Like many other groups, interest rates have dragged down earnings at Hemas Holdings PLC, Sri Lanka’s fastest growing conglomerate, with the company reporting a modest five percent rise in post-tax profit in the quarter ending June 2008.

The company said in a statement that although operating profits increased by 10 percent over the corresponding period to Rs 389.6 million, high interest rates continued to exert pressure on the business with finance costs increasing by 22 percent to Rs 97.8 million. Hemas recorded a turnover of Rs 3.8 billion for the end-June 2008 quarter, adding that it was a satisfactory performance in a challenging ‘economic environment’.

Post-tax profit rose modestly to Rs 293.5 million. The FMCG sector recorded a turnover of Rs 1.1 billion for the quarter, up five percent from the previous corresponding period. “The business witnessed significant cost escalation of input and operating costs and was forced to pass these on by way of price increases.

This in turn has negatively impacted volumes, not only for our business but for the industry as a whole. Baby Cheramy expanded its range by introducing the 'flowers' range during the quarter while Gold hair gel was relaunched with a new look and feel. During the quarter, Manufacturing operations were fully shifted to the new plant in Dankotuwa,” the statement from Director/CEO Husein Esufally said.

A healthy 28 percent increase in turnover in the Healthcare sector was recorded in the period under review to Rs 884.4 million, primarily driven by the increased sales in the branded generic drug category.
However profit after tax declined by 19 peecent to Rs 25.4 million, mainly on account of start-up costs of the hospitals together with higher finance costs.

The company said the leisure sector continued its lack luster performance reporting a profit after tax of Rs 4 millon although turnover increased by 36 percent to Rs 203.6 million. The Serendib Group contributed to the growth in turnover with Hotel Dolphin, Waikkal continuing to retain occupancy levels of 88 percent whilst the two properties in Bentota and Sigiriya achieved average occupancies of 32 percent.

The star performer during the quarter under review was the transportation sector which reported year on year growth of 79 percent in revenues, to Rs 247.4 million whilst profit after tax grew by 123 percent to Rs 59.9 million.