Hemas Holdings achieves growth despite revenue decline

• Reports a cumulative revenue of Rs.54.4bn, with operating profits of Rs.5.0bn and earnings of Rs.2.5bn 
• Attributes decrease in revenue to cautious consumer spending accompanied by several strategic downward price adjustments
• Notes with policy stability and upcoming reforms, there is cautious optimism for consumption growth

Hemas Holdings PLC reported strong profitability for the six months ended September 30, 2024, despite facing a challenging market environment characterised by cautious consumer spending and competitive pressure in key sectors.

Hemas Holdings PLC reported a cumulative revenue of Rs.54.4 billion, with operating profits of Rs.5.0 billion and earnings of Rs.2.5 billion. 

“The decrease in revenue compared to the same period last year was a result of cautious consumer spending accompanied by several strategic downward price adjustments, particularly in the consumer brands segment,” Hemas Holdings Acting Chief Executive Officer Ravi Jayasekera said.

However, the group’s ongoing commitment to efficiency improvements alongside favourable foreign exchange movements, contributed to enhanced profitability margins. Additionally, the initiatives aimed at optimising working capital combined with the advantages of a declining interest rate environment, led to a further reduction in finance costs, thereby boosting earnings. The consumer brands sector reported a cumulative revenue of Rs.19.9 billion, while the operating profit and earnings reached Rs.2.5 billion and Rs.1.8 billion for the year, respectively. The sector reported a revenue of Rs.11.0 billion for the quarter, while the operating profits and earnings increased to Rs.1.7 billion and Rs.1.2 billion, respectively due to the improved profitability margins compared to last year.  During the quarter, a stronger domestic currency and falling global commodity prices prompted aggressive pricing and promotions, intensifying competition across the key categories. Despite a decline in the overall industry demand, the company saw improvements in market share, consumer reach and product availability, driven by a focus on value-for-money options and enhanced supply chain efficiency. Increased emphasis on personal and beauty care contributed to higher profitability margins, while successful new product launches, including the relaunch of Vivya, boosted brand visibility and consumer engagement.

The stationery market faced heightened competition as new brands emerged, driving some players to lower prices, often sacrificing quality. Consumers, prioritising affordability, increasingly favoured value-for-money options. Despite this, the company maintained its leadership position by offering high-quality products at competitive prices. It expanded its Homerun stationery line to include books and launched its first range of educational toys, diversifying its portfolio and reinforcing its commitment to enhancing children’s learning experiences.

The healthcare sector achieved a cumulative revenue of Rs.33.6 billion, with operating profits totalling Rs.2.8 billion and earnings of Rs.1.8 billion. The increase in operating margins was driven mainly by the portfolio mix and initiatives focused on optimising the overhead cost.  Additionally, strategic management of working capital, along with the declining interest rates, reduced the finance costs and enhanced the sector earnings.

The sector posted a revenue of Rs.17.4 billion for the quarter, while the operating profits increased to Rs.1.6 billion. In addition, the benefit of lower finance costs contributed to achieving earnings of Rs.1.0 billion for the quarter.

The distribution business maintained its market-leading position this quarter, while both the distribution and manufacturing divisions focused on optimising overheads, improving margins and leveraging synergies for better performance. The pharmaceutical manufacturing segment expanded its Morison-branded portfolio with new product launches, including BisoMor for hypertension and SalMor for respiratory conditions. Morison’s industry strength was further validated by its recognition as the Sector Winner for Pharmaceuticals in LMD’s Most Respected Entities in Sri Lanka 2024.

Hospital admissions declined due to fewer communicable diseases compared to last year, while the outpatient volumes increased, driven by more medical screenings. Additionally, targeted efficiency initiatives helped reduce the administrative costs, improving the overall operational effectiveness of the hospitals.

The mobility sector posted a cumulative revenue of Rs.941.4 million while the earnings were reported at Rs.378.1 million. Accordingly, the quarter witnessed Rs.476.7 million in revenue and Rs.108.4 million in earnings.

The maritime sector experienced growth in volume and freight rates, with improved market share in the Gulf and increased volumes to the Far East, after the resumption of the CEM/E service. In aviation, cargo volume rose year-on-year, driven by higher sea-air movements related to the Red Sea situation and increased demand for shipments to Europe and the USA, which also led to improved cargo yields due to the higher rates.

“The economic outlook in Sri Lanka shows signs of recovery but consumer disposable income remains under pressure. With policy stability and upcoming reforms, there is cautious optimism for consumption growth. The group will focus on consumer and patient needs to drive sustainable growth in the coming quarters,” Jayasekera said.