Sunshine Holdings revenue up 14% to Rs. 12.2 b; PAT up 8% to Rs. 840 m
Thursday, 5 February 2015 00:00
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Sunshine Holdings Plc (CSE: SUN) reported PAT of Rs. 840 million for the nine months ended 31 December 2014 (9MFY15), up 8.3%YoY on a consolidated top line of Rs. 12.2 billion, up 14.1% YoY.
EBIT margin of 10.4% for 9MFY15 slightly contracted from 10.5% in 9MFY14. The growth in revenue is mostly attributed to the Agri sector, while Healthcare and FMCG also contributed to the top-line growth. The increase in EBIT is attributed to better performance in Agri, specifically Palm Oil and FMCG.
For 9MFY15, PAT amounting to Rs. 840 million grew 8.3% YoY, but profit to equity holders (PATMI) was down 4.8% YoY to Rs. 408 million.
The 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. Healthcare still remains the largest contributor to PATMI in 9MFY15 with Rs. 174 million, which represents 42.7% of total PATMI.
Goodwill written off amounting to Rs. 62 million also impacted PAT for 9MFY15. Normalised group PAT amounted to Rs. 902 million, up 16.2% against the same period last year.
Net Asset Value per share increased to Rs. 38.35 as at end 9MFY15, compared to Rs. 36.23 at the beginning of the year (FY14).
Business segments
Healthcare
Healthcare revenue for 9MFY15 grew 11.4% YoY and stood at Rs. 4.5 billion. This represents 36.8% of group turnover for the period. 3QFY15 was a challenging for the healthcare business with EBIT contracting 5.3% YoY.
The Pharma subsegment which made Rs. 3.0 billion in revenues (67.3% of healthcare revenue) grew 9.5% YoY over 9MFY14. This was a commendable performance against flat market growth based on IMS data. Growth in other subsectors was at; Surgical (+19.1% YoY), Retail (+16.4% YoY), Diagnostics (+9.7% YoY), OTC (+1.5% YoY).
PAT for Healthcare amounted to Rs. 174 million in 9MFY15, down 27.9% YoY. Normalised PAT amounted to Rs. 236 million after adjusting for the one off goodwill write-off. PAT margin contracted to 5.2% in 9MFY15, against 6.0% in 9MFY14, due to GP margin erosion and Goodwill write-off. However the company has somewhat watered down the impact by tighter control on overhead cost which grew only 6.9% YoY.
FMCG
The FMCG sector reported revenues of Rs. 2.1 billion in 9MFY15, up 18.0% YoY, on the back of both volume and price growth. The sector accounts for 17.2% of group revenue for the period. The branded tea business within FMCG sold 2.3 million kilograms of branded tea, up 9.2% YoY, primarily driven by their largest brand ‘Watawala Tea’ – which is the number one selling brand in Sri Lanka.
PAT from the FMCG segment grew12.4% YoY, despite challenging 1Q, to stand at Rs. 254 million in 9MFY15, with margin of 12.4% in 9MFY15, compared to 12.7 % in the same period last year. The dip in profitability is due to a challenging 1QFY15. 3Q PAT margin was at 16.7%, 230 BPS higher against the same period last year.
Agri business
The Agri sector with revenues of Rs. 5.3 billion in 9MFY15, up 16.6% YoY, contributed 41.6% of the total group revenue. Management attributes the strong topline growth mainly to its tea segment which saw higher volumes (+9.1% YoY) aided by favourable weather in 1QFY15, and increased quantities of bought crop. Palm Oil volumes (+6.3% YoY) continued to grow steadily during 9MFY15.
PAT for 9MFY15 amounted to Rs. 409 million, against Rs. 311 million in the same period last year. The growth is mainly attributed to the strong performance in Palm Oil with Tea making a loss of (Rs. 210 million). PAT for 3QFY15 just amounting to Rs. 143 million, down 30.9% YoY. Both 2Q and 3Q was challenging for the Agri sector, specifically for tea, which was adversely affected by inclement weather resulting in volume contraction, and a dip in selling price.
Nevertheless, the Palm Oil segment which made Rs. 593 million PAT for 9MFY15, continued to be the largest contributor to WATA profits and managed to cover the losses in both tea and rubber.
Other
Packaging revenues amounted to Rs. 186m, down11.5% YoYin 9MFY15, against Rs. 210 in the same period last year. The current year has been challenging for the packaging division with lull sales to both the tea and confectionary industry. PAT was negative for the packaging business at (Rs. 19 million) due to low capacity utilisation at the plant.
Revenue for the renewable energy division amounted to Rs. 88 million in 9MFY15, almost flat from the same period last year. Low rainfall during 1Q, and also five-day loss of revenue due to CEB grid failure in 2Q was fully offset by higher rainfall in 3Q.As a result, the mini-hydro plant, which is in its second year of operation made PAT of Rs. 20 million, up from Rs. 5 million in the last year.
Outlook
For 4QFY15, 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, and to increase the retail footprint of Healthguard.
The group also expects more traction from the new products which were introduced during FY14. We are mindful of the contraction in margins due to pressure from its business partners and we continuously look out for new molecules in profitable therapeutic classes.
In FMCG, we are bullish on our converter brand ‘Ran Tea’, priced to win over consumers who currently buy non-branded tea. If tea prices were to drop, we expect this to translate into better margins for the FMCG segment.
For the Agri sector, we expect the Palm Oil segment to continue its strong performance for 4QFY15. We expect CPO prices to be challenged during the next quarter, given the global dip in CPO prices.
We are also mindful of the demand side issues with buying at the auctions slowing down due to issues in key Ceylon tea markets in CIS and the Middle East.
For the two new mini-hydro plants that we have signed PPA agreements with the CEB, the company expect construction to commence in 4QFY15.
