Performance review for the Six Months ended 30th September 2024
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 same period last year was a result of cautious consumer spending accompanied by several strategic downward price adjustments, particularly in the Consumer Brands segment. 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.
Consumer Brands
The Consumer Brands Sector reported a cumulative revenue of Rs. 19.9 billion while the operating profit and earnings 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 the last year.
During the quarter, a stronger domestic currency and falling global commodity prices prompted aggressive pricing and promotions, intensifying competition across key categories. Despite a decline in 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 re-launch 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, prioritizing affordability, increasingly favored value-for-money (VFM) 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.
Healthcare
The sector achieved a cumulative revenue of Rs. 33.6 billion, with operating profits totaling 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 optimsing overhead cost. Additionally, strategic management of working capital, along with declining interest rates, reduced finance costs and enhanced 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 optimizing 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 outpatient volumes increased, driven by more medical screenings. Additionally, targeted efficiency initiatives helped reduce administrative costs, improving the overall operational effectiveness of the hospitals
Mobility
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 higher rates.
Continuing focus on ESG
During the quarter, the Group made significant strides in its Environmental Agenda, focusing on responsible plastic consumption, reducing water usage, and increasing renewable energy usage. Water intensity was reduced by 11.8%, and renewable energy sourced reached 10.1%, a 119% increase from the previous quarter. The Group also progressed toward its goal of collecting 100% of its plastic waste by 2030, having collected over 830,000 kg so far, with Hemas Consumer Brands investing in a new facility to collect 360,000 kg of plastic in three years. In conservation, the Group reintroduced two critically endangered plants to their natural habitats. On the social front, over 107,000 families were impacted by purpose-driven initiatives, including the launch of Fio, Sri Lanka’s first trilingual period-tracking app, and Hemas Outreach Foundation added two new preschools in Galgamuwa and Badulla, benefiting over 100 children.
Outlook
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.
