Strong balance sheet gears Teejay for growth despite challenging third quarter

• 9-month revenue grows 84% to Rs. 66.8bn
• Net profit for period up 17% to Rs. 1.97bn even with 3Q loss

Teejay Lanka PLC has reported strong revenue growth for the nine months ending 31st December 2022 as well as for the third quarter of the year, but higher domestic costs, increased taxes and a softening of orders in international markets have impacted the Group’s third quarter profits.

In a filing with the Colombo Stock Exchange (CSE), Sri Lanka’s first multinational textile manufacturer said the Group had improved revenue for the nine months by 84 percent to Rs.66.8 billion and for the third quarter by 38 percent to Rs.18.15 billion. 

However, with the underutilisation of its plants due to a softening in its main markets, increases in fixed costs due to expansion, income tax increases and a rise in utility costs, the Group posted a net loss of Rs.365 million for the third quarter.

Despite the challenges of the third quarter, Teejay said it had, as a result of the Group’s exceptional first half performance, ended the nine months with a robust cash balance of Rs.10.4 billion, a nine-month net profit of Rs.1.97 billion and a net assets base of Rs.36.2 billion, representing a net assets value of Rs.50.52 per share, an increase of 90 percent when compared to the corresponding quarter of the previous financial year.

Noting that a crucial challenge faced by the Group during the quarter was a low order book, an obstacle that is envisioned to remain unchanged for the upcoming two quarters, Teejay Lanka Chairman Ajit Gunewardene said, “The China Plus One strategy acts as a bright prospect for the Textile and Apparel industries, and our timely expansion in India makes Teejay a likely benefactor of the strategy, going forward. Teejay will also continue to explore opportunities for growth by discovering new business and evaluate the potential of capturing new international markets.”

Teejay Lanka CEO Pubudu De Silva explained that Teejay has taken a strategic approach to move into scheduled factory slowdowns for short durations to address the rising overhead costs, and intends to fine-tune this strategy going forward.

“The strides made in the Group’s operational excellence journey enabled Teejay to adopt a fresh new efficient model to reduce its breakeven point which peaked during the end of 3Q. As a result, the Group is now geared to face the challenges of the upcoming two quarters by implementing a leaner operating model. Despite the volatilities in the market, Teejay remains confident that positives are not entirely absent,” he added.

Teejay Lanka was the first textile manufacturer in Sri Lanka to receive membership of the US Cotton Trust Protocol, and is a public quoted company with 40 percent public ownership. The company is backed by Sri Lanka’s largest apparel exporter Brandix Lanka which has  32 percent stake. Pacific Textiles of Hong Kong, whose key shareholder is the Tokyo Stock Exchange listed Toray Industries Inc., owns 27 percent of Teejay Lanka.