ECONOMYNEXT – Sri Lanka is seeing new entrants and products in several markets with the central bank helping drive down costs with currency stability, a top player in fast moving consumer goods, stationery and healthcare.
“Compared to the previous year, the appreciation of the Rupee and the decline in commodity prices have intensified competition within the industry, with several players offering a variety of consumer, shopper and trade promotions,” Sri Lanka’s Hemas group told shareholders in its interim accounts.
“With the easing of import restrictions and the stabilisation of the Rupee, the stationery market experienced added competition with an influx of new entrants offering products at lower price points and varying quality.”
In home and personal care, Hemas has “successfully maintained market shares across most categories, achieving marginal growth in a number of categories, along with improved profitability,” despite the challenges posed by downward price movements.
Established brands which enjoy brand loyalty do not necessarily have to cut prices, though most brands are now offering discounts as costs fall amid the central bank’s broadly deflationary policy which allowed currency appreciation.
The central bank has a high cost of living target of 5 percent, which critics have said amounts to un-anchored monetary policy which will destabilize the external sector as has happened earlier.
But the central bank up to December has undershot the cost of living target, providing exceptional monetary stability, giving some space for people to recover.
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In the last quarter there have also been warnings that the single policy rate which requires an abundant reserves regime (excess liquidity) and inflationary open market operations are a threat monetary stability, and the external sector.
Sri Lanka central bank has triggered currency crises in 2011, 2015/16, 2018 and 2019/2022 chasing a 5 percent inflation target and also ‘potential output’ critics have said. The economy has grown at 5 percent, with no fiscal or monetary stimulus, which may be above ‘potential output’.
Meanwhile, with the effects of inflationary policy not yet hitting the market people have also started to spend more on beauty care, Hemas said.
“The beauty categories experienced a significant volume growth compared to the same quarter last year,” the group said.
“While the home care segment saw a decline in market share due to increased demand for generic products in price-sensitive segments, the personal care segment experienced volume-led growth compared to the same quarter last year.”
The group is also in Bangladesh, which also saw a currency collapse. The external sector has started to stabilize.
“However, the country is facing high inflation, reaching 10.9 percent in December, with food inflation particularly affecting households,” Hemas said.
“In response, the government has reduced import duties on key commodities to curb price hikes and address shortages.”
Hemas said revenues grew 6.4 percent to 33.2 billion rupees, while cost of sales went up at a slower 4 percent to 22.22 billion rupees. Gross profits rose 11.7 percent to 11.0 billion rupees.
Finance costs were down 42 percent to 399 million rupees.
Net profits were up 36 percent to 3.02 billion rupees. Earnings were 5.07 rupees per share. Nine month earnings were 9.18 rupees on total profits of 5.4 billion rupees, up 20.9 percent. (Colombo/Feb10/2025)
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