Hemas expects first half of current FY to be extremely challenging for corporates

After posting a strong financial performance in one of the most testing years in the country’s history, diversified conglomerate, Hemas Holdings PLC expects the upcoming two quarters of FY2022/23 FY to become particularly challenging for corporates with deepening economic crisis and its broad impact on businesses. 

“In the coming financial year, we expect the operating environment to remain volatile. We are cautious about the next two quarters given the current crisis and the impact it would have on businesses,” Hemas Holding PLC Group Chief Executive Officer Kasturi C. Wilson highlighted in the Group’s annual performance review.

However, she was confident of the group’s ability in navigating the macroeconomic headwinds being in defensive sectors such as home and personal care (HPC), stationary, pharmaceuticals and hospitals coupled with a strong core. 

She also said political stability and economic reforms under an IMF programme remain critical for economic recovery.

Driven by strong performance in HPC and stationary segments, Heams reported 27.2 percent Year-on-Year increase in revenue to Rs.21.01 billion for the quarter ended March 31, 2022 (4Q22).  

However, the operating profit only grew by 16 percent YoY to Rs.153 billion in the quarter with the intensifying pressure on margins across most of the businesses due to input cost inflation and challenges relating to foreign exchange volatility.

Despite rising finance costs, the group’s earnings rose by 23.6 percent YoY to Rs.1.06 billion or Rs.7.12 per share in the quarter.

Hemas saw a volume-led growth in both modern and general trade channels in the key HPC segment, which contributed to 14.4 percent of its revenue as it continues to focus on strategies to maintain the balance between margin pressure and reducing the burden to consumers due to inflation.   

In the pharmaceutical segment, the group continued to absorb exchange losses owing to the steep depreciation of the rupee, which was compounded by the absence of a transparent pricing mechanism despite consecutive price increases granted by the National Medicine Regulatory Authority (NMRA).

Meanwhile, for FY2021/22, the group reported a strong 30.6 percent YoY increase in earnings to Rs.4.25 billion on Rs.79.8 billion revenue.

Wilson noted that the group would continue with its current strategy of strengthening its core businesses and improving market share to stay agile and robust.

“We will continue to focus on our business models and cost optimisation initiatives while improving efficiency by building on digital capabilities. The group will also accelerate expanding our footprint into export markets, with greater emphasis placed on our international business,” she added.

Further, Heams also plans to develop its presence in the mobility sector as a key priority in the medium term. Last year, Hemas invested Rs.894.9 million in Morlan (Pvt) Ltd, a newly incorporated fully owned subsidiary to acquire strategic assets related to the mobility sector.