Fitch Ratings has affirmed Sri Lanka-based Sunshine Holdings PLC’s National Long-Term Rating at ‘A-(lka)’. The Outlook is Stable.
The affirmation reflects the company’s improved business-risk profile after exiting its tea-plantation business, which lowers the group’s reliance on volatile cash flow from the structurally weak segment.
Disposal proceeds and robust operating performance by some of the group’s key operating segments, such as palm-oil plantations and healthcare, should help keep Sunshine’s net leverage - defined as lease-adjusted net debt/operating EBITDAR, including proportionate consolidation of 60% owned subsidiary, Estate Management Services (Private) Limited (EMSPL) - at around 1.5x, the level below which we may upgrade the rating. However, a number of medium-term challenges may prevent the company from sustainably reducing leverage below this threshold, including heightened regulatory risk in the pharmaceutical-distribution business, execution risk surrounding the dairy-production business and commodity-price volatility in its palm-oil business.
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