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Sunshine Holdings Board of Directors - Colombo Stock Watch (1)

S. A. Munir - Chairman

Mr. S. A. Munir was the Managing Director of Abbott Pakistan from 1970 to 1977. He was the Regional Manager Caribbean and West Indies for Abbott based in Puerto Rico from 1977 to end 2008 and posted to Abbott’s headquarters in Chicago as Director Business Development from 1978 to 1982. He was the Regional Director for Pacific and Far East, based in Chicago, from 1983 to 1988 and then promoted as the Vice President Asia Pacific and Africa based in Singapore. Mr. S. A. Munir is now retired from Abbott, a major healthcare company after 40 years of service but continues as the Chairman of the Board of Abbott India and Pakistan.

G. Sathasivam - Director

Mr. G. Sathasivam began his career in the pharmaceutical sector. Over the 48 years of success and innovation, he established Sunshine Healthcare Lanka Limited (SHL) into a leader in Sri Lanka’s pharmaceutical industry. Not content to rest on his laurels, he drove the Group’s diversification into uncharted territories – moulding Sunshine Holdings into the pride of the nation.

Mr. Sathasivam’s business acumen is recognized both in Sri Lanka and abroad. A testimony to the vote of confidence in his abilities is his close relationship with the TATA Group – an Indian and global corporate giant involved in a multitude of sectors. With confidence in the good stewardship of Mr. Sathasivam, the TATA Group initially joined hands with Sunshine Holdings to acquire a single regional plantation company in Sri Lanka. The fact that the TATA Group has subsequently moved into launching several joint ventures with Sunshine Holdings further underscores the recognition given to the management of Sunshine Holdings and the emphatic faith in its Founder.

V. Govindasamy - Group Managing Director

Mr. V. Govindasamy pioneered the Group’s diversification into newer but key economic sectors such as renewable energy, telecommunications and FMCG. In recognition of his achievements, the TATA Group invited Mr. V. Govindasamy to sit on several key committees in the House of TATA – a truly rare honour for a person in the corporate sector globally. His international experience coupled with his innate managerial capability and innovative qualities enabled him to transform the plantation business, achieving perceptible improvement in quality, production standards and penetration into new markets. Under his managerial direction, the company established several new brands and consolidated and expanded its share in both domestic and international markets. He holds a Bachelor of Science in Electrical Engineering and an MBA from the University of Hartford, USA. He is a Fellow Member of the Institute of Certified Professional Managers of Sri Lanka.

U. L. Kadurugamuwa - Director - (Resigned Effective 30th June 2015

Mr. U. L. Kadurugamuwa was the senior partner of F. J. & G. de Saram, Attorneys-at-Law and Notaries Public. He has more than 40 years of experience as a corporate commercial lawyer. He is presently inter alia, on the Boards of Taj Lanka Hotels PLC and Central Finance PLC, both long standing clients of the firm. He has from time to time served on many other Boards of Directors of companies.

N. B. Weerasekera Director

Mr. N. B. Weerasekera is the Managing Director responsible for Sri Lanka and Bangladesh of The Abraaj Group, a leading investor in growth markets managing USD 7.5 billion in assets, operating through 31 offices in Asia, Africa, Latin America and the Middle East. He is a Fellow Member of the Chartered Institute of Management Accountants, UK. He graduated from the University of Peradeniya in Physics and holds a Masters Degree in Economics from the University of Colombo.

S. Piyaratna - Director

Mr. S. Piyaratna was a Director of Nations Trust Bank and he was Former Deputy CEO of HSBC Sri Lanka. He graduated from Madras Christian College, University of Madras and holds a Masters Degree in Economics from the School of Economics, Delhi University.

A. Hollingsworth - Director

Mr. A. Hollingsworth is a founder and Managing Director of Mann Made Enterprises Ltd. He also held Senior Management positions with Union Bank of Switzerland of which he was a Director.

B. A. Hulangamuwa - Director

Mr. B. A. Hulangamuwa is also a Director of Watawala Plantations PLC and Secretaries and Financial Services (Pvt.) Ltd. He is a Fellow Member of the Institute of Chartered Accountants of Sri Lanka and a Certified Fraud Examiner (USA) and holds a Masters Degree in Business Administration the from University of Colombo.

