Fitch affirms Hemas Holdings at 'AAA'; Outlook Stable

FITCH Ratings has affirmed the National Long-Term Rating on Sri Lankan consumer brands and health-care company, Hemas Holdings PLC, at 'AAA (lka)' with a Stable Outlook.

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The affirmation reflects Hemas' defensive operating cashflows, driven by its healthcare and consumer brands businesses, which contribute approximately 90% 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.

Fitch issued the following key drivers for its rating decision:

Leading domestic market position: We expect Hemas to retain its leading position in pharmaceutical import and distribution, supported by reduced competition after import challenges in the last few years that disproportionately affected 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.

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 consumers' constrained purchasing power in recent years. Stationery demand is expected to be underpinned by educational needs, while the essential nature of most HPC products continues to support demand.

Investments, capex to rise: We expect capex and investments to rise significantly to around Rs. 7 billion annually for FY26-FY27, from the Rs. 3.5 billion estimated for FY25. 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 billion annually in FY26-FY27 to balance lower investments in the last few years amid the weak domestic environment.