Earnings release - SUN

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Earnings release - SUN

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SUN Revenue up 14% to LKR12.2bn; PAT of LKR840m for 9MFY15, up 8%

9MFY15 Highlights

 Consolidated revenue of LKR12.2bn, an increase of 14.1% YoY;

 Normalized PAT at LKR902m, before LKR62m Goodwill write-off in Healthcare

 Reported PAT amounted to LKR840m, up 8.3% YoY, EPS of LKR3.05, down 4.8% YoY

 Healthcare grew 11.4% despite stagnant pharma market

 Agri revenue grew at 16.6% YoY, due to strong 1Q but a challenging 2Q and 3Q

 FMCG revenue up 18.0%, Strong 3Q drives profitability

3QFY15 Highlights

 Consolidated revenue of LKR4.1bn, an increase of 8.8% YoY;

 PAT amounted to LKR289m, down 30.3% YoY, due to Agri results & Goodwill write-off

 Healthcare growth strong in challenging market conditions to post LKR1.6bn revenue

 Despite increase in Palm oil profits, Agri Profits down 21.7% YoY to LKR147m

 Strong growth in FMCG, revenue up 21.5% to LKR788m

Colombo, February 02, 2015– Sunshine Holdings PLC (CSE: SUN) reported PAT of LKR840m for the nine months ended 31 December 2014 (9MFY15), up 8.3% YoY on a consolidated top line of LKR12.2bn, up 14.1% YoY.

LKRm 9M 9M Growth 3Q 3Q Growth

FY15 FY14 % FY15 FY14 %

Revenue 12,221 10,714 14.1 4,072 3,743 8.8 EBIT 1,271 1,123 13.2 493 546 (9.6) EBIT Margin 10.4% 10.5% 12.1% 14.6% PAT 840 776 8.3 289 415 (30.3) Normalized PAT* 902 776 16.2 351 415 (15.4) PAT Margin 6.9% 7.2% 7.1% 11.1% Profit Attributable to Equity owners 408 429 (4.8) 104 187 (44.6) EPS (LKR) 3.05 3.20 (4.8) 0.77 1.40 (44.6)

*Excluding Goodwill written-off in the Healthcare business amounting to LKR62m

EBIT margin of 10.4% for 9MFY15 slightly contracted from 10.5% in 9MFY14. The growth in revenue is mostly attributed to the Agri sector, while Healthcare and FMCG also contributed to the top-line growth. The increase in EBIT is attributed to better performance in Agri, specifically Palm Oil, and FMCG.

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For 9MFY15, PAT amounting to LKR840m grew 8.3% YoY, but Profit to equity holders (PATMI) was down 4.8% YoY to LKR408m. Majority of the growth in PAT is on account of the strong performance of the Agri sector which has a limited impact at the PATMI level. Healthcare still remains the largest contributor to PATMI in 9MFY15 with LKR174m, which represents 42.7% of total PATMI.

Goodwill written off amounting to LKR62m also impacted PAT for 9MFY15. Normalized group PAT amounted to LKR902m, up 16.2% against the same period last year.

Net Asset Value per share increased to LKR38.35 as at end 9MFY15, compared to LKR36.23 at the beginning of the year (FY14).

Business segments

Healthcare

FY15 FY14 % FY15 FY14 %

Revenue 4,495 4,036 11.4 1,575 1,333 18.2 EBIT 350 351 (0.2) 121 128 (5.3) EBIT Margin 7.8% 8.7% 7.7% 9.6% PAT 174 242 (27.9) 20 90 (77.6) Normalized PAT* 236 242 (2.5) 82 90 (8.9) PAT Margin 3.9% 6.0% 1.3% 6.7%

*Excluding Goodwill written-off in the Healthcare business amounting to LKR62m

Healthcare, 20.8% Agri, 48.6% FMCG, 30.3% Other, 0.3%

PAT-9M FY15

LKR 840m Healthcare, 42.7% Agri, 25.1% FMCG, 20.7% Other, 11.5%

PATMI-9M FY15

LKR 408m

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Healthcare revenue for 9MFY15 grew 11.4% YoY and stood at LKR4.5bn. This represents 36.8% of Group turnover for the period. 3QFY15 was a challenging for the healthcare business with EBIT contracting 5.3% YoY.

The Pharma sub segment which made LKR3.0bn in revenues (67.3% of Healthcare revenue) grew 9.5% YoY over 9MFY14. This was a commendable performance against flat market growth based on IMS data. Growth in other sub sectors were at; Surgical (+19.1% YoY), Retail (+16.4% YoY), Diagnostics (+9.7% YoY), OTC (+1.5% YoY).

PAT for Healthcare amounted to LKR174m in 9MFY15, down 27.9% YoY. Normalized PAT amounted to LKR236m after adjusting for the one off Goodwill write-off. PAT margin

contracted to 5.2% in 9MFY15, against 6.0% in 9MFY14, due to GP margin erosion and Goodwill write-off. However the company has somewhat watered down the impact by tighter control on overhead cost which grew only 6.9% YoY.

