JAT delivers solid 3Q; eyes backward integration to mitigate external shocks

JAT Holdings PLC delivered sturdy sales and profits for the three months ended December 31, 2021 (3Q22), as the company capitalised on the construction sector rebound and the soaring commodities prices, which enabled it to adjust prices.  

The leader in wood coating products in the Sri Lankan and Bangladesh reported revenues of Rs.2.30 billion for the October-December period, logging 70 percent increase over the same period in 2020, ahead of its crucial fourth fiscal quarter sales, which typically brings 45 percent of its profits.

The company’s share ended 40 cents or 1.49 percent lower at Rs.26.50 last Friday, slightly below its initial public offer price of Rs.27 in July last year. 

Despite a number of challenges stemming from the foreign exchange and global commodities shortage, which pushed prices of almost every commodity higher from the levels before the pandemic, the company managed to defend its gross profit margins, reflecting a pass through. 

The company in a press release said it managed to maintain the gross profit margin at 30 percent between the two periods, despite direct costs rising by 91 percent. 

The company reported earnings of 63 cents a share or Rs.323.7 million for the three months compared to earnings of 53 cents a share or Rs.233.1 million reported for the corresponding period in 2020.  For the nine months, the company reported earnings of Rs.1.48 a share or Rs.743.9 million compared to earnings of 47 cents a share or Rs.212.3 million in the same period in 2020. The sales were up by a robust 72 percent to Rs.5.4 billion. 

“These metrics were achieved amidst a subdued market environment and other challenges, volatile exchange rates and a scarcity of materials in the global market,” JAT Holdings Executive Director/CEO Nishal Ferdinando said.

“However, we adapted to the market conditions and remained agile, maintaining our gross profit margins. We also leveraged on our strong supplier relations and continuous improvements to our production processes through the implementation of lean and six sigma principles to maintain our gross profit targets”, he added.

The company has operations in Sri Lanka and Bangladesh, and exports to India, Maldives and to some African markets. 

Its Sri Lankan sales rose by 47 percent to Rs.4.2 billion while Bangladesh delivered a star performance of Rs.1.2 billion, rising 379 percent from the year earlier period. 

Its exports to India, Maldives and other markets, which are still at a nascent stage, declined 17 percent to Rs.37.2 million. 

The company said its ‘The White by JAT’ product range delivered revenues 62 percent above the budget in the nine months while brush sales and wood coatings sales came in 57 percent and 33 percent higher respectively. 
The company also said it is looking at opportunities for backward integration in its supply chain to overcome and minimise the external shocks, hinting that it could be embarking on potential M&A deals in the next few months. 
“The company is also looking towards backward vertical integration to insulate its supply and value chains from external shocks and is looking at embarking on several ambitious projects taking advantage of our strong liquidity,” a company statement said.

As at December 31,2021,JAT Holdings Founder/Managing Director Aelian Gunawardene held 64.82 percent stake in the company followed by 5.31 percent by Falcon Trading (Pvt) Limited.