Sunshine Holdings 1Q earnings boosted by divestments

While the divestment of its tea subsidiary boosted its June quarter (1Q20) earnings, Sunshine Holdings PLC saw a dip in its top line performance as the consumer goods and agribusiness of the group performed poorly during the quarter under review.

The group revenue for the period fell 7 percent year-on-year (YoY) to Rs.5.2 billion, while cost of sales also fell 10 percent YoY to Rs.3.7 billion, resulting in a gross profit of Rs.1.4 billion, up 2 percent YoY.

Boosted by the gains from the sale of Hatton Plantation PLC (HPL)—Sunshine’s tea plantation business—to Lotus Renewable Energy Group, the group’s earnings for the quarter rose 76 percent YoY to Rs.332.9 million. The earnings per share improved to Rs.2.33, from Rs.1.39 a 
year ago.

During the quarter under review, the Sunshine group saw a 40 percent YoY increase in its finance cost while the net finance cost rose 22 percent YoY to Rs.111.5 million.
A segmental analysis of the group’s business clusters showed the healthcare segment reporting a revenue of Rs.2.4 billion for the quarter under review, up from Rs.2.2 billion a year ago. The post-tax profit of the segment improved to Rs.140.5 million, from Rs.87.4 million.

Sunshine Holdings Managing Director Vish Govindasamy said the recent increase in the controlled prices of certain drugs and stabilisation of the rupee helped the healthcare segment to report improved performance.

However, he said the Easter Sunday attacks impacted the group’s consumer goods sector. The sector revenue remained flat during the quarter under review while the post-tax profit fell to Rs.57.8 million, from Rs.90 million.

Govindasamy said the group’s consumer business would continue to invest behind its brands to scale the domestic businesses focusing on sales and marketing efforts to drive revenue in 2Q. The agribusiness of the group, represented by Watawala Plantations PLC and HPL, fell to Rs.1.4 billion due to the unfavourable weather conditions, which directly impacted the tea plantations managed by HPL. 

Sunshine Holdings said even though the palm oil volumes under Watawala Plantations increased by 28 percent YoY during the quarter, the post-tax profit of the segment was Rs.199 million, down from Rs.204 million a year ago.

In the agribusiness, Govindasamy hopes to see moderate growth in volumes for the palm oil segment due to the shift in yield curve while the prices are expected to be stable in the  short term. 

The palm oil duty, increased by Rs.25 with effective from July 12, 2019, will further enhance the revenue.

On the dairy sub-sector, the total milking cows stood at 813 and the total number of animals at 1,380. Govindasamy expects to rationalise the feed cost further and increase the selling price due to the higher demand. 

In the renewable energy segment, the revenue amounted to Rs.26 million in the quarter under review, down from Rs.92 million, as a result of the lower rainfall in the catchment areas and plant maintenance. 

The segment reported a post-tax loss of Rs.42 million, compared to a profit of Rs.44 million in the same period last year. In the renewable energy segment, Govindasamy said the company is evaluating its rapid expansion in solar power, after securing a growth funding of US $ 2 million from SBI Japan.

As at June 30, 2018, Lamurep Investments Limited held a 45.41 percent stake in Sunshine Holdings, followed by an 18.08 percent stake by SBI Ven Holdings Private Limited and a 17.43 percent stake by Deepcar Limited.