ECONOMYNEXT – Sri Lankaâ€s Hemas Holdings which has interests in personal care, stationery and pharmaceuticals said industry players were cutting prices as a strong rupee reduced costs at a time when consumers were looking for low prices.
“During the quarter, the strengthening of the domestic currency and declining global commodity prices have led to aggressive pricing and promotion strategies among industry players, intensifying competition in key categories,†the group told shareholders in its September quarter financial review.
“A strong focus on value-for-money (VFM) options continues, reflecting the current constraints on purchasing power.â€
In education sector there was strong competition. Hemas said it cut prices while maintaining quality.
“Despite severe competition in the market, the company has successfully maintained its leading position by adapting to evolving consumer preferences for high quality products at competitive pricing,†the group said.
“This quarter, the segment expanded its ‘Homerun†stationery line to include books, providing an accessible and cost-effective range for consumers.
“To mitigate the impact of seasonal fluctuations on turnover, the Learning Segment also launched its first-ever range of educational toys, marking a strategic entry into the educational toys market.â€
Hemas group revenues fell 3.1 percent to 28.9 billion rupees, cost of sales fell at a faster 6.6 percent to 19.7 billion rupees as prices were cut, helping customers who were hit by inflation and higher taxes.
“The decrease in revenue compared to same period last year was a result of cautious consumer spending accompanied by several strategic downward price adjustments, particularly in the Consumer Brands segment,†the group said.
“However, the Groupâ€s ongoing commitment to efficiency improvements alongside favourable foreign exchange movements, contributed to enhanced profitability margins.â€
Sri Lankaâ€s central bank has run deflationary policy since mid 2022, and also allowed the exchange rate to appreciate to around 300 to the US dollar after earlier inflationary policy (printing money) to cut rates, led to a collapse of the rupee from 200 to 360 to the US dollars.
Concerns have been raised that inflationary policy is resuming, which will lead to renewed monetary instability as private credit picks up.
Gross profits rose 5.6 percent to 9.1 billion rupees in the quarter, despite the price cuts as costs were managed.
Finance cost was also down 58 percent to 376 million rupees as interest rates came down.
Income tax rose 71 percent to 1.23 billion rupees, but Hemas group reported net profits of 1.5 billion rupees for the quarter, up 23.7 percent. (Colombo/Nov09/2024)