FMCG

FY15 FY14 % FY15 FY14 %

Revenue 2,105 1,784 18.0 788 649 21.5

EBIT 290 273 6.0 147 109 34.3

EBIT Margin 13.8% 15.3% 18.6% 16.9%

PAT 254 226 12.5 131 93 41.0

PAT Margin 12.1% 12.7% 16.7% 14.4%

The FMCG sector reported revenues of LKR2.1bn in 9MFY15, up 18.0% YoY, on the back of both volume and price growth. The sector accounts for 17.2% of group revenue for the period. The branded tea business within FMCG sold 2.3m kgs of branded tea, up 9.2% YoY, primarily driven by their largest brand “Watawala Tea”– which is the number one selling brand in Sri Lanka. PAT from the FMCG segment grew 12.4% YoY, despite challenging 1Q, to stand at LKR254m in 9MFY15, with margin of 12.4% in 9MFY15, compared to 12.7 % in the same period last year. The dip in profitability is due to a challenging 1QFY15. 3Q PAT margin was at 16.7%, 230 BPS higher against the same period last year.

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Agri business

FY15 FY14 % FY15 FY14 %

Revenue 5,280 4,529 16.6 1,601 1,651 (3.0)

EBIT 577 433 33.4 213 272 (21.7)

EBIT Margin 10.9% 9.6% 13.3% 16.5%

PAT 409 311 31.6 147 212 (30.9)

PAT Margin 7.7% 6.9% 9.2% 12.8%

The Agri sector with revenues of LKR5.3bn in 9MFY15, up 16.6% YoY, contributed 41.6% of the total group revenue. Management attributes the strong topline growth mainly to its tea segment which saw higher volumes (+9.1% YoY) aided by favorable weather in 1QFY15, and increased quantities of bought crop. Palm Oil volumes (+6.3% YoY) continued to grow steadily during 9MFY15.

Revenue (LKRm) Volumes (MT)

Description 9M 9M Growth 9M 9M Growth

FY15 FY14 % FY15 FY14 %

Palm oil 1,226 1,124 9.1 6,935 6,521 6.3

Tea 3,584 2,928 22.4 7,940 7,280 9.1

PAT for 9MFY15 amounted to LKR409m, against LKR311m in the same period last year. The growth is mainly attributed to the strong performance in Palm Oil with Tea making a loss of (LKR210m). PAT for 3QFY15 just amounting to LKR143m, down 30.9% YoY. Both 2Q and 3Q was challenging for the Agri sector, specifically for Tea, which was adversely affected by inclement weather resulting in volume contraction, and a dip in selling price.

Nevertheless, the Palm Oil segment which made LKR593m PAT for 9MFY15, continued to be the largest contributor to WATA profits and managed to cover the losses in both Tea and Rubber.

Other

Packaging revenues amounted to LKR186m, down 11.5% YoY in 9MFY15, against LKR210 in the same period last year. The current year has been challenging for the packaging division with lull sales to both the Tea and confectionary industry. PAT was negative for the Packaging business at (LKR19m) due to low capacity utilization at the plant.

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Revenue for the Renewable energy division amounted to LKR88m in 9MFY15, almost flat from the same period last year. Low rainfall during 1Q, and also 5 day loss of revenue due to CEB grid failure in 2Q was fully offset by higher rainfall in 3Q. As a result, the mini-hydro plant, which is in its second year of operation made PAT of LKR20m, up from LKR5m in the last year.

Outlook

For 4QFY15, we expect revenue growth to be largely driven by our core business segments. Our Healthcare segment will focus on aggressively growing its Wellness brands business, and to increase the retail footprint of Healthguard. The group also expects more traction from the new products which were introduced during FY14. We are mindful of the contraction in margins due to pressure from its business partners and we continuously look out for new molecules in profitable therapeutic classes.

In FMCG, we are bullish on our converter brand “Ran Tea”, priced to win over consumers who currently buy non-branded tea. If tea prices were to drop, we expect this to translate into better margins for the FMCG segment.

For the Agri sector, we expect the Palm Oil segment to continue its strong performance for 4QFY15. We expect CPO prices to be challenged during the next quarter, given the global dip in CPO prices.

We are also mindful of the demand side issues with buying at the auctions slowing down due to issues in key Ceylon tea markets in CIS and the Middle East.

For the 2 new mini-hydro plants that we have signed PPA agreements with the CEB, the company expect construction to commence in 4QFY15.

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ABOUT SUNSHINE HOLDINGS

Sunshine Holdings Plc is a diversified holdings company, with interests in Healthcare, Agribusiness, FMCG, and Renewable Energy. The group's key portfolio comprises mature Healthcare products in Pharmaceutical, Surgical, and Diagnostics & Wellness supported by a dynamic proprietary distribution infrastructure with an island-wide reach, along

with plantation infrastructure across Palm Oil, Tea, and Rubber. Sunshine Holdings’ fast growing FMCG Company is one of the largest branded tea company in Sri Lanka.

The group, which has over 12,000 employees and has generated over US$100m in revenue, is consistently ranked among the LMD top 50 companies in Sri Lanka.

Contact:

Ara Pararajasingham

Head of Strategy, Sunshine Holdings PLC +94 11 4702429

[email protected] Hiran Samarasinghe

Business Analyst, Sunshine Holdings PLC +94 11 4702455