Sunshine Holdings doubles profits over 2Q17, driven by resurgent Agri biz

Bolstered by impressive growth in its Agribusiness segment, Sri Lanka’s most dynamic diversified conglomerate, Sunshine Holdings PLC concluded the half year ended 30 September 2016 (1H17) on a strong positive note.

Consolidated revenue during the period in review rose by 13.6% YoY up to Rs. 9.6 billion, while Profits After Tax (PAT) increased by 42.2% YoY up to Rs. 935.4 million, leading to a 29% YoY increase Profits to Equity Holders of Rs. 433 million during, and earnings per share of Rs. 3.21 over 1H17.

Healthcare continued to be the largest contributor to top and bottom line performance, accounting for 41.7% of group revenue and 42% of Profit After Tax and Minority Interest (PATMI). The Healthcare sector’s contribution was followed by strong performances across Sunshine’s Agribusiness and FMCG segments which accounted for 34.2% and 19.6% respectively. 

Net Asset Value per share during the same period increased to Rs. 44.9, as compared with Rs. 42.8 at the beginning of the year.

Notably, the performance of Sunshine Holdings over the quarter ended 30 September 2016 (2Q17) amounted to the Group’s highest ever 2Q performance. During this period, profits more than doubled, recording 53.5% YoY growth to reach Rs. 527 million. 

The five sectors in which the diversified conglomerate operate are; Healthcare (Sunshine Healthcare Lanka Ltd. and Healthguard Ltd.), FMCG (Watawala Tea Ceylon Ltd.), Agribusiness (Watawala Plantations PLC), Packaging (Sunshine Packaging Ltd.) and Renewable Energy (Sunshine Energy Ltd.).   

“Sunshine Holdings continues to demonstrate resilience and agility in the face of some notable challenges. Particularly in our agribusiness, we have been able to achieve some of the best results in our industry and these qualities have also been the driving force behind the strong performances of our other business units. Group Managing Director (GMD) – Vish Govindasamy said, “Building on a record breaking first quarter earlier this year, Sunshine Holdings was able to achieve its highest ever 2Q profits. These results stand as further evidence of the growing success that our growth-oriented strategy has enabled and the Group remains poised for further expansion and innovation over the medium-long term.”

Healthcare revenue during 1H17 rose by 17.9% YoY driven by growth in the Group’s retail business, however as a result of price controls of Pharmaceuticals, an increased cost of sales and exchange rate fluctuations were absorbed by the company, leading to a 90 basis point (bps) contraction in Earnings Before Income Tax margins (EBIT).

The FMCG sector reported revenues of Rs. 1.9 billion in 1H17, up 20.3% YoY, on the back of both volume and price growth while the group’s domestic branded tea business within FMCG sold 1.89 million kilos of branded tea, up 15% YoY, driven by their largest brand ‘Watawala Tea’, and their converter brand ‘Ran Kahata’.

PAT from the FMCG segment saw a contraction of 28.2% YoY, to stand at Rs. 164 million in 1H17, with a margin of 8.6%, compared to 14.4% in the same period last year. High margins witnessed during same period last year were mainly a result of low tea prices which prevailed during the period. Business expansion investments pertaining to scaling up of the ‘Zesta Connoisseur’ brand across Shangri-La properties worldwide also had an impact on the operating margins.

The Agribusiness sector represented by Watawala Plantations PLC (WATA) saw revenue growth of 1.7% YoY to Rs. 3.3 billion, despite a contraction of 6% YoY in Tea revenues, which was mitigated by the group’s flourishing Palm Oil sub sector which recorded a 42% YoY during the period in review. 

Given the weak market conditions for Tea, the company strategically cut down Tea output to curtail losses and to improve quality, which has paid dividends as seen in the strong growth in profitability, and through the reduction in Tea losses. In light of this reduction in tea losses and backed by a 15% YoY increase in volumes and prices from the Palm Oil sector, the Group’s agribusiness was able to record a PAT of Rs. 548 million, as compared with a previous Rs. 262 million. 

Packaging revenues increased by 13.4% YoY to Rs. 192 million, leading to a PAT of Rs. 7 million while the changing weather patterns resulted in 27.9% YoY reduction in revenue within the group’s Renewable Energy division. 

Sunshine Holdings PLC is a diversified holding company contributing to ‘nation building’ by creating value in vital sectors of the Sri Lankan economy – including healthcare, agribusiness, fast moving consumer goods and renewable energy. Many of its business units are leaders in their respective sectors, have secured partnerships with multiple top global brands and have won prestigious awards at the national as well as the regional level. 

The leading brands of the group include Zesta, Healthguard, Watawala Tea, Pedia Plus and Diabeta Plus. Sunshine Holdings’ jointly-owned plantation company is Sri Lanka’s largest palm oil producer and has also been the country’s largest tea producer for several consecutive years. The company’s healthcare marketing unit is the second largest in its sector nationally. Its tea sector also consists of Sri Lanka’s best-selling tea brand locally. The group, which provides employment to approximately 12,000, generates over $ 120 million in revenue. Sunshine Holdings is consistently ranked among the LMD Top 50 companies in Sri Lanka.