Hemas’ focus on core Ssectors continues to deliver sustained growth

Hemas Holdings PLC delivered a commendable performance in the first nine months of the financial year 2023. Notwithstanding the volatile economic conditions, the Group posted a cumulative revenue of Rs. 81.7 billion, a 41.6 per cent growth over last year. Despite the 51.5 per cent growth in Group operating profits, reported earnings for the period remained flat at Rs. 3.2 billion amidst the escalating interest rates.

Sri Lanka struggled to maintain economic stability amidst lingering concerns regarding soaring inflation, delays in entering into a comprehensive IMF programme and limited foreign exchange reserves. Inflation as per the National Consumer Price Index (NCPI) hit a record high in September 2022, which subsequently decreased to 59.2 per cent in December. The domino effect of multiple tax reforms is to be realised in the months to come. Even though challenges surrounding the disruptions to power supply, and lack of essentials were present, the operating conditions saw relative improvements in comparison to the preceding quarter.

While the prolonged effects of the economic crisis continued to impact the operating dynamics and the consumption habits, the Group posted a revenue of Rs. 29.8 billion for the quarter, a growth of 38.2 per cent over same period last year. Increased resilience in the backdrop of successive crises coupled with future focused business strategies on optimising working capital, internationalisation and customer centricity resulted in a stronger recovery in business activities. The positive momentum of declining global commodity prices and improved exchange availability was not reflected in the earnings due to inflationary pressure and elevated borrowing costs.

Consumer Brands

Consumers remained cautious on their purchase decisions on the back of multiple tax reforms and inflationary pressure leading to volume contractions across the industry. With the reduction in key global commodity prices, the domestic market witnessed a decline in prices for multiple personal care products. Increased availability of fuel resulted in distribution efficiencies and significant improvement in footfall to the stores.

Stationery market witnessed increased competition with almost all market participants being active under improved operating conditions. Value for money products gained traction under increasing pressure on disposable income with non-essential items recording higher volume reductions. Towards the latter part of the quarter, multiple donor-led support programmes were introduced to the system by various parties including corporates, non-profit organisations and individuals as an effort to ease the burden to the customers.

Bangladesh economy was adversely impacted by the soaring inflation, depreciating currency, energy shortage, slowdown of the recovery from the pandemic, the war in Ukraine and poor economic conditions in key export markets. However, the country is expected to benefit from the IMF programme which was signed in January 2023 with a view of preserving macroeconomic stability.

Consumer Sector reported a 44.3 per cent growth in cumulative revenue to reach Rs. 32.5 billion for the first nine months of the year. Increased focus on the International and exports segments, notably on personal care and learning verticals positively contributed to the revenue growth. Despite the growth in operating profit, the dual impact of increase in interest rates and the widened working capital base restricted the earnings to Rs 1.9 billion as against Rs. 1.6 billion reported last year.

The Sector reported a revenue of Rs. 13.6 billion for the quarter, supported by the improved performance of both the Home and Personal Care and Learning Segments. Prudent efforts to identify challenges and implement appropriate pricing and cost management strategies along with dynamic supply chain solutions allowed the Sector to achieve an operating profit of Rs 1.8 billion during the quarter.

Home and Personal Care

Volume contraction witnessed in the preceding periods continued to the quarter under discussion with key categories experiencing challenges amidst the deteriorating purchasing power. Considering the rising inflationary pressure on consumers, the business took a decision to pass down the benefit of declining global commodity prices in the form of price reductions and discounts. Moreover, value for money pipeline was further strengthened with additions to the ‘Velvet cutie’ and ‘Baby Cheramy’ value packs. Our efforts in tackling period poverty were further supported by the Government’s decision to remove taxes on feminine hygiene products resulting in a growth in volumes for the sub sector. The quarter witnessed an 8.6 per cent contribution to revenue from new product launches supported by the increased traction for key brands including ‘Baby Cheramy’, ‘Diva’, ‘Fems’ and ‘Vivya’.

With an aim of uplifting safety standards and innovating best quality baby care products, ‘Baby Cheramy Safety Institute’, the first of its kind development facility in Sri Lanka was launched during the quarter. In line with the strategic drive to explore adjacent spaces, Hemas ventured into the food industry with the recent launch of ‘Tasty Country Flakers’, a wholesome cereal made with natural ingredients. The product was successfully introduced to the market via multiple trading platforms as a healthier alternative to breakfast cereals.

Learning

Reinforcing its strength and stability, the Learning arm of the business continued to maintain its market leading position with improvements to market share in all key categories. Building up to the back-to-school season that is expected in the fourth quarter, increased demand was witnessed for stationery products in the month of December. ‘Atlas Learn’ platform which was launched in the previous quarter as an enabler for curriculum development and lesson planning has gained traction with increased active user engagement.

In recognition of our commitment to purpose and innovation, Atlas was honoured with the Local Brand of the Year (Gold) and the CSR Brand of the Year (Bronze) accolades at the SLIM Brand Excellence Awards.

Consumer Brands International

During the quarter, revenue from new launches resulted in a 24.0 per cent contribution to the total Home and Personal Care International revenue against the 16.9 per cent recorded for the same period last year. In response to the economic pressure, ‘Actisef’ launched the mini variant at an affordable price point to provide the customers with much needed choice amidst reducing disposable income levels.

Aligning to our long-term commitment to drive internationalisation and export footprint, the Consumer Brands International Segment witnessed a double-digit growth in cumulative revenue due to increased focus on personal care and stationery products in regional markets, mainly in Bangladesh, Pakistan and Maldives.