Sunshine records Rs. 10.7 b revenue in 9MFY14, with FMCG driving top line growth
Monday, 10 February 2014 00:00
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Sunshine Holdings PLC (CSE: SUN) reported PAT of Rs. 776 million for the nine months ending 31 December 2013 (9MFY14), an 18.9% YoY decline compared to Rs. 957 million in 9MFY13. It’s reported top line stood at Rs. 10.7 billion in 9MFY14 against Rs. 9.8 billion during the same period last year. EPS was Rs. 3.20, out of which Rs. 1.40 is attributable to 3QFY14. EPS for 9MFY13 stood at Rs. 3.65.
The company’s EBIT margin has contracted to 10.5% in 9MFY14 compared to 14.1% in 9MFY13 due to margin erosion in the agri sector, resulting from crop loss due to bad weather, and wage hikes for plantation workers.
Despite an 18.9% YoY drop in group PAT, profit to equity holders was down only 11.9% YoY to Rs. 429 million in 9MFY14 due to the limited impact of the agri sector on the profit to equity holders as a result of low effective holding.
Business segments Healthcare
Revenues for the healthcare sector marginally grew to Rs. 4.0 billion in 9MFY14 up 2.7% YoY. This represents 37.0% of total group revenue. The sub segment pharmaceuticals, which is the largest segment within its healthcare business, grew by just 2.5% YoY, mainly due low growth in the overall healthcare sector in Sri Lanka of 0.1% for 12 months ending Sept 2013 as reported by IMS. The retail segment, Healthguard Pharmacy grew 7.8% YoY. The growth was mainly driven by new outlets in Thalawathugoda and Orion City, with same store sale growth amounting to 3.3% YoY
The segment witnessed a slight contraction in PAT margins to 6.0% in 9MFY14 from 6.5% in the same period last year. This is largely due to the increase in promotional expenses and growth in staff related costs. Majority of the promotional expenses were spent on its own brand wellness product line ‘Surelife’ which, the company believes, is an investment which that will yield benefits to the group in the near future.
9MFY14 Highlights
Consolidated revenue of Rs. 10.7 b, an increase of 9.4% YoY
PAT amounted to Rs. 776 m, down 18.9% YoY, mainly due to Agri wage impact and a dip in healthcare margins
Healthcare growth lull due to stagnant market
Agri revenue growth resilient at 8.8% YoY, despite bad weather
FMCG on a bull run with 31.9% YoY growth, as it gains dominance over the local tea market
Agri business
The agri sector, which contributed 41.5% of group revenue, reported revenues of Rs. 4.5 billion in 9MFY14, up 8.8% YoY against Rs. 4.2 billion in 9MFY13. The primary driver of agri growth was the increase in palm oil production, up 9.5% YoY while tea volumes were flat due to rain affected crops in 1QFY14.
PAT declined to Rs. 311m for 9MFY14, from Rs. 589m recorded in 9MFY13. The overall decline in YoY PAT, and the contraction in PAT margins to 6.9% in 9MFY14 from 15.5% last year, is mainly attributed to the 20.0% YoY wage hike which came into effect from April 2013, which inflated the cost of production across all crops. Tea crop losses also contributed to the decline.
FMCG
The FMCG sector reported revenues of Rs. 1.8 billion in 9MFY14, up 31.9% YoY, on the back of both volume and price growth. The sector accounts for 16.4% of group revenue in 9MFY14. For 9MFY14, the segment sold 2,102,545 kgs of branded tea, up 16% YoY. The division also re-initiated the sale of its edible oil brand “Oliate” in 3QFY14.
PAT from the FMCG segment grew 71.6% YoY to stand at Rs. 226 million in 9MFY14, and margins increased to 12.7% in 9MFY14 against 9.7% in the same period last year.
Other
The packaging division reported revenues of Rs. 210 million, up 19.6% YoY on the back of new orders. As opposed to last year, the tin packaging company was able to attract new orders from two giant confectionary producers in Sri Lanka. PAT was negative at Rs. 6 million in 9MFY14, compared to negative Rs. 10 million in 9MFY13 due to high finance cost.
The renewable energy division witnessed a revenue growth of 34% YoY in 9MFY13 and contributed Rs. 89 million to group revenue. The mini-hydro plan, which is in its second year of operation, churned out a PAT of Rs. 5 million in 9MFY14 against a loss of Rs. 23 million in the same period last year. With all the initial costs accounted for, the company believes that the division will give consistent returns over the next few years.
3QFY14 results
For the quarter ending 31 December 2013 (3Q14), revenue is up 11.0% YoY to Rs. 3.7 billion, while PAT declined 7.7% YoY to Rs. 415 million. PAT margins contracted to 11.1% in 3QFY14 compared to 13.3% in the same period last year, mainly driven by the wage impact in the agri business segment.
Profit attributable to equity holders was down 8.3% YoY to Rs. 187 million in 3QFY14, with reported EPS at Rs. 1.40.
Outlook
Overall, 9MFY14 has been challenging, but the company has managed to turn the business around due to a strong 3Q14 performance.
For the healthcare sector, majority of our growth will mirror the local health sector growth. The group is particularly bullish on its own brand wellness product “Surelife” which it believes will drive above average growth and superior margins in its health segment.
Historically, 4Q is kno
wn to be the quality season for agri business, and provided there are no extraordinary weather conditions, the company believes that it can recuperate most of its lost crop in the next few months up to the year-end FY14, to be at least on par with the volumes witnessed last year.
The FMCG business will continue to grow at the same pace till the end of the year. It also expects a slight improvement in margins as Colombo tea prices contract from its record highs witnessed during 3QFY14.
“Taking into consideration the current environment we are operating in, I continue to be optimistic about reporting a sustainable growth in all business units, as we move into the final quarter of FY14,” said Sunshine Holdings PLC Chairman Rienzie T. Wijetilleke.
Sunshine Holdings Plc is a diversified holdings company, with interests in healthcare, agribusiness, FMCG, and renewable energy among other growth industries.
The group’s key portfolio comprises plantation infrastructure across palm oil, tea, and rubber, along with mature healthcare products in pharmaceutical, surgical, and diagnostics and wellness supported by a dynamic proprietary distribution infrastructure with an island-wide reach. Sunshine Holdings’ fast growing FMCG Company is one of the largest branded tea company in Sri Lanka.
The group, which has over 12,500 employees and has generated approximately $ 100 million in revenue, is consistently ranked among the LMD top 50 companies in Sri Lanka.
