Hemas sustains Q1 revenue amid market volatility
The Group recorded revenue of Rs. 28.77 Bn in Q1 FY27, an increase of 0.9% YoY, while gross profit margin improved by 0.2 percentage points to 30.4%. However, EBITDA declined by 14.1% to Rs. 2.26 Bn and Group earnings attributable to equity holders declined by 21.4% to Rs. 937 Mn. Revenue growth in Consumer Brands, […]
Hemas reported a Q1 FY27 revenue of Rs. 28.77 Bn, marking a slight 0.9% year-over-year increase. However, gross profit margin rose by 0.2 percentage points to 30.4%. EBITDA saw a 14.1% decline to Rs. 2.26 Bn, and net earnings attributable to equity holders fell by 21.4% to Rs. 937 Mn. The revenue growth in Consumer Brands, Hospitals, and Mobility was countered by a 3.8% drop in Life Sciences.
The key drivers were escalated costs and time lag in recovering these costs through pricing. The quarter was marked by geopolitical instability due to the Middle East conflict, leading to significant hikes in fuel, petroleum raw materials, freight, and insurance costs. In Sri Lanka, petrol and diesel prices surged over 40% YoY, while the LKR depreciated by an average of 8% YoY and 5% QoQ.
Inflation averaged 5.9%, peaking at 6.8% in June, which dampened consumption growth and heightened operating costs. Net operating costs surged by 9% YoY, with selling and distribution costs accounting for more than half of the rise, mainly due to increased logistics, fuel, freight, and distribution expenses. In certain Consumer Brands segments, selective price hikes were implemented to preserve volumes despite temporary cost pressures, causing Hemas to absorb part of these increases this quarter.
In Life Sciences, the effect was more significant as pharmaceutical prices are regulated, and price adjustments weren't immediate due to LKR depreciation and higher import costs. Consequently, these cost increases were absorbed until regulatory approvals were granted. Finance costs at the Leisure JV also rose due to LKR depreciation on its USD borrowings, further denting Group earnings.
However, these challenges were somewhat eased by robust earnings growth in Mobility and higher finance income from the Group's net cash position. Despite ongoing supply continuity, the costs were higher. Management's primary focus is now to restore cost recovery, maintain volumes through measured pricing, expedite productivity initiatives, and boost profitability in Consumer Brands and Life Sciences.
Although energy and currency volatility are anticipated to continue, Hemas remains committed to enhancing performance while adhering to its long-term growth objectives with caution.
Written by urgent.news from The Island Sri Lanka's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
