Fitch affirms Hemas Holdings at ‘AAA(lka)’; Outlook Stable

Fitch Ratings has affirmed the National Long-Term Rating on Sri Lankan consumer brands and healthcare company Hemas Holdings PLC at ‘AAA(lka)’, with a Stable Outlook.

The rating underscores Hemas’ defensive operating cash flows, driven by its healthcare and consumer brands businesses, which contribute approximately 90 percent of the group’s EBIT. 

The Stable Outlook is supported by Fitch’s expectations that Hemas will continue to maintain a robust balance sheet, even as the company explores significant investments in its core businesses over the next few years.

“We expect Hemas to retain its leading position in pharmaceutical import and distribution, supported by the reduced competition after the import challenges in the last few years that disproportionately affected the smaller players. The company’s strong local distribution network and long-standing global partnerships are also key advantages. Demand for Hemas’ pharmaceutical manufacturing and hospital operations is rising, due to an ageing population,” said Fitch.

Hemas holds a prominent position in the home and personal care (HPC) segment and is the market leader in stationery products. The company has sustained its market share through the introduction of new brands and a variety of packaging options tailored to accommodate the consumers’ constrained purchasing power in recent years. Stationery demand is expected to be underpinned by the educational needs, while the essential nature of most HPC products continues to support demand.

Fitch said it expects the capex and investments to rise significantly to around Rs.7.0 billion annually for FY26-FY27, from Rs.3.5 billion estimated for FY25. The planned investments include significant capacity expansions in the hospitals sub-segment, over a four-year period, with cashflows from this project expected after FY27. Recurrent capex will also rise temporarily to around Rs.4.0 billion annually in FY26-FY27, to balance the lower investments in the last few years, amid the weak domestic environment.

It added that it expects the company to also expand its pharmaceutical manufacturing capacity over the next few years, which is supported by Sri Lanka’s ongoing efforts at substitution of imports. Fitch expects Hemas will continue to adopt a prudent approach to these and potentially other opportunistic investments, consistent with its track record. While the above projects will be financed through an increase in net debt, Hemas’ strong balance sheet should absorb the investments with limited credit impact.