Weak consumer a drag on Hemas June performance

• Company cites subdued demand, price cuts & extended holidays for tepid performance 

 Hemas Holdings PLC reported subdued top and bottom-line performance in the three months ended in June 2024 as the company scrambled with consumers significantly weakened by the red-hot inflation in 2022 and 2023 and the repeatedly raised taxes.

The consumer giant said the sales for their home and personal care products and stationary were low in the three months, both due to several downward price revisions and subdued consumer demand which continues to remain a challenge for the company.

Besides, the extended holidays during April and May also had a bearing on the company’s performance, especially on the sales from general trade channels.

As a result the consumer juggernaut reported revenue of Rs.25.48 billion, down 12.5 percent from the same period last year.

The company’s share ended 0.86 percent or 70 cents down to end at Rs.81.00 before the interim results were released after the market closed.

The lower revenues from the group’s medicinal drugs and hospitals business also weighed on the top-line as the pharmaceutical business continued contracting, albeit at a lesser pace due to patients choosing generic drugs and lower price alternatives while the hospitals saw slightly fewer admissions due to fewer reported communicable diseases during the period.

The healthcare segment revenues were down by 8.6 percent from the same period in 2023 to Rs.16.13 billion while the consumer brands business revenues were off by 19.8 percent to Rs.8.86 billion between the same two periods.

Meanwhile Hemas’ consumer brands business in Bangladesh has also come under some pressure due to higher inflation there prompting the consumer to switch from what they call, ‘the Value Added Hair Oil (VAHO)’, to coconut oil.

“Despite these challenging market conditions, ‘Kumarika’ increased its market share in the VAHO market. Recent introductions in the value-for-money and the pure coconut oil categories have also achieved significant traction in the market. ‘Actisef’ continues to play a crucial role in the product portfolio”, the company said in an earnings release.

Meanwhile, the company’s next major segment, the learning segment represented by Atlas, while continuing to maintain its market leadership position, confronted slowdown with prolonged school closures in the first quarter and the gradual easing of stock holdings from previous quarters. This segment has also come under pressure from the competition from new entrants after the ease in import restrictions and the rupee appreciation.

The group’s mobility segment represented largely by its maritime sector was the only sector which did well during the June quarter due to rise in freight rates as well as the volumes. Meanwhile its aviation sector also saw a positive impact on cargo volumes as the increased tonnage had been diverted to mitigate port congestion.
Overall the mobility segment recorded revenues of Rs.475.91 million, up 14.0 percent from a year ago.
The group reported operating profit of Rs1.93 billion, down 10.3 percent from the same period a year ago.
Despite pressure, the company was seen doing a good job in containing both direct costs as well as its overheads, partly due to the easing costs in line with overall decline in inflation and partly due to conscious efforts to further improve efficiency through the processes.

The lower finance cost helped the company to report a 21.5 percent increase in before tax profits to Rs.1.72 billion but the nearly 150 percent surge in tax expenses turned the earnings into a 13.5 percent decline.

The finance cost came down sharply by 61.5 percent to Rs.373.9 million in the quarter largely due to the company paying down a large chunk of its short term debt.

The company reported earnings of Rs.1.58 a share or Rs.945.6 million in the April – June quarter compared to Rs.1.83 a share or Rs.1.09 billion in the same period in 2023.