Sunshine Holdings records strong growth in turnover and PAT despite challenging market conditions

Sunshine Holdings Plc posted consolidated revenues of Rs. 19.2 billion for the 2016/17 financial year (FY16/17), up 10.3% Year-on-Year (YoY), leading to an improved Profit After Tax (PAT) of Rs. 1.6 billion, reflecting a 33.1% YoY improvement over the previous financial year. 

Profitability was bolstered by drastic improvements in the group’s agri-business, which recorded a 3.2% YoY increase in revenue up to Rs. 6.5 billion despite a 5.1% YoY contraction in tea revenue in the wake of unfavourable weather conditions during the year. The sector’s tea crop was affected by bad weather, even as the company continues to focus on a concerted strategy to grow quality teas to offset reductions in volumes. 

“It has been a year of notable challenges in key sectors however we are pleased to note that the Sunshine Group continues to display a resilient and entrepreneurial spirit in the face of such difficulties. During the year, our subsidiaries were able to generate significant growth, particularly as a result of some of our more recent innovations as seen in the performance of our palm oil business and our popular Healthguard franchise,” Sunshine Holdings Group Managing Director Vish Govindasamy stated.

Notably, the Palm Oil subsector reported an increase of 43.8% YoY for FY16/17 with palm oil volumes rising 18.2% YoY. The company managed to obtain a higher price for its CPO during FY16/17, which positively contributed to both the top line and bottom line of the agri sector.

While escalating tea prices helped support a notable recovery in the group’s tea subsector, they also resulted in increased pressure on FMCG margins during the second half of the year. Nevertheless, FMCG revenue increased by 22.5% YoY on the back of both volume and price growth, closing the year with PAT of Rs. 275 million, down 34.9% YoY.  

Moving forward, the group’s FMCG brand anticipated improved potential in the sector resulting from the scaling up of the ‘Zesta Connoisseur’ brand across Shangri-La properties worldwide and other growth-oriented strategies designed to further consolidate the brand both locally and internationally.  

Meanwhile, the imposition of pharmaceutical drug price controls on 48 separate molecules by the Ministry of Health over the last year continued to generate negative ramifications for Sunshine’s Healthcare segment. While remaining as the largest contributor to total group revenue, the segment recorded a 9.8% YoY increase driven by strong growth in the retail business. 

However, the pharmaceutical sub-segment, which represents 64% of healthcare revenue, grew at only 6% YoY, due to the impact of reduced prices leading to a sharp 36.9% YoY contraction in PAT down to Rs. 198 million. The company’s pharmaceutical segment is the second-largest player in the country with an 11.3% share of the market.

Moving forward the group anticipates weaker consumer activity during the in 1HFY18, as an increased tax burden weighs on disposable incomes and increased market volatility as a result of severe adverse weather conditions. Despite these conditions, the group is gearing up for above market growth in all business segments as a result of proactive strategies targeting new growth opportunities. 

Sunshine Holdings Plc is a diversified conglomerate with interests in healthcare, plantations, FMCG, packaging and renewable energy. The group, with revenue exceeding $120 million, is listed on the Colombo Stock Exchange.  

Beginning with the healthcare business in 1967, the group has built strong businesses over the last five decades, including partnering the Tata Group in 1992 to form a joint venture in plantations. The group’s companies include Sunshine Healthcare Lanka, Watawala Plantations Plc, Watawala Tea Ceylon Ltd, Sunshine Packaging and Sunshine Energy.