Record 1Q for SUN with Rs. 326 m profit

Friday, 8 August 2014 00:28 - - {{hitsCtrl.values.hits}}

Sunshine Holdings PLC has reported PAT of LKR 326 million for the quarter ending 30 June 2014 (1QFY15), up 161.0% YoY compared to LKR 125 million in the same quarter last year. Reported top line stood at LKR 4.0 billion in 1QFY15, compared to LKR 3.5 billion in 1QFY14, up 14.7% YoY. EPS was LKR 1.03 for 1QFY15, up 110.5% YoY. EBIT margin saw a significant improvement in 1QFY15, up to 10.9% against 6.0% in the same quarter last year. The growth in both revenue and profitability mainly stems from the group’s Agri sector, especially due to the improvement in its tea plantations. Profit to equity holders (PATMI) is up 111.3% YoY to LKR 138 million in 1QFY15, and PAT grew 161.0% YoY. Majority of the growth in PAT is on account of the strong performance of the Agri sector which has a limited impact at the PATMI level due to low effective holding. But Vish Govindasamy, Group Managing Director of SUN, emphasised that the Healthcare sector is still the largest contributor to PAT in 1QFY15 with LKR74 million, which represents 53.9% of total PATMI. Net Asset Value per share increased to LKR 37.32 as at end 1QFY15, compared to LKR 36.23 at the beginning of the year (FY14). It stood at LKR 35.29 at the end of 1QFY14. Business segments: Healthcare Healthcare remains the largest contributor to group PATMI with reported PAT of LKR74m in 1QFY15, contracting 5.1% YoY and representing 53.9% of total group PATMI. Revenue amounted to LKR 1.4 billion in 1QFY15 up 4.1% YoY. This represents 35.5% of total group revenue. Growth in Healthcare revenue is similar to what was seen during FY14, and the healthcare sector in Sri Lanka (Pharma), which only grew 2.1% YoY for FY14, as reported by IMS. The retail segment, represented by Healthguard Pharmacies grew 12.3% YoY in 1QFY15. The growth was mainly driven by two new outlets in Thalawathugoda and Orion City opened during FY14. Healthguard opened another new outlet in Ethul Kotte in Mid-June. This outlet will start contributing to the top line from 2QFY15 onwards. The segment witnessed a slight contraction in PAT margins to 7.8% in 1QFY15 from 8.6% in the same quarter last year. This is largely due to the increase in staff related costs (up 4.1% YoY). Agri business The Agri sector with revenues of LKR1.9bn in 1QFY15, up 25.0% YoY, contributed 47.2% of the total group revenue. Management attributes the strong topline growth mainly to its tea segment which saw higher volumes aided by favorable weather, and increased quantities of bought crop. Palm Oil volumes (+1.2% YoY) remained steady during 1QFY15. PAT for the quarter amounted to LKR231m in 1QFY15, against LKR 11 m in the same quarter last year. The growth in PAT, which is close to 20x is attributed to the profitability of the tea segment which benefited from favorable weather conditions, and buoyant market prices for its teas. It should be noted that 1QFY14 was an exceptionally poor quarter for WATA due to the impact of heavy rains and floods, in a wage impact year. Nevertheless, the Palm Oil segment which made LKR185m PAT for 1QFY15, continued to be the largest contributor with 80.1% of WATA PAT coming from the Palm Oil. FMCG The FMCG sector reported revenues of LKR 589 million in 1QFY15, up 11.6% YoY, on the back of both volume and price growth. The sector accounts for 14.8% of group revenue for the quarter. The branded tea business within FMCG sold 0.6m kgs of branded tea, up 5.4% YoY, primarily driven by their premium brand ‘Zesta’. The division also markets edible oil under the ‘Oliate’ brand and bottled water under ‘Zest’ brand. PAT from the FMCG segment contracted 46.5% YoY to stand at LKR 29 million in 1QFY15, with margin of 4.9% in 1QFY15, compared to 10.3% in the same period last year. The dip in profitability came in the back of an increase in both Admin (+ 55.5% YoY), and Selling & Distribution (+27.2% YoY). Management believes that passing the total cost increase to its customers will negatively impact the sustainability of the volume growth, and hence decided to absorb a major part of it, given its long term growth goals. Other Packaging revenues amounted to LKR 84 million, up 52.7% YoY in 1QFY15, on the back of new orders. As opposed to same quarter last year, the metal packaging company was able to attract new orders from 2 giant confectionary producers in Sri Lanka. The packaging company managed to break-even during 1QFY15 with a PAT of LKR39k, against a loss of (LKR7m) in the same quarter last year. The improvement in margin was due to higher capacity utilisation. Revenue for the Renewable energy division witnessed a dip of 44.4% YoY to LKR15m in 1QFY15 due to low rainfall during the period. The mini-hydro plant, which is in its second year of operation made a negative PAT of (LKR6m), due to lower revenue, as majority of the cost is fixed. Outlook For FY15, we expect revenue growth to be largely driven by our core business segments. Our Healthcare segment will focus on aggressively growing its Wellness brands business. The group also expects more traction from the new products which were introduced during FY14. We also plan to expand our healthcare retail sub segment by adding another two stores to the chain. In FMCG, we are bullish on our bottom of the pyramid strategy, in which we target to convert the unbranded tea consumers with our ‘Ran Tea’ brand. This segment is estimated to consume approx. 14 million kgs a year. We will continue to expand our edible oil and bottled water business. Agri growth will mainly be driven by the palm oil segment, in which we intend to further increase the yield through good agri practice. In our road map towards 10MW, the group plans to add another two mini-hydro plants with a combined capacity of 5MW, at a cost of LKR 1.2 billion. The two projects are currently pending its PPA’s from the CEB.