Sunshine Holdings plans Chinese, African and Russian tea entry
Diversified Sri Lankan conglomerate Sunshine Holdings PLC has plans to enter China, Africa and Russia with its tea brand, officials said.
“We are working on (venturing to) China with our partners, Pyramid Wilmar Plantations (pertaining to tea),” Sunshine Holdings PLC Group Managing Director, Vish Govindasamy, told the Business Times on the sidelines of a media conference held by the company recently. He added that Sunshine is likely to go to Africa and also Russia Wilmar. The company also has over a 20 year joint venture with Tata Tea (Tata Global Beverages) with whom it set up estate management services.
Vish Govindasamy
Mr. Govindasamy said that they have had slow entries into Singapore, Malaysia and Ukraine with their Zesta tea brand in the past, but they are more aggressive with their latest plans.
Sunshine Holdings PLC posted consolidated revenue of Rs. 16.3 billion in FY15, an improvement of 11.1 per cent year-on-year (YoY). Key business segments, particularly Healthcare and Agribusiness, grew above industry averages despite challenging conditions, according to a company media statement.
“There was growth across the board; fast moving consumer goods (FMCG), healthcare and agribusiness revenues grew at 20.4 per cent, 10.2 per cent and 9.6 per cent respectively YoY; group profit after tax (PAT), however, was affected partially by goodwill written off (Rs. 62 million) and declined by 10.4 per cent to Rs. 1,047 million for the financial year ended March 31, 2015,” it added. It said that Net asset value per share of the company increased to Rs. 39.23, compared to Rs. 36.23 at the beginning of the year (FY14), Profit to equity holders (PATMI) was down 21.1 per cent YoY to Rs. 542 million at group level. “The EBIT (earnings before interest and tax) margin experienced a marginal contraction, to 8.7 per cent in FY15 from 10.9 per cent in FY14; improved margins in the FMCG segment were offset by a contraction of margins in the Agribusiness and Healthcare sectors because of unfavourable market conditions.”
The statement said that Healthcare, which accounted for 37.2 per cent of the group’s turnover for the period, posted strong revenue growth at 10.2 per cent YoY to Rs. 6.1 billion; however, stagnation in overall market growth, according to IMS data adversely impacted the pharma segment (which accounted for 67.3 per cent of Healthcare revenue in FY15). “Despite difficult market conditions, revenue from pharma grew 9.7 per cent YoY to Rs. 4.1 billion while Surgical, Retail, Diagnostics and Wellness sub-sectors expanded 18.1 per cent, 14.9 per cent, 9.7 per cent and 3.5 per cent YoY. Partly as a result of the one-off goodwill write-down referred to in preceding paragraphs, PAT for Healthcare declined 35.8 per cent YoY to Rs. 228 million; normalized PAT (adjusting for goodwill write-off) amounted to Rs. 289 million.”
Mr. Govindasamy added that Sunshine Holding PLC is the number 2 player in the retail healthcare space. He said that despite difficult market conditions for tea and palm oil, the Agri sector posted a resilient 9.6 per cent YoY growth to Rs. 6.8 billion and contributed 41.9 per cent of total group revenue in FY15. The media statement added that Palm Oil, which recorded a PAT of Rs. 780 million for FY 15, continued to boost the Agri sector and more than compensated for losses in both tea and rubber, despite a global decline net selling average (NSA) of Palm Oil, in FY15, in line with the drop in global crude oil prices.
“Revenue in the packaging segment declined 7.9 per cent to Rs. 270 million in FY15; the lull in sales in both tea and confectionary industries took a toll. PAT was a negative Rs. 24 million for the year. There was however a turnaround in the fourth quarter of FY15; increasing export orders resulted in a PAT of Rs. 2 million in that period.”
Mr. Govindasamy added that the Sri Lankan tea industry is highly challenged by rising cost of production due to continuous increasing in wages. In addition declining yields of tea bushes which are more than 50 years of age and the challenges in finding labor are two other challenges currently faced by the tea industry in Sri Lanka.