S. G. Sathasivam Director

Mr. S. G. Sathasivam is the Managing Director of Sunshine Healthcare Lanka Limited (SHL) and a Director of Sunshine Packaging Limited. He graduated from The London School of Economics & Political Science, UK and holds a Masters in Business Administration from Kellogg School of Management, USA.

Chairman's Message

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Dear Shareholders,

Welcome to the 42nd Annual General Meeting of your company.


Recovery of the global economy, which began in 2013, continued into 2014. According to the International Monetary Fund (IMF), global growth in 2014 was 3.4% compared to 3.3% in 2013, and is expected to be about 3.5% in 2015. Currency instability, stagnation and low inflation in the Euro Zone and Japan, escalation of tensions in the Middle East and Ukraine and slowdown in the Russian economy coupled with sharp depreciation of the Ruble pose significant challenges to Sri Lanka’s exports such as Tea and Garments.

Sri Lanka’s economy grew by 7.4% in 2014 compared to 7.2% in 2013, becoming one of the fastest growing countries in South Asia. Strengthened domestic economic activity and improved exports were key contributors to this growth. Low inflation and downward revision in interest rates are conducive for business. We expect Sri Lanka’s post war growth story

to continue with enhanced transparency and improved international image after the January 2015 elections.

Your Group has evolved into a conglomerate with a diverse portfolio. This diversity allows for resilience, when challenging times faced by one sector are balanced by improved performance in another.

We will continue to constantly review our strategies in keeping with the changing dynamics in the marketplace, and to explore alternatives whilst continuing with those which remain relevant and have served us well.

The products we market, from serving the Healthcare needs of our people to the number one beverage in the nation, are either leading global brands or a market leader in the country.

We will aggressively seek to introduce new products, mindful of the need for innovation to sustain long term growth. Our FMCG business will launch products to harness the potential of our brand equity without diluting the value of our brands which enjoy a market leadership position in the country.

The Group will continue with our focus on people and products to enhance Shareholder value. We will strive to attract the best talent in the country and to train, motivate and retain them to be future managers and leaders in the organization.


As good corporate citizens we will abide by the National Medicinal Drug Regulatory Authority Bill but fully support the Doctor’s right to choose the most appropriate brand for the patient and a fair pricing policy to ensure availability of quality pharmaceuticals in the country.

The role of Agriculture is critical despite the volatility faced by this sector. There is potential in Palm Oil crop, but escalating costs and little room for price increases continue to be a challenge in Tea and Rubber. We reiterate the need for innovative solutions to reduce the vulnerability in the Tea and Rubber sectors.

The need for alternative sources of energy cannot be overstated. Sri Lanka’s high dependence on petroleum- derived power continues to be a strain on the country’s finances. We see tremendous potential in this sector and the Group’s initiative, although at a nascent stage has performed well and we expect to continue our focus in this area.

As we look ahead, we will continue our focus on organic growth, leveraging on our strengths and maximizing use of our assets.

Board Changes

Mr. Wijetilleke who was Chairman of the Board of Directors of Sunshine Holdings PLC from 2006 stepped down from The Board on 2 February 2015 and we thank him for his contribution over the years.

Air Chief Marshal (Rtd) Harsha Abeywickrama and Dr. T. Senthilverl joined the Board of Directors in 2014 and 2015 respectively.

We welcome these gentlemen to the Board. With their wealth of experience we look forward to their active participation.


I would like to thank my colleagues on the Board for their guidance and all our employees for their hard work, dedication and commitment and our customers for their support and faith in our products. I am also grateful to you, our shareholders, for your trust and confidence in us.

