Sunshine Group 1Q profits up 32.5% to Rs. 540 m

Fuelled by impressive growth in its consumer and agri-business sectors, diversified Sri Lankan conglomerate Sunshine Holdings reported impressive growth in top and bottom line performances during the first quarter of the current financial year (1QFY18).

Consolidated group revenue during the quarter increased by 12.5% Year-on-Year (YoY) to Rs. 5.2 billion, bolstered by strong performances in Agri and Consumer sectors, and despite a slight reduction in growth within the Healthcare sector. 

The group’s Agribusiness emerged as the largest contributor to Sunshine’s top-line performance, accounting for 38% of total revenue, where Healthcare contributed 37% and Consumer 22% of the total revenue.

Profit after tax (PAT) for the period in review rose by 32.5% YoY, on the back of sales growth and operating margin improvement, with strong positive results also being carried through to the Group’s Profit After Tax & Minority Interest (PATMI) which rose by 8.7% YoY to Rs. 224 million.   

For 1QFY18, PAT amounted to Rs. 540 million up 32.5% YoY, on the back of sales growth and operating margin improvement in 1QFY18 (10.4%) compared to 1QFY17 (8.8%). Profit After Tax and Minority Interest (PATMI) grew 8.7% YoY to LKR 224m with prominent group Sunshine Holdings subsidiary, Watawala Plantation PLC, making the largest contribution to PATMI, accounting for 42% of the total.

“Overall, it has been another highly dynamic quarter for Sunshine Holdings, during which we were able to achieve substantial gains with regard to turnover and profitability. Our proactive strategy of focusing on improving quality and internal efficiency continues to yield strong results for the group, as evidenced by the resurgent performance of our agribusiness.

“While our healthcare sector continues to grapple with significant challenges arising out of the implementation of the price controls on pharmaceuticals and recently on medical devices, the group continues to perform extremely admirably. We commend our dynamic team of employees, and our network of business partners and valued customers for their role in driving outstanding performance over the last quarter. Moving forward we will continue to work in the same spirit of responsible entrepreneurship that Sunshine Holdings guided our company from strength to strength,” Sunshine Holdings Group Managing Director, Vish Govindsamy stated.

In total, the group’s healthcare segment generated Rs. 1.9 billion in turnover during 1Q18, representing a minor 1.2%YoY contraction. Despite these constraints however, tight cost and efficiency controls resulted in the group’s healthcare segment improving its profitability by 5.8% YoY up to Rs. 85 million over the quarter. 

Similarly, Sunshine’s Consumer brands – spearheaded by premium brands like ‘Zesta’ and ‘Watawala Tea’ – recorded impressive growth in revenue, with stronger domestic business growth enabling a sharp 45.4% YoY growth to Rs. 1.1 billion on the back of both volume and price increases. The Consumer sector accounted for 22% of group revenue during the period in review while the domestic branded tea business sold 0.95 million kilos of branded tea, up 19% YoY. These strong performances resulted in a 22.5% YoY increase to PAT for the Consumer segment, which closed the quarter at Rs. 51 million. 

The Group’s Agribusiness sector, led by Watawala Plantations PLC, recorded 19.8% YoY growth up to Rs. 2 billion on the back of a 29.6% YoY growth in Tea revenue driven entirely by increase in average selling price and supported substantially by a 12.2% YoY increase in the contribution of the  Palm Oil segment. Palm Oil volumes were 10.7% higher than same period last year while the company also managed to obtain a higher price for its crude palm oil during 1QFY18, which also positively contributed to both top line and bottom line of the Agribusiness sector.

Particularly in the context of Sunshine’s remarkable performance over the last quarter, Vish Govindasamy expressed strong confidence over the outlook of the group over the coming year. While acknowledging the continuing impact of the price controls on its healthcare business, he noted that the potential for further growth, supported by increased volumes to offset the reduced prices and greater attention to its growing surgical and medical devices sub sector, which had displayed impressive growth potential over the recent past. 

Similarly, the Group’s consumer business would continue investments into its brands to scale both domestic and international businesses while the continuing success of its Palm Oil segment was also expected to continue to yield higher returns, brought about by superior agronomic practices. 

The Dairy segment is anticipated to begin contributing to Group Revenues from the second quarter of this financial year, having successfully imported an initial herd of 400 milking cows from New Zealand;however, Govindasamy noted that the interim cost of feeding the whole herd would produce limited impacts to the group’s Agri profits over the short to medium term.