Sunshine Holdings PAT down 39% on low Agri profits

Sunshine Holdings PLC (CSE: SUN) reported top line growth of 8% YoY to end 1Q of the financial year (1QFY19) with consolidated revenue of Rs. 5.6 billion, with Profit after tax (PAT) declining by 38.8% to Rs. 343 million and profit margins reducing to 6.2% from last year’s (1QFY18) 10.9%.

The top line increase was achieved in spite of lower profitability in the agribusiness sector and holding company’s higher finance cost, mainly due to strong performances in consumer and healthcare sectors.

The group’s healthcare sector emerged as the largest contributor to Sunshine’s top-line performance, accounting for 40% of total revenue, where agribusiness contributed 33% and consumer 25% of the total revenue.

Recently, Sunshine announced a private placement to raise Rs. 775 million with SBI Ven Holdings (Pte) Limited, the overseas private equity firm of Japan’s financial giant SBI Holdings Inc. Through this private placement, the company hopes to reduce its net debt and net finance cost.

The Group’s Healthcare sector posted revenue growth of 15.6% YoY on the back of volume increase in the pharma sub sector and foot fall growth in retail, represented by its rapidly-growing Healthguard Pharmacy chain, growing 13.5% YoY. The pharma sub-segment which represents 67% of healthcare revenue grew 15.6% YoY in 1QFY19, due to higher sales volumes. Medical devices sub-sector grew by 16.2% YoY.

“In Healthcare, we expect strong growth momentum in volumes to continue into 2QF19. The healthcare industry is expecting another phase of price control by the regulator during 2QFY19. Although this was announced by the Minister of Health on 1 August 2018, no guidelines have been issued by the regulator on the same,” Sunshine Holdings Group Managing Director Vish Govindasamy commented.

The Consumer sector reported revenues of Rs 1.4 billion in 1QFY19, up 22.2% YoY, on the back of both volume and price growth, and accounted for 25% of group revenue for the period.

The Group’s Agribusiness sector, led by Watawala Plantations PLC and Hatton Plantations PLC, saw a revenue decline of 7.2% YoY to Rs. 1.8 billion due to unfavorable weather conditions. Palm oil volume contracted by 16.9% YoY for 1QFY19 due to a decrease in yield and reflected a YoY revenue drop of 11.5%, despite an increase in net sale average (NSA). Tea volumes contracted by 14.3% YoY, resulting in a revenue drop of 9.8% YoY.

Sunshine Holdings PLC is a diversified holding company with interests in healthcare, agribusiness, fast moving consumer goods and renewable energy, with brands such as Zesta, Healthguard, Watawala Tea, Pedia Plus and Diabeta Plus. The Estate Management Services Limited (EMS), the agri-business arm of Sunshine Holdings PLC, manages Watawala Plantations, Sri Lanka’s largest palm oil producer.


Photo caption: Sunshine Holdings Group Managing Director VishGovindasamy