Hemas Holding PLC (Hemas) recorded a 24.5% net profit growth to Rs 247 million in the third quarter of this year (3Q2009) and this momentum is expected to continue in the next quarter since their Fast Moving Consumer Goods (FMCG), healthcare, leisure and power sectors has showed a sustainable improvement, according to analysts.
“Some strategic measures (in the immediate future) could bring enhanced earnings which in turn could drive up group profits. Increased economic developments in the country would enhance Hemas’ profitability as it represents a wide range of product and service mix to deliver shareholder value in the coming last quarter,” Charitha Kamaladasa, Research Analyst Lanka Securities said.
He said that since the company has already exploited the new market opportunities in the North and the East (N&E) they are well placed to enjoy the enhanced sales and growth opportunities in these regions. “Having boosted its distribution reach extensively in the country, Hemas is well placed to deliver its best products to the customer with an efficient distribution channel network and further to take advantage of the enhanced demand in the N&E market,” he said.
The market leadership enjoyed by several products will strengthen groups FMCG performance as it's bound to create more awareness and attract more customers to the group’s product portfolio,” he added. Hemas’ CEO Hussein Esufally in his quarterly review has said that FMCG revenues in the company grew 14.2% to Rs 4 billion and profits grew by 29.6% to close at Rs 474 million. “Industry growth remained flat over 2009 with rural demand helping to offset lower demand in the urban sector,” he has said.
The healthcare sector, represented by pharmaceuticals distribution and hospitals, posted a turnover for the nine months of Rs 3.7 billion which is a growth of 34.6% and profits of Rs 89 million, reflecting a 21.8%. “Progress at both Wattala and Galle hospitals has been quite satisfactory with customer franchise on an increasing trend. With the improving macroeconomic outlook we will be looking to expand our healthcare model to new sites in the country,” Mr. Esufally has said.
Some analysts said that the strong competition in the healthcare sector will provide a stiff challenge to Hemas in the coming months as healthcare is considered a sensitive area to the customers and will need more strategic measures, specially confidence building among the customers.
Nikitha Tissera, Head of Research Sampath Securities said that improving economic conditions will definitely help with the finance costs in such a capital intensive operation. “Again the benefits are spread over a longer time period,” he added.
Jaliya Wijeratne, Director SMB Securities said that the increasing purchasing power that is coupled with the low inflation will increase the demand for personal care products. "Apart from that, the enhancing demand from the North and East of the country as a result of better market access will also contribute to achieve a increased revenue. The several initiatives that have been launched by the company to improve productivity and achieve cost advantage in the FMCG sector will play a vital role.
The company's flagship personal care brands will assist to become the market leader in North and East while maintaining its market share in the other parts of the country," he said. He said that presently Hemas represents 16.5% of market share in the Pharmaceutical distribution industry which will put them in a better footing.
"The higher capacity utilization of the two hospitals; Wattala and Galle can be achieved since the location of the hospitals, which are out of the Colombo city, presents the ability of meeting customer demand that is not met by the other leading hospitals. The favourable situation in the North and East parts of the country brings new healthcare business opportunities in those areas as well," he said, adding that the adequate internally generated funds in the company as well as the ability to borrow at a low rate (current Debt/Equity ratio 25%) will make the funding for new projects easier. |
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