Hemas looking for consumer and healthcare acquisitions

Hemas Holdings PLC is looking expand its presence in consumer and healthcare segments, as the corporate behemoth remains acquisitive in the two fields. 

Hemas commands the market leadership in pharmaceutical and stationary businesses which engages in both distribution and manufacturing while its home and personal care (HPC) segment demonstrated resilience despite some slowdown in the recent past. 

“Hemas’ domestic HPC business, which operates in the mid to premium price categories, continued to innovate, offering value propositions such as smaller pack sizes and product variants that gained traction among customers. 
This helped the company to defend its market share despite falling demand”, Fitch Ratings said this week. 
“Hemas is looking at acquisitions in the consumer and healthcare segments to further improve its market position, given the attractive valuations in the current environment,” it added. 

The rating agency affirmed Hemas’ AAA rating with a Stable outlook considering its defensive cash flows stemming from pharmaceutical trading and manufacturing and consumer businesses. 
They together account for 90 percent of the group’s Earnings Before Interest and Taxes, a performance matrix equivalent to the operating profit. 

“The rating is supported by Hemas’ exceptionally strong balance sheet and high rating headroom. Its EBITDA net leverage is likely to remain below 1.0x over the next two years, compared with the 4.5x leverage threshold for the current rating,” Fitch added.  However, the rating agency expects the revenue growth to slow to high single digits in the next financial year ending March 2024 following 42 percent growth in revenues in the nine months in the FY2023 amid weaker consumer spending. 

Fitch estimates Sri Lanka’s Gross Domestic Product to contract by 2.2 percent in 2023 after a record 7.8 percent decline in 2022. 

“Consumers’ prioritisation of essentials such as healthcare, education and food should bode well for Hemas, but sales volumes are dropping even in those segments as consumers ration their spending,” Fitch said.