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25 May 2015

Group Managing Director’s Review


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Corporate Performance

Group Revenue grew marginally by 11.1% to Rs. 16.3 billion whilst Profits After Tax (PAT) contracted by 10.4% to Rs. 1,047 million. The performance was below expectation during the year due to many changes and challenges in the global and industry environments which impacted three of our sectors. The Tea sector was severely impacted by the decline in exports due to global economic and political crises which have been impacting Sri Lanka’s key tea exports. Our FMCG business on the other hand achieved an exceptional performance surpassing its previous best and underscoring its potential for expansion to make a sizeable contribution to Group profitability in the years ahead.

The key contributors to Group Revenues were the Agribusiness and Healthcare sectors which contributed 41.9% and 37.2% respectively. The Group’s Healthcare sector was once again the highest contributor to Profits Attributable to Shareholders, accounting for 42.0% during the year. The Agribusiness segment only contributed 18.8% to PATMI and hence we were able to sustain shareholder earnings with marginal impact. Sunshine Holdings PLC’s Earnings per Share was at Rs. 3.62 in 2014/15 compared with Rs. 4.47 in 2013/14.


We are heartened by several international and national awards received during the year. I am particularly happy to note that the wide range of aspects these awards have covered reflect the Group’s Triple Bottom Line approach in business; they range from recognition of overall business excellence to financial reporting and governance, quality of our manufacturing, social empowerment and corporate citizenship. These accolades will continue to encourage us in our efforts to constantly refine and enhance the ways in which we achieve our vision. Some of the key awards received during the year under review are given below:

• Gold Award for Best Corporate Citizen in the Agriculture sector, from the Ceylon Chamber of Commerce.

• Gold Award at the Asian CSR Leadership Awards for the Vocational Training Centre for empowerment of the differently abled at Kenilworth Estate.

• Gold Award for Best Presented Annual Report in the Agriculture Sector from the South Asian Federation of Accountants in 2014.

• Silver Award for Sunshine Holdings PLC for the Best Annual Report at the Annual Reports Awards from the Chartered Institute of Accountants of Sri Lanka.

• Gold Award for the Manufacturing Sector – Large Scale, at the People Development Awards 2014 awarded by the Sri Lanka Institute of Training and Development.


Sector Performance


The Group’s Healthcare sector performed well above industry growth with Revenue increasing by 10.2% vis-à-vis flat industry growth. The Healthcare industry performed in line with projections made last year experiencing almost static growth, as subdued demand impacted the country’s Pharmaceuticals sub segment in particular. Profitability of Sunshine’s Healthcare sector contracted by 35.8% this year, mainly due to an one off goodwill write-off amounting to Rs. 62 million and margin contraction.

Our Retail Arm Healthguard achieved an excellent performance during the year, reaping the rewards of initiatives launched last year. It was able to achieve its highest profitability to date with Profit After Tax (PAT) growing by 46.5% to Rs. 23 million whilst revenue rose to Rs. 677 million. The Company also expanded its presence with the opening of two new outlets.


The Group’s FMCG sector achieved an excellent performance crossing many milestones during the year. ‘Watawala Tea’ now has become a leading tea brand in the country, whilst our three brands collectively account for one third of the branded Tea market. The sector also achieved the highest ever revenue at Rs. 2.9 billion whilst PAT increased by 27.7% to Rs. 397 million. As per A.C Neilsen, the market grew at mid-single digits whereas our volumes grew by 12%.


The Group’s Agribusiness subsector Watawala Plantations PLC was adversely impacted by the decline in the Tea subsector and recorded a marginal contraction in PAT of 6.1% to Rs. 408 million, despite an exceptional performance from the Palm Oil subsector. Revenue in the Agribusiness subsector grew 9.6% to reach Rs. 6.8 billion. We continued to be Sri Lanka’s highest producer of Tea and Palm Oil. Both these subsectors have been able to reap the harvest, literally and metaphorically, of the seeds sown in terms of good agronomic practices, field level innovations, and other environmental and social sustainability measures which have been diligently implemented over the past few years. Land as well as worker productivity increased during the year as well.

The Tea subsector as well as the entire industry was beleaguered by challenges which impacted Sri Lanka’s key export markets. Countries such as Russia, Ukraine and the Middle East which have been in political and economic turmoil since January 2014, account for as much as 70% of Sri Lanka’s Tea exports. The impact of the decline in purchasing power and devalued currencies in these economies has thus been significant on the Sri Lankan Tea Industry. Loss for the Tea subsector increased by 54.5% to Rs. 428 million despite a 13.3% increase in Revenue to Rs. 4.7 billion.

