Diesel & Motor Engineering PLC | Annual Report 2007/08

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Vision & Strategy

Business Performance

	Vehicles
	Vehicle parts and services
	Lighting & power tools
	Construction & material handling machinery
	Diversified activities

Financial Review

Key Principals

• Davex Engineering (M) SDN Bhd
• Fischer Werke GmbH
• OSRAM GmbH
• Robert Bosch Ew.
• Schwing Stetter
• SiTeco Lighting (M) Sdn Bhd
• Snap-on Tools Private Limited
• Vossloh-Schwabe GmbH
• Zenoah

business performance

Sale of Power Tools and Accessories, Lamps, Lighting Fittings and Accessories

Key Figures
	2007/08	2006/07	Change %
Segment Turnover (Rs. mn)	421	354	19
Segment Result (Rs. mn)	62	52	19
% Contribution to the Group Turnover	3	3	-
Segment Result/Segment Net Assets (%)	39	38	1

Customer Profile
	B2C	B2B	B2G	Total
No. of Customers (accumulated)	111	1,706	216	2,033
Customer Satisfaction Index (weighted average %)	-	-	-	89

Industry Overview

Total electricity consumption in Sri Lanka increased by 5.7% for the year, down from 8% seen in 2006. Electricity consumption in the industrial sector grew marginally in 2007 by 5.7% while the consumption for domestic and general purposes grew by 16.6%.

The growth in demand for electricity has decelerated in recent years largely as a result of the slow growth in the domestic & industrial sectors. These changes in demand have been triggered by significant upward revisions in electricity tariffs due to the ever escalating global oil prices.

The construction sector continued to expand at a relatively high rate of 9% in 2007 with positive contributions being made by both the Government and Private sectors. The continued demand for housing and the Government’s mandate on infrastructure development will continue to drive growth in this sector. (Source: Central Bank Annual Report 2007)

This business sector is also affected by the depreciation of the Sri Lankan Rupee against the Euro, as most of the imports are from European countries this was a serious cause for concern. Another risk faced by this business sector is the influx of inferior quality products that are sold at very low prices, from China and India.

Operational Review

Lighting

DIMO is a solution provider to many domestic and industrial users for their switching, protection and lighting needs. We offer lighting solutions to our customers by marketing a range of brands including Osram, Siemens, Siteco, Davis and Vossloh-Schwabe.

A special advertising campaign, ‘Korale Mahaththaya’ was launched by the Company during the year in order to create greater awareness of the energy efficiency of the Company’s products and thereby increase sales. Consolidation of the dealer network and the rising cost of energy have contributed to the growth in sales in the year. This has resulted in a growth in sales of 26% in the year compared to 40% in the previous year.

To further consolidate our position in the market, the Company plans to introduce new energy efficient products such as Sensor CFLs and LED products. To further augment and strengthen our presence in the business to business sector we plan to introduce Lighting Management Systems and electronic control gear for energy efficient lighting solutions to organisations in the Garments and Hospitality industries and to high end corporates. Other new products that will be introduced are switches & Sockets from Siemens - Delta Vega.

The future growth of this business sector is encouraging. The expected growth in condominium and housing projects together with the changing lifestyles of people will lead to increased demand for Architectural Solutions. The Government’s concern for energy conservation which has resulted in increased tariffs for electricity open up avenues for growth in energy efficient lighting equipment. All these together with the Company’s plan to further penetrate the modular switch gear, sockets and switches market is in line with Dimo’s strategy of providing ‘total solutions’ for greater customer convenience.

Power Tools

The Company markets a range of products including professional power tools, accessories, outdoor power equipment, garage equipment and hand tools under this business unit. The newly introduced ‘Zenoah’ outdoor products and the popularity of the ‘SNAP ON’ range were the main contributors to the increase in turnover of 8% seen in the year. Regrettably however, the higher cost of imports as a result of the depreciation of the Rupee against the Euro resulted in an erosion of margins on these products.

As is the norm, the Company continued its service demonstrations, hands on training programmes and service campaigns to help customers to better understand the use and care of these products.

The future of this sector depends much on the growth of the construction industry. In the year 2007, the industry which includes condominiums, warehouses and factories had grown by 9%. The implementation of Government-sponsored large infrastructure development projects in Kerawalapitiya, Upper Kotmale and the Hambantota port augurs well for the growth of sales of
power tools.

Encouraged by these developments, the Company plans to offer solutions jointly with Fischer Germany, catering to the demand in the construction industry.
Plans are also underway to introduce a Bosch Special System (for displays) to selected dealers.

Always keen to enhance its product range, the Company is planning to introduce Fischer products to the anchoring systems market. As the total anchor market is estimated to be Rs. 100 mn, this line is expected to contribute significantly to the revenue of the segment.

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