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Sathosa Motors Ltd. (SML) faced setbacks during the financial year 2001/2002 and ended up with an operational loss of Rs. 7.6 million before tax. This was mainly due to the company deciding to make specific write-offs amounting to eight million rupees on non-moving stocks accumulated over the years and increasing the debtors' provision by Rs. 0.2 million. If not for the write-offs, the company would have had an operational net profit of Rs. 0.6 million.

The drop in sales was attributed to the situation which arose due to the attack at the Katunayake airport, the September 11 attacks in the US affecting the global economy and the uncertain political and economic environment which led to the downturn of the economy to a below-zero level GDP.

SML, which had a favourable market share with the government sector, suffered severely when the newly-appointed government adopted cost-cutting exercises and adopted a policy of hiring vehicles instead of purchasing them. The turnover during the nine months ended December 31, 02 dropped to Rs. 246 million and the number of vehicles sold were reduced.

However, during the above period, the company showed profitability compared to the previous financial year, despite the fact that economic conditions were not conducive. By prudent management, SML was able to bring about a change and convert the company to a profitable venture.

The company took stringent measures to curtail unwanted expenditure, control finance and inventory and close monitoring of debt recoveries, while every effort was made to give a better service to the customers. Within regulatory systems, it brought about a reduction of staff as some redundant jobs were not replaced. All these factors contributed to a rejuvenated business environment.

During the first nine months of the financial year 2002/2003, SML, achieved a pre-tax profit of eight million rupees and in January 2003 a pre-tax profit of four million rupees, making a total of Rs. 12 million for the 10 months.

The management expects the total pre-tax profit for the 12 months of 2002/2003 to be Rs. 20 million. This could be achieved, if the peace process continues and an economic condition conducive for business remains in the future, the management said.

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