Sunshine Holdings achieves above average growth in key segments

Diversified conglomerate posts consolidated revenue of Rs. 16.3 b in FY15, up 11.1% YoY despite challenges

Diversified conglomerate Sunshine Holdings PLC posted a consolidated revenue of Rs. 16.3 billion in FY15, an improvement of 11.1% year-on-year (YoY). Key business segments, particularly Healthcare and Agribusiness, grew above industry averages despite challenging conditions.

There was growth across the board; Fast Moving Consumer Goods (FMCG), healthcare and agribusiness revenues grew at 20.4%, 10.2% and 9.6% respectively YoY; group Profit After Tax (PAT), however, was affected partially by goodwill written off (Rs. 62 million) and declined by 10.4% to Rs. 1,047 million for the financial year ended 31 March 2015.

Net asset value per share of the company increased to Rs. 39.23, compared to Rs. 36.23 at the beginning of the year (FY14), Profit to equity holders (PATMI) was down 21.1% YoY to Rs. 542 million at group level. The EBIT (earnings before interest and tax) margin experienced a marginal contraction, to 8.7% in FY15 from 10.9% in FY14; improved margins in the FMCG segment were offset by a contraction of margins in the Agribusiness and Healthcare sectors because of unfavourable market conditions.

“Despite the challenging conditions in many of our key segments, we were successful in increasing revenue growth above industry averages; this healthy financial performance underscores Sunshine Holdings’ solid fundamentals,” Sunshine Holdings PLC Group Managing Director, Vish Govindasamy said.

“The company’s visionary strategic initiatives are continuing to pay dividends in boosting long-term growth – such as the diversification into palm oil – and we remain optimistic about future prospects, despite potential future challenges.”

“As a Group we are primarily focused on long-term performance; Sunshine Holdings takes much satisfaction from achieving these results, which indicate steady growth in the different business segments,” Sunshine Holdings PLC Chairman Munir Shaikh said.

“Being an entity which aspires to be the most admired conglomerate in Sri Lanka, we take greater pride in having achieved this performance by our uncompromising adherence to best business practices and ethics.”

Healthcare, which accounted for 37.2% of the Group’s turnover for the period, posted strong revenue growth at 10.2% YoY to Rs. 6.1 billion; however, stagnation in overall market growth, according to IMS data adversely impacted the pharma segment (which accounted for 67.3% of Healthcare revenue in FY15).

Despite difficult market conditions, revenue from pharma grew 9.7% YoY to Rs. 4.1 billion while Surgical, Retail, Diagnostics and Wellness sub-sectors expanded 18.1%, 14.9%, 9.7% and 3.5% YoY. Partly as a result of the one-off goodwill write-down referred to in preceding paragraphs, PAT for Healthcare declined 35.8% YoY to Rs. 228 million; normalised PAT (adjusting for goodwill write-off) amounted to Rs. 289 million.

FMCG, which accounted for 18.3% of group revenue in FY15, reported robust growth of 20.4% to Rs. 3 billion boosted by both volume and price growth. Driven by the sale of ‘Watawala Tea’, the number one selling tea brand in the country, the branded tea sub-sector achieved 11.6% increase in sales (based on volume) of 3.1 million kg. PAT for the FMCG segment improved 27.8% YoY to Rs. 397 million in FY15, with margin increasing to 13.3% in FY15 from 12.5% a year earlier.

Again, despite difficult market conditions for tea and palm oil, the Agri sector posted a resilient 9.6% YoY growth to Rs. 6.8 billion and contributed 41.9% of total group revenue in FY15. Continued adherence to good agri practices yielded dividends in higher volumes – 3.9% YoY in Tea and 8.9% YoY in Palm Oil – which partially helped mitigate the adverse impact of market conditions.

PAT for FY15 was lower at Rs. 408 million, compared to Rs. 434 million in FY14, mainly due to the downturn in tea, which recorded a net loss of Rs. 428 million for FY15. Poor weather, combined with a significant decline in the price of Ceylon Tea in global markets and other external factors, eroded profits.

Timely strategic diversification to Palm Oil, which recorded a PAT of Rs. 780 million for FY 15, continued to boost the Agri sector and more than compensated for losses in both tea and rubber, despite a global decline Net Selling Average (NSA) of Palm Oil, in FY15, in line with the drop in global crude oil prices.

Revenue in the packaging segment declined 7.9% to Rs. 270 million in FY15; the lull in sales in both tea and confectionary industries took a toll. PAT was a negative Rs. 24 million for the year. There was however a turnaround in the fourth quarter of FY15; increasing export orders resulted in a PAT of Rs. 2 million in that period

There was a boost to growth in the renewable energy division, by 16.3% to Rs. 113 million in FY15; what makes this creditable is that this was only the second year of operation. Higher rainfall in the second half of FY15 boosted operations of the mini-hydro plant operated by the renewable energy division. PAT was Rs. 20 million in FY15, a substantial Rs. 19.9 million increase from the Rs. 0.1 million PAT the year before.