Group Financial
Performance and Outlook

Navigating complexity, delivering stability

Having sufficiently recovered from one of the most profoundly turbulent periods in the country’s economic history, Sri Lanka took substantive measures in 2024 to build on the initial success of its post-crisis growth agenda. However, even as lingering volatility gave way to further macroeconomic stabilisation, the financial year 2024/25 saw businesses across industries adjust further to shifting fiscal policies, exchange rate fluctuations and changing consumer dynamics. Against this backdrop, Sunshine Holdings PLC delivered a strong financial performance during the year under review, one driven by a smarter approach to capital allocation, operational adaptability and long-term strategic focus.

Broadly in line with the previous year, Group revenue for 2024/25 stood at approximately Rs. 59 Bn., which represented year-on-year growth of 7%, while Profit After Tax (PAT) remained steady at Rs. 6 Bn. Though topline growth proved modest, Sunshine’s earnings base remained strong during the reporting period supported by disciplined cost management and improved operating margins. Gross profit margin is steady year-on-year to approximately 30%, supported by improved performance in Healthcare and productivity gains in Agribusiness. The Group also maintained a healthy Return on Invested Capital (ROIC) of around 25% during the fiscal year, due in large part to a strong emphasis on capital efficiency and value-focused growth.

The year 2024/25 was notable for a number of structural and strategic milestones that have already proved significant. Chief among these was the adoption of a shared services operating model that sought to provide centralised Treasury, Taxation, IT and HR support to all subsidiaries. This strategic shift was envisioned with the aim of enabling cost rationalisation, more stringent governance and closer inter-business alignment. The Group also completed a share subdivision for the Company and its subsidiary, Watawala Plantations, both listed entities, in a bid to improve market liquidity and broaden investor participation. These initiatives are all part of Sunshine’s ongoing evolution into a leaner, more integrated and future-ready enterprise that seeks to dominate the industries in which the Group operates.

In a concerted effort to realise the Group’s long-held ESG ambitions, Sunshine in 2024/25 took meaningful, tangible measures to embed sustainability into its operations and financial DNA, which will drive the initiatives in subsequent years. The Group also sought the services of Deloitte to map its ESG reporting landscape during the year under review, identifying any gaps. This has laid the groundwork for a more structured and auditable sustainability roadmap, further cementing Sunshine’s long-term commitment to responsible growth.

A USD 10 Mn. equity infusion by the International Finance Corporation (IFC) into the Healthcare vertical marked a highly valued vote of confidence in Sunshine’s growth trajectory.

Segment-level performance

Healthcare

The Healthcare business continued to be the Group’s largest contributor in 2024/25, accounting for approximately 55% of revenue. Double-digit topline growth during the reporting period was driven by improved delivery against government contracts a strong manufacturing and distribution performance. The Healthcare vertical also saw increased internal capacity utilisation and better price discipline in 2024/25.

Consumer Goods

Contributing nearly 32% of revenue, the Consumer Goods business experienced some margin compression in 2024/25. Inflationary cost structures from the year prior, the imposition of VAT on branded tea, and constrained pass-through ability led to thinner margins, particularly in the confectionery sub-segments. However, export revenues held steady throughout the reporting period, while margin improvements were observed in some product lines. Sunshine continued to absorb VAT in its branded tea segment to protect demand and maintain volume momentum.

Agribusiness

Comprising some 13% of Group revenue, Agribusiness posted a subdued performance in topline terms during the year under review. While revenue was flat, net profits were significantly affected by the lapse of a five-year corporate income tax exemption on agriculture farming. The palm oil business benefited from productivity improvements including gang harvesting techniques during the latter part of the year, while the dairy segment recorded a valuation loss in livestock due to price and yield. .

Taxation and compliance

The year under review was marked by a structural shift in Sri Lanka’s fiscal landscape, with consolidated corporate tax expense increasing by 49% year-on-year to Rs. 3 Bn.

The expiration of income tax exemptions in the agriculture farming segment – particularly in palm oil – saw the standard rate of a 30% corporate tax, resulting in a year-on-year PAT impact of over Rs. 700 Mn. Meanwhile, the phase-out of VAT suspension for exporters, which is expected to take full effect in 2025/26, will have short-term implications for cash flow cycles, though VAT refund mechanisms are expected to stabilise over time.

External operating environment

Continued stabilisation in the macroeconomic climate proved both advantageous and detrimental for the Group. A stronger rupee benefited the import-heavy Healthcare sector while compressing margins in tea exports.

Interest rates continued to fall during the reporting period, reflected in lower borrowing costs, with the policy rate expected to be stable in the new financial year. This has created a favourable lending climate, allowing the Group to pursue selective leverage. Current gearing stands at a conservative 20–24%, well below the internal threshold of 40%, with plans underway to increase external financing to better optimise capital costs.

Strategic investments and ESG alignment

As mentioned earlier in this chapter, notable investments during the year included the IFC’s USD 11 Mn. equity infusion into the Healthcare vertical, earmarked for capacity expansion in retail, manufacturing, and diagnostics. At the Group level, Sunshine began operationalising a new ESG roadmap in 2024/25, with Deloitte engaged to assess material gaps in data capture and reporting in the new financial year.

Operating model transformation

The reporting period also saw a transformation in the Holding company’s operating model. Sunshine Holdings PLC transitioned into a shared services centre for Group companies, centralising Treasury, Taxation, IT and HR functions. The change necessitated a reclassification of income sources, with intercompany service charges now reflected in the holding company’s revenue structure.

The Group also executed a subdivision of shares across two listed entities to enhance market liquidity, reflecting its ongoing commitment to shareholder value.

Looking ahead, the Group remains cautiously optimistic. With declining interest rates, a stable exchange rate and improving consumer sentiment, Sunshine expects topline expansion across Healthcare and Consumer segments in the 2025/26 financial year. Planned enhancements in ESG reporting, digitalisation and legal risk management will serve to further reinforce operational resilience and value creation.

Sunshine Holdings remains committed to financial prudence, sustainable growth and proactive risk management and corporate governance, ensuring continued value delivery to shareholders and the country at large.