Diversified Sri Lankan conglomerate Sunshine Holdings PLC (CSE: SUN) posted consolidated revenue of Rs. 10.5 billion, resulted in a 3.0% Year-on-Year (YoY) decrease. Consolidated revenue of the Group decreased due to the sale of a majority stake in the tea plantation business represented by Hatton Plantations PLC (HPL) during the first quarter.
Profit after tax (PAT) for the period in review rose to Rs. 1.2 billion, on the back of profit from sale of Hatton Plantations PLC’s, which amounted to Rs. 343 million. Group’s Profit After Tax & Minority Interest (PATMI) also grew by 72.5% YoY to Rs. 731 million. Watawala Plantation PLC, Group’s agribusiness subsidiary was the largest contributor to PATMI, accounting for 46% of the total and Healthcare accounting for 38%.
The PAT margins increased to 11.7% for 1HFY20 from 7.2% in 1HFY19 mainly due to the profit gained from the sale of Hatton Plantations PLC. Net Asset Value per share also increased to Rs. 53.52 as at end 1HFY20, compared to Rs. 52.72 at the end of 1HFY19. Group’s healthcare business emerged as the largest contributor to Sunshine’s top-line performance, accounting for 48% of total revenue, while Consumer and Agribusiness sectors of the Group contributed 25% and 21% respectively of the total revenue.
“Following the unfortunate events last April, the struggling economy has negatively impacted many industries in the country. During the period in review, this negative impact brought many challenges to some of the key business sectors of Sunshine Group as well,” commented Vish Govindasamy, Group Managing Director of Sunshine Holdings. “However, we have remained resilient in the face of such difficulties, and with expected improvements in micro and macro indicators, we remain optimistic about consolidating our operations to strengthen the overall performance of the Group further.”
In total, the group’s healthcare segment generated Rs.5.3 billion in turnover during 1HFY20, representing a growth of 19.2% YoY on the back of volume and price growth in the pharma and medical devices sub-sector.
“In Healthcare, we expect strong growth for 3QFY20, especially in the medical devices and pharma sub-divisions. We are closely monitoring the changes in the exchange rate, which is sensitive to our margins. The sector will continue to focus on improving the product range and service quality. At Healthguard, the focus continues to be on developing speciality range of Beauty and Wellness products while attracting more customers to the chain. We recently opened our newest outlet at One Galle Face Mall which we believe will help us grow revenue during the second half,” Govindasamy commented.
The group’s agribusiness sector, represented by Watawala Plantations PLC (WATA) and Hatton Plantations PLC (HPL), saw a revenue decline of 33% YoY to Rs. 2.3 billion. The decrease was mainly due to unfavourable weather conditions which impacted Group’s tea plantations, and the divestment of a majority stake in Hatton Plantations PLC during the latter part of the first quarter. Overall, palm oil and dairy segments recorded a 17.6% YoY growth mainly due to better performance of the palm oil sector which was driven by improving yields. Palm oil production was at 7.1million Kg for 1HFY20, up 14.0% YoY.
Sunshine’s consumer business, reported a topline of Rs.2.8 billion in 1HFY20, up 0.5% YoY, and accounted for 25% of group revenue for the period. 1HFY20 has been a challenging period for the domestic branded tea business due to subdued consumer spending and intense competition.
Revenue of the group’s renewable energy business amounted to Rs.100 million in 1HFY20, down 49.4% YoY from Rs.197 million during 1HFY19, as a result of lower rainfall in the catchment areas coupled with plant maintenance activities.
Particularly in the context of Sunshine’s performance over the last quarter, Govindasamy expressed strong confidence over the outlook of the group over the coming year. He said Group’s consumer business would continue to invest behind its brands to scale the domestic businesses where he expects some increase in tea input cost, which will create pressure on the margins.
In agribusiness, Sunshine expects to see moderate growth in volumes for the palm oil segment due to improving yields, while prices are expected to be stable in the short term. The Roundtable on Sustainable Palm Oil (RSPO) audit is ongoing and the company expects to receive the certificate by 4QFY20.
On the dairy sub-sector, the total milking cows for the period stood at 853, producing 3.0 m liters of fresh milk for the period compared to 2.7 m liters during the same period last year. Govindasamy also noted that the Group will continue to focus on rooftop solar projects with the capital raised from their joint venture partners during the period.