Teejay Lanka 4Q performance hit by higher sales costs, taxes and finance expenses

Chairman Ajit Gunewardene

CEO Pubudu De Silva

Sri Lanka’s first multinational textile manufacturer Teejay Lanka PLC saw its earnings for the quarter ended on March 31, 2023 (4Q23) declining, despite the gains at the top line, amid higher sales costs, finance expenses and increased taxation.
The group reported a revenue of Rs.17.3 billion for the quarter under review, up 28 percent year-on-year (YoY) but the cost of sales rose at a higher pace of 30 percent YoY to Rs.16.1 billion, resulting in a gross profit of Rs.1.18 billion, up 8 percent YoY.
The operating profit for the period also rose 8 percent YoY to Rs.772.8 million.
Net finance cost in 4Q23 rose over 300 percent YoY to Rs.363.7 million, as a result of higher interest rates. 
This along with a tax expense of Rs.256.6 million, up 287 percent YoY, resulted in the group recording earnings of 21 cents a share or Rs.152.3 million in 1Q23, compared to earnings of Rs.1.15 per share or Rs.826.1 million.
This marked an 82 percent decline in net profits. 
Meanwhile, for the year ended on March 31, 2023, the group reported earnings of Rs.2.97 per share or Rs.2.1 billion, compared to earnings of Rs.3.54 per share or Rs.2.5 billion in the previous financial year.

The Central Bank may also want to avoid getting mired in potential future litigation over issuing bonds, which could probably be subjected to some form of restructuring under the voluntary bond restructuring, which was announced recently. 
There was a furore last week in Parliament over the decision by the Parliamentary Committee on Public Finance (COPF) to raise the Treasury bill ceiling from Rs.5.0 trillion to Rs.6.0 trillion, which the main opposition charged was done under a Chairmanship of the Committee, which does have the due legality. 
The COPF does not have a permanent Chairman after a confusion that arose a few months ago over the appointment and resignation of a chairman from the main opposition Samagi Jana Balawegaya. 
