Hemas to exit from crisis-hit Myanmar

Sri Lanka’s Hemas Holdings Group is exiting from its operations in Myanmar which has been gripped by political unrest under a military-led regime for nearly a year, the group announced on Wednesday.

“Due to the challenges in the operating environment in Myanmar, we have entered into a sale and purchase agreement with our joint venture partner to sell HHL’s stake in Myanmar. As a result, we will be exiting the operations in Myanmar, effectively from the fourth quarter onwards,” Kasturi C. Wilson, Group Chief Executive Officer, revealed in her review of the group’s 9-month results on Wednesday.

She said Hemas Holdings PLC (HHL) delivered a strong and a resilient first nine months (to December 2021) amidst a challenging operating environment.

The cumulative group revenue stood at Rs.57.7 billion, an increase of 20.5 per cent over last year. The underlying cumulative operating profit of Rs.4.9 billion, excluding all disposed entities, reported an increase of 4.3 per cent over last year in spite of profitability pressure experienced across most parts of the business due to input cost inflation and challenges around foreign exchange liquidity. Underlying group earnings excluding dividend tax stood at Rs. 3.3 billion, an increase of 7.2 per cent over last year.

During the October-December quarter, group revenue grew by 21.9 per cent over last year. The group underlying operating profit and earnings of Rs.2.3 billion and Rs. 1.3 billion saw a year-on-year increase of 5.7 per cent and 2.4 per cent respectively. The group’s Healthcare businesses, in particular, contributed to the improved performance.

Her review said that the group divested its interest in Spectra Logistics for a total consideration of Rs.1.3 billion in October 2021 and the gain realised in the sale amounted to Rs.295.3 million.

Consumer Brands

The pandemic coupled with the macroeconomic headwinds continued to influence consumer behaviour, sales mix and market channel dynamics. “As we experienced lower infection rates, the quarter under review was a near ‘normal’ quarter with minimal disruptions to trade and operations. With the rising inflationary pressure, basket value was skewed towards food and essentials, impacting shopper patterns for non-essential items. The quarter continued to witness escalation in commodity prices by over 50 per cent against last year. Global supply chain disruptions coupled with import restrictions in Sri Lanka underpinned by forex liquidity challenges exerted pressure on profitability margins,” according to the review.

The Consumer Brands sector recorded a cumulative revenue of Rs.22.5 billion, a growth of 17 per cent over last year. However, sector cumulative earnings of Rs.1.6 billion witnessed a year-on-year decline of 14.8 per cent due to profitability pressure as stated above.

Home and Personal Care (HPC)

HPC Sri Lanka delivered a steady volume-led growth across both modern and general trade channels compared to last year. Similarly, the recent launches and relaunches have been gaining good traction. Cumulative revenue from new launches stood at 16.1 per cent over 13.5 per cent recorded last year.

Sector profitability continues to be impacted due to steep increases in raw material cost along with cost impact due to foreign exchange liquidity pressures. In an ongoing effort to reduce the burden to consumer from the inflationary impact, we have adopted multiple strategies whilst continuing to prudently manage cost to recover margins.

Healthcare

Market demand for healthcare services and medicines experienced a sudden surge with the COVID-19 cases escalating. More outpatient visits were registered as restrictions on mobility eased across the island. Medical tourism witnessed improved performance with borders opening up and more patients opting for elective surgeries. Further, acceleration of digital adoption across the healthcare sector saw an increase in demand for digital healthcare platforms.

The sector reported a cumulative revenue of Rs.33.7 billion, a growth of 23.7 per cent over last year whilst sector profit of Rs.2.7 billion was a 21.2 per cent growth over last year.

Pharmaceuticals

Pharmaceutical businesses delivered a stable revenue growth year to date. Price controls on medicine coupled with scarcity in foreign exchange reserves have hampered medicine imports into the country. This has led to medicine supply shortages within the industry whilst adding to profitability pressure. 

“Whilst we urge the government to lay out a strategy for equitable allocation of buy back on local manufacturers, we are looking at opportunities to accelerate contract manufacturing, exports and other alternative opportunities to de-risk Morison from the volatility of the buyback agreements,” the review said.

Hospitals

Hospitals witnessed an average increase in admission volumes by 10.6 per cent over last year for the first nine months.

The third quarter of the year saw robust growth as the focus on non-COVID-19 patients was increased, especially Non Communicable Diseases (NCDs), which pose a substantial risk to the health of the people. Further, an outbreak of dengue was another contributor to the increased admissions during the quarter.

“Against a challenging operating environment, I am encouraged by the progress we have made in the first nine months into the year. In the near-term, the operating environment will continue to remain challenging. In this scenario, we will manage our business with agility, and continue to grow our footprint whilst maintaining our focus in managing margins. We remain confident of the medium to long term potential of the Consumer and Healthcare sector in Sri Lanka and Hemas’ ability to deliver a consistent growth. Further, we continue to invest in uplifting digital capability within the organisation,” Ms Wilson said.