard (TAS# 29), whereas more new installment accounts could generate more interest from installment sales by Baht 9.0 Million. Although the number of installment accounts were reduced from 230,957 accounts at the end of December 2007 to 202,553 accounts at the end of September 2008, which was caused by more accounts being closed and reverted especially motorcycle installment accounts as the Company's strategy to re-focus on electrical home appliances. The number of new Installment Accounts of home appliances have been increased month by month but it could not cover with the number of accounts closed due to the Company's Policy to clear the overdue accounts by discount and revert. Inventory reserve as of September 2008 equaling Baht 78.0 Million was lower than the reserve at end of December 2007 at Baht 162.0 Million due to on going plan to clear by selling the slow-moving stock of home appliances. In summary, the Net Loss for this quarter was Baht 38.5 million compared to a Net Loss of Baht 105.0 million for the third quarter of last year. The favorable difference of Baht 66.5 million can be analyzed as follows: Million Baht i. An increase of net products sale 40 ii. A decrease of interest from Installment -2 iii. An increase of other income 4 iv. A decrease of cost of goods sold 4 v. An increase of variable expenses -11 vi. A decrease of semi-variable expenses 41 vii. A decrease of loss on products reprocess 26 viii.An increase of period expenses -42 ix. A decrease of interest expense 7 Total difference 67 Balance Sheet Net installment and other receivables decreased to Baht 1,508 million at end of September 2008 from Baht 1,675 million at the end of December 2007 or a reduction of 9.9%, which was caused by more accounts being closed by revert and discount. At 30 September 2008 the number of installment receivable accounts was 202,553 compared to 230,957 at the end of December 2007 or a reduction of 28,404 accounts. Net inventories at the end of September 2008 decreased to Baht 198 million from Baht 231 million at the end of December 2007. This was mainly due to a plan to turn all obsolete stock to be cash. Trade account payable at the end of September 2008 increased to Baht 140.1 Million from Baht 72 million at the end of December 2007, which was caused by increasing inventory orders for increasing sales and the extension of credit term from major Suppliers. Interest bearing debt was decreased by Baht 201.1 million during the quarter due to continued positive operating cash flows resulting from ongoing collections of receivable accounts. Kindly be informed, Yours truly, Daniel Michel Philiponet Managing Director