Second round of drug price controls “challenging”, says Sunshine Holdings

While Sunshine Holdings expect strong growth in the healthcare sector, revenue over the next six months is challenging owing to the second round of drug price control which came into effect on September 1, said the company announcing its results for the six months ending September 2018.

It said the depreciation of the Sri Lankan rupee against the US dollar continued to impact the margins of the entire industry.

The group has reported top-line performance growth of 5.7 per cent YoY to Rs. 10.9 billion for the six months period.

This increase was mainly due to strong performances in the consumer and healthcare sectors and despite a contraction within the agribusiness sector.

However post-tax profit (PAT) for the period in review declined by 30 per cent to Rs. 804 million and profit margins have also reduced to 7.4 per cent compared to last year’s (1HFY18) 11.1 per cent, mainly due to lower profitability in the agribusiness sector and holding company’s higher finance cost.

The group’s healthcare business emerged as the largest contributor to Sunshine’s top-line performance, accounting for 40 per cent of total revenue, while agribusiness and consumer goods sectors of the group contributed 32 per cent and 25 per cent respectively of the total revenue.

“Our continuous focus on improving quality and internal efficiency through well-placed strategies has yielded strong results for the group, transforming another quarter into a successful one,” said Vish Govindasamy, Group Managing Director of Sunshine Holdings PLC. “Throughout the period, key business sectors of the group have faced notable challenges but however we are pleased to note that the Sunshine Group continues to display a resilient and entrepreneurial spirit in the face of such difficulties.”

In total, the group’s healthcare segment grew by 11.5 per cent YoY, generating Rs. 4.4 billion in turnover during 1HFY19. The growth was witnessed on the back of volume increase in the pharma sub- sector and footfall growth in retail. Revenue for the current period was negatively impacted by the second round of drug price control which came into effect in September 2018.

The overall operation of the dairy segment of Sunshine Holdings is steadily growing to the target of 1,000 milking cows. The total milking cows have reached 991 and the total number of animals has increased to 1,536. However, Mr. Govindasamy noted that the interim cost of feeding the whole herd would have a negative impact on the group’s agri profitability.