Financial Times

Hemas holding strong against interest rates, lower rupee

Hemas Holdings said this week that prevailing high interest rates still poses challenges together with the implications of the depreciating rupee.“We have, however, set in place a process to identify and mitigate our risks in this scenario and are confident that we would maintain our growth momentum in line with our strategic objectives,” Husein Esufally, Director/CEO said in his company review for the quarter to September 2008.

Turnover for the quarter was Rs 4.2 billion, reflecting a year on year growth of 17%. Turnover for the first six months of the year reached Rs 8.0 billion, an increase of 18% over the previous year. Operating margins for the first half of the year, however, declined by 2% to Rs 658.6 million compared to the corresponding period, the CEO’s report said.

Planned maintenance costs in the power sector as well as a 29% increase in administrative costs werecontributory factors. As expected, finance cost increased 28% to Rs 211.7 million during the half year due to prevailing high interest rates on loan capital obtained for our Hospital and factory relocation projects, resulting in profit before tax for the six months falling 12% to Rs 454.7 million, the report said.
On the positive side, tax efficiencies resulted in post tax profit decreasing by only 8% to Rs 372.4 million for the six month period.

The FMCG sector saw operating profits increase by 17% to Rs 282.8 million due to price adjustments as well as business efficiencies. Significantly, the sector grew sales volume during a period which saw declines in consumer consumption as a result of pressure on household spending, the report said.
It said Hemas Marketing achieved the distinction of being the second largest company in Sri Lanka in terms of distribution reach as per AC Neilson report on the Sri Lankan FMCG market released in September 2008 which augurs well for sector growth.

The transportation sector continued its good performance reporting a turnover of Rs 364.9 million for the half year, a growth of 25% in comparison to the corresponding period the previous year. “The second half of the year will pose a number of challenges as we gear ourselves to meet the implications of the global financial crisis. With major economies expected to go into recession we are mindful that productivity and efficiency are key to maintaining market share as disposable incomes contract,” Mr Esufally said.

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