Group Strategy

On the back of an unprecedented economic crisis that deeply impacted the disparate industries that Sunshine operates in, the 2023-2024 financial year saw our nine business units meet the lingering challenges of the crisis head on in unique and varied ways and collectively emerge stronger as a Group. Though there was a marked drop in volumes as a result of the previous year’s record inflation, growth was achieved in value gains as prices increased to reflect rising costs.

Sunshine Holdings PLC stayed focused during the year under review, strengthening our presence in each industry segment and enhancing our internal processes in a concerted effort at industry consolidation.

Macroeconomic Environment

Global outlook

On the international front, ongoing conflicts and rising tensions continue to have profound implications for the world economy. However, global GDP grew by 3.1% in 2023 and is projected to rise to 3.2% in 2025, showing remarkable resilience. Headline inflation worldwide stood at 6.8% in 2023 but is expected to come down to 5.8% in 2024 and 4.4% in 2025.

Our tea export segment, and the entire Ceylon Tea industry, continued to be affected by the seemingly unrelenting war between Russia and Ukraine during much of the year under review, with the more recent conflict in the Middle East also having a demonstrable impact, leading to a notable drop in volumes. Further escalation could more adversely affect the business, making it harder to sell tea in these markets. Recognising this, we have opted to refocus our geographies to the far east, with particular emphasis on China.

Currency fluctuations also proved a challenge for our export-dependent businesses during the reporting period, Particularly for Sunshine Tea (Pvt) Limited.

Local outlook

The reporting period was more than one of healing and recuperation for Sri Lanka, with a steeply uphill but not insurmountable climb to growth and prosperity not far on the horizon. Having survived one of the toughest periods of its post-Independence history, the country’s efforts at stringent fiscal consolidation and thorough reform more than paid off during the year under review, with the economy now projected to record positive growth for the first time in a long while.

Macroeconomic stability has been largely restored by the end of the reporting period, leading to an encouraging rise in economic activity. Household incomes grew over the past few months helped by a decrease in energy costs and the trickle-down effects of higher spending both by the private sector due to credit growth and by the public sector through the redistribution of tax incomes. We anticipate further growth in purchasing power in the ongoing financial year which augurs well for our business.

Commodity prices moderated during the year under review, which helped us with our margins, which in turn helped us withstand cost increases such as the 0 to 18% spike in value added tax (VAT) that applied to most of our products, particularly in the consumer segments. Price softness in these sectors helped us absorb such cost hikes and deliver value to our customers, without passing the added expense on to them in a period that remains challenging for the vast majority, positive indicators notwithstanding.

During the year under review, Sunshine Holdings PLC focused on consolidating its existing strengths, particularly in the healthcare and consumer segments, rather than diverting resources to further diversification.

With regard to our environmental performance, there is some room for improvement, though we have certainly made considerable progress in minimising the impact of our palm oil and dairy businesses, as the Agribusiness chapter will show in detail. We are currently engaged in measures to monitor our greenhouse gas emissions so that we may formulate better strategies to reduce our carbon footprint.

Governance is an area in which we continued to shine during the reporting period. The Group meets all Securities Exchange Commission (SEC) requirements for listed companies and we have gone above and beyond in establishing stringent governance practices throughout our operation. The commitment to independence at the Board-level is replicated in our individual business units, which is not strictly a statutory requirement considering they operate as private companies.

OUR BUSINESS MODEL

Strategy

The Sunshine group’s strategy is built on four pivotal elements: innovation, focus, synergy, and sustainability. These strategic enablers are driven by six distinct parenting functions, serving as a centralised framework to create maximum value across our nine individual business units through everyday operations and an overarching holding strategy, within which the six parenting functions operate.

Strategic enablers

Focus	Synergy	Sustainability
In the wake of the crisis, the Group took a strategic call to focus more on its existing strengths over a more diversity-oriented approach. With increased focus on deeper market penetration in the sectors we are already strong in, the Group now, going into the current financial year, concentrates on growing and consolidating through product differentiation, capacity building and innovation.	Leveraging the strengths and potential of each of our core segments to capitalise on opportunities and mitigate risks has been at the heart of our success over the decades. Synergies occur both within each segment, through the alignment and cohesion of the various operations, and at the group level through effective coordination, resource allocation, and oversight. The synergies of Sunshine’s three segments come at the Group centre primarily in the form of cost synergies, governance, IT, human resources and the like, all of which are centralised.	Sunshine places great emphasis on sustainability throughout our operation cycle across each segment and is a value that’s deeply entrenched in the very fabric of the Group’s ethos. Serving the interests of all stakeholder groups is of paramount importance to us and our commitment to delivering value to each segment including the environment and society at large is at the foundation of our corporate philosophy.

Group Parenting Functions

Governance	Risk Management	Finance	Human Resources	Information Technology	Sustainability
Governance takes the form of independent boards, an Audit Committee, an Investment Committee, Remuneration Committee and Risk Committee, all of which come under the central Sunshine Holdings Board of Directors which appoints the boards of each respective company. High calibre Independent Directors of the Holding board also sit on the subsidiary boards.	Risk assessment is done centrally at the Group level for all business segments. A risk management system developed with the consultation of the Audit Committee and Risk Review Committee is also implemented across the Group. Headline risks including political/regulatory risks, external risks, strategic risks and business risks are all assessed and managed by this committee.	Finance’s parenting function in our group is crucial for establishing financial policies, resource allocation, risk management, and performance evaluation. It ensures consistency, transparency, and optimal utilisation of financial resources across subsidiaries, fostering growth and strategic alignment. By effectively fulfilling these roles, our finance function supports the Group’s financial stability, accountability, and overall success.	The Group runs a centralised HR operation as it was decided early on to achieve cost synergies by using centralised talent. A majority of functions that are universally applicable to all strategic business units are centrally controlled, with individual HR units also overseeing human capital related matters at the business unit level.	The Group’s information infrastructure is primarily cloud-based, across each business unit, including Enterprise Resource Planning (ERP) systems. All businesses utilise data and analytics resources in a shared service model that is run centrally for cost sharing purposes.	Sunshine’s sustainability strategy is implemented at the segment level rather than at the Group level as centralising sustainability is difficult for a conglomerate that engages in vastly different businesses.