Operating Environment

Having sufficiently recovered from an unprecedented crisis that engulfed all aspects of life, Sunshine Holdings PLC’s outlook for 2024-25 was to draw from the resilience of the national economy and channel that momentum into disciplined growth, operational focus, and long-term value creation across the Group’s core segments. Thus, our strategic focus for the financial year remained sharply on consolidation. During the reporting period, Sunshine’s strategy continued to be rooted in its four enablers: innovation, focus, synergy, and sustainability, principles underpinning our evolution from a legacy family enterprise into a 21st-century, purpose-driven conglomerate whose interests align with those of the nation itself. Our six parenting functions – namely, governance, risk management, finance, human resources, information technology, and sustainability – continued to be central to this journey of growth, all the while allowing the Group to balance decentralised sectoral agility with disciplined, centralised oversight.

Macro picture

Global

The world economy entered the reporting period on uncertain footing, to say the least, shaped as it was by competing crosscurrents of recovery and volatility. Though inflationary pressures have largely eased by now across major markets, monetary policy remains tight worldwide, with interest rates likely to stay elevated longer than previously anticipated. Sluggish growth in Europe, continued weakness in China, and lingering geopolitical fractures – from the protracted war in Ukraine to escalating tensions between the US and China, particularly in light of a looming trade war – weigh on global trade flows and investor sentiment. Against this backdrop, emerging markets in Asia provide some cause for optimism, with regional growth underpinned by rising domestic demand and a more noticeable degree of supply chain diversification. The global environment presents a mixed picture to Sri Lankan exporters, however, with stabilising input costs and softening freight rates on one hand, tempered by muted consumer spending in some traditional export markets on the other.

Domestic

At home, Sri Lanka’s macro trajectory in 2024-25 was and continues to be shaped by the post-crisis recovery cycle and the fiscal discipline instilled by the ongoing IMF programme. Headline inflation at present is a far cry from the 70% peak of 2022, having receded dramatically over the past two years. The rupee, too, has stabilised, while interest rates remain on a downward path. These developments have collectively served to restore a measure of much-needed predictability to the operating environment. Yet, beneath this stabilisation, welcome though it is, lies a fragile equilibrium. Fiscal pressures persist, with taxation – particularly VAT – continuing to heavily impact household spending power and business margins alike. Private credit growth, while showing early signs of revival, remains critical for broader demand recovery, which is still at some distance, though not altogether elusive. Meanwhile, political uncertainty in an election year added yet another layer of complexity, though it transpired that Sri Lanka would stay the course of structural reform with no major policy departures from the IMF- led framework despite a change in government, which has led to further stability. Going into 2025-26, for businesses including our own, the outlook remains one of cautious optimism. While growth is gradually returning, so, too, is competition; success will depend entirely on operational resilience, pricing discipline, and strategic adaptability.

Within this stabilising yet fragile macroeconomic context, the Group’s strategy remained grounded in consolidation and operational resilience, with targeted growth only where structural readiness allowed.

The 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.