Thailand operating results for the Q3/2009

H.T. SET 030/2009 Date : November 12th, 2009 To : Managing Director The Stock Exchange of Thailand Re : Singer Thailand operating results for the Third Quarter of Y 2009 The Company has generated for the quarter a profit of Baht 6.0 Million compared to a loss of Baht 38.5 Million for Q.3 Y2008. As a result, the Company's Earning Per Share (EPS) was Baht 0.02 higher than EPS for Q.3 Y2008 which was shown the negative figure equal to Baht -0.14 even total sale for Q.3 Y2009 was lower than Q.3 Y2008 by 22.5%. It is a matter of commitment of the management to deliver profits under the business and economic conditions in Thailand affected not only by global recession but also by the unstable political situation,and while encouraging it is also a clear indication that the Company's strategies have beenworking. During the third quarter of Y2009, the major highlights were:- - The Company has generated a positive operating cash flow of Baht 81.9 Million. - A significant improvement of the gross margin resulting from lower purchase prices from the Suppliers, better conditions and additional volume rebate combined with lower Trade-in business. The Trade-in value is basically a discount and tends to put pressure on gross margin, in addition effective 1st January 2009, the Company had reduced its trade-in values. - After having negotiated with the existing financial institutions to extend their repayment schedule of the remaining loans outstanding to six years end up with the month of March Y2015 in order to keep the liquidity under the uncertainty of the economic and political situation, the Company succeeded in the substance of the Debt Rescheduling Agreement. It is expected for the Financial Institutions to finalize the Debt Rescheduling Agreement by November 2009. - Total short & long-term loans have been reduced from Baht 1,168.6 Million as of December 2008 to Baht 1,015.3 Million as of September 2009. - The balance of hire-purchase motorcycle accounts has been reduced from 20,093 accounts as of December 2008 to 8,430 accounts as of September 2009. - At the end of September 2009, the inventory of used motorcycles was reduced to 1,178 units. - At the end of September 2009, the percentage of paying accounts which is measuring how many accounts are paying from the total portfolio has been improving by 5.6% compared with the end of December 2008. The future strategy of Singer Thailand is to continue to dominate the appliance hire purchase business in the rural areas of Thailand. The Company has been in this market for over 100 years. The Company keeps on multi brands, multi products trade-in strategy however with lower trade-in values and the Company expects the momentum to continue and gaining in strength providing the opportunity of a huge replacement business for the Company. To continue with the implementation of the measures to prevent, detect and hasten recovery of employee defalcations, the Company is focused on the followings. - Revised credit scoring criteria and models - Mapping the customer density by district as an additional tool in making credit decisions. - Streamlining of legal procedures for filing cases and police reports - Tracking of collections from guarantors to recover the past due accounts - Recovery of "revert losses" - Implementation of a whistleblower policy - To age unresolved exceptions more effectively to assist with follow-up - Announce and implement zero tolerance policies with regards to staff defalcations - To formulate written disciplinary policies for defalcations - Reassess the Role of Account Checkers and follow-up of exceptions identified during account checking. The Company has successfully made a U-Turn by 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 Y2009, in which the motorcycle business represented only 1.1% of total gross sales. Comments to Key Financial Numbers: Income Statement The operating performance for Q.3 2009 is indicating that the Company has generated net profit of Baht 6.0 Million compared to the net loss of Baht 38.5 Million for Q.3 2008. Total revenue decreased from Baht 571.5 Million for Q.3 2008 down to Baht 451.9 Million or a decline of 20.9% mainly due to net product sales decreased by 22.5%, which was caused by the combination of two factors : there remain substantial slack in the economy and political issues would continue to discount whatever prospects there are for the recovery of domestic demand and the strengthening of Credit Evaluation and Control, interest from installment sales decreased by 6.6% or equal to Baht 7.8 Million due to a decrease of installment accounts number from 189,031 accounts at the end of December 2008 to 169,503 accounts at the end of September 2009, which was caused by the impact of a change from Sum of the Digit Method to Effective Rate and more accounts being closed and reverted than new accounts being opened, and other income decreased by Baht 13.4 Million mainly due to less gain from selling non performance shops. Inventory reserve as of September 2009 equaling Baht 42.0 Million was lower than the reserve at end of December 2008 at Baht 103.0 Million due to on going plan to clear slow-moving stock of home appliances and motorcycles. In summary, the Net Profit for this quarter was Baht 6.0 million compared to a Net Loss of Baht 38.5 million at the third quarter of last year. A significant favor difference of Baht 44.6 million can be analyzed as follows: Million Baht i. A decrease of products sale -98.3 ii. A decrease of interest from Installment -7.8 iii. A decrease of other income -13.4 iv. A decrease of cost of goods sold 104.8 v. A decrease of variable expenses 28.9 vi. An increase of semi-variable expenses 3.4 vii. A decrease of period expenses 29.0 viii. An increase of interest expense - 2.0 Total difference 44.6 Balance Sheet Net installment and other receivables decreased to Baht 1,191 million at end of September 2009 from Baht 1,395 million at the end of December 2008 or a reduction of 15%, which was caused by more accounts being closed by revert and discount. At 30 September 2009, the number of installment receivable accounts was 169,503 compared to 189,031 at the end of December 2008 or a reduction of 19,528 accounts. Net inventories at the end of September 2009 reduced to Baht 197 million from Baht 222 million at the end of December 2008. This was mainly due to a plan to clear slow-moving stock of home appliances to convert it into cash and strictly focus on adapting orders to lower sales forecast. Trade account payable at the end of September 2009 reduced to Baht 89 million from Baht 179 million was caused by a reduction of stock orders to match lower sales level. Interest bearing debt was decreased by Baht 153 million over the quarter due to continued positive operating cash flows resulting from ongoing collections of receivable accounts. Kindly be informed, Yours truly, Boonyong Tansakul Director and Deputy Managing Director