An excellent performance by the Palm Oil subsector helped post a 23.4% growth in PAT to Rs. 780 million, and a 11.7% increase in Revenue to Rs. 1.6 billion. Continuing on the trend from the past few years, total production increased by 8.9% whilst the yield per hectare was flat but above industry average during the year. Performance of the subsector was also supported by a 2.5% increase in prices driven by increasing demand in the domestic market.


Our Energy sector performed well during the year achieving its highest Revenue of Rs. 113 million and highest profits of Rs. 19 million. The Group’s first commissioned hydropower plant in Lindula (Waltrim Lower) in 2012, has been generating 1.62 MW. Two other projects as indicated last year, got underway during the year; we began construction of the Upper Waltrim plant and committed capital to commence the construction of the third plant - Elgin-Hydro Power. We expect Upper Waltrim to begin generating energy by the end of next year and the completion of the third plant in the year after will increase the Group’s total generation capacity to 7 MW.


The Packaging sector was adversely impacted by several external environmental factors, mainly the decline in the demand for Tea exports. The sub segments of Confectionery and Milk Powder packaging performed well and exceeded projected growth. However, as Tea packaging accounts for 54.0% share of its Revenue the 21.4% decline in the Tea packaging sub segment impacted the overall performance of Sunshine Packaging, causing Revenues to decline by 7.9% to Rs. 270 million. Although declining interest rates and energy prices during the year helped to contain costs, the sector posted a loss of Rs 24 million. Sunshine Packaging accounts for a significant 95% of Sri Lanka’s manufactured export tin packs, and leveraging on this strength, the sector ventured into direct exports of value added Teas to alternate markets and will look to expand this venture in the year ahead.


The Directors have proposed a dividend of Rs. 0.95 per share.

A Sustainable Approach to Business

The Group’s sustainable practices have been intrinsic to its performance and in the Agriculture sector in particular, where the benefits of sustainable agri practices, and social engagement have been more tangible and immediate. Some of these are discussed in the ensuing Management Review and Preview which analyses the performance of the Group, the sectors and the industry environment.

We also see our enterprise in its wider context, and contributing to nation building and the country’s economic growth is important and intrinsic to the Triple Bottom Line approach to enterprise that we have adopted. Sustainability is not merely about keeping abreast with global trends in business and governance, but our belief that sustainability of our profits ultimately depends on the sustainability of the community and environment.

People have been the driver of the Group’s success and a number of initiatives this year were taken across the sectors, to enhance and sustain our talent pool.

We adopted a new and Integrated format of reporting last year which better reflects our sustainable approach to management, and we continue with the same Integrated approach to review and previewing our business this year.

Looking Ahead

The strategic alliances we have fostered with two global giants, TATA Global Beverages and Wilmar International Group, position us well for vertical and horizontal integration as well as geographic expansion and entry into new markets. The partnership with TATA Global Beverages which commenced in 1992 has exceeded expectations and seen your Group move up the value chain from plantations to branded teas. It continues to be a key platform in the Group’s strategies for expansion and innovation. The partnership with Wilmar established last year has begun to benefit our Palm Oil sector whilst Wilmar’s global presence would create a gateway for some of our products into markets such as China.

Following the establishment of our first overseas subsidiary, Sunshine Holdings International, in Singapore as reported last year, we have actively explored opportunities to export our FMCG brands into the region.

The year that just ended was a challenging one, for our plantations sector in particular. We are concerned that some of the economic and political turbulence that affect our export markets are not likely to be resolved in the year ahead, thus prolonging the demand-led challenges faced by Sri Lanka’s Tea sector. The likely appreciation of the U.S. Dollar, supported by a strengthening U.S. economy augurs well for Sri Lanka’s exports and worker remittances whilst on the other hand, the resulting increase in cost of imports could negatively impact the Group’s import dependent sectors of Healthcare and Packaging. The challenging environment necessitates that we adopt an approach of caution and look at operational efficiencies to reduce costs and alternatives to reduce vulnerabilities of our Tea sector.

Whilst the global environment will offer many challenges we remain optimistic that Sri Lanka’s growth story will continue. Ensuring consistency of policies and a long term vision for the nation remain essential.

Sector Outlook

Despite a restrained performance over the past two years, we are confident that the potential in the Healthcare sector of the country is significant and the market would pick up in the year ahead. Sunshine Holdings’ Healthcare sector represents 40 leading multinational Pharmaceutical companies, 16 of whom have partnered us for more than 20 years. Widening our portfolio of principals and products to enable a more balanced contribution to profitability from
the four segments of Pharmaceuticals, Diagnostics, Surgicals and Wellness, would be a priority for the next few years. Healthcare delivery models will be dynamic, and evolving and will rely on innovation. Developments in the Sri Lankan market which include an increase in demand for Diagnostics and Preventive Care, and an increasing role by the Private Healthcare sector, support growth and bodes well for your Company.

The Government’s new National Medicinal Drug Regulatory Authority Bill is likely to become effective by end 2015, and its specifics, are yet to be established. We welcome it for the opportunity it would create to raise the bar for the industry and create a more level playing field for legally compliant members like us. Whilst appreciating the need to protect consumer interests, it is our fervent hope that prices will be regulated rather than controlled, for the latter would prove detrimental to all stakeholders of the industry. Moreover, it is also important that ensuring quality of medicines and healthcare receives highest priority.

We also look to harness the opportunities that some of the policy measures would create for the local manufacture of medicines and we are encouraged by the government’s focus on increasing local production of medicines both at a national level and by inviting foreign investment.

We remain concerned about the sustainability of Sri Lanka’s tea plantations. The vulnerability of commodity exporters is further exacerbated by the current world market conditions. Innovative thinking that can bring in alternatives to reduce the vulnerability of commodities to world market conditions, together with a new regulatory framework and a replacement of the current politicized model of wage increases remain prerequisites as plantations are severely burdened by competitiveness issues.

We are buoyant on the outlook for our FMCG sector. The sector’s core strengths of an efficient and extensive distribution network, high brand equity and a strong team, have positioned it well to reach new milestones.

The Energy sector has much potential for expansion and the Group will actively look at venturing into other forms of renewable energy. We also hope that the government would permit the re-entry of the private sector into wind power generation for the benefit of all stakeholders.

Whilst we are actively exploring opportunities to infuse new capital to harness the considerable potential identified in our Packaging sector, we will also look to diversify our product segments into new higher margin packaging, as well as seek new markets to minimize exposure to crisis ridden markets. Direct exports of value added teas which Sunshine Packaging has ventured into, will also be expanded upon further. Sunshine Holdings will continue to seek organic growth over the next few years by leveraging its strengths, expertise and the leadership it has established in its core businesses, which contribute to thrust areas of Sri Lanka’s economy. We will also be nimble enough to respond to changing market needs, lifestyles and the rapid pace of advancements in science and technology. In the medium to long term, we will also harness opportunities to diversify into new growth sectors and expand our portfolio to enhance the value we create for all our stakeholders.


As we look to the year ahead there are many I would like to convey my heartfelt gratitude to, for their contributions have been the fuel behind your Group’s ability to imagine, create and meet opportunities and exceed expectations. My sincere appreciation to my colleagues on the Board for their guidance, constant support and the confidence placed in me, the 11,953 members that make up our team, for their unwavering commitment and tireless efforts, our customers, shareholders, business associates and other stakeholders for their continued support and inspiration.

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25 May 2015

Group At A Glance

Sunshine Group Performance - Colombo Stock WatchSunshine Group Performance 2- Colombo Stock Watch

Financial Highlights

Sunshine Holdging Financial Highlights - Colombo Stock WatchSunshine Holdging Financial Highlights 2 - Colombo Stock Watch

Group Performance - Value Creation

Sunshine Holdings Group Performance - Colombo Stock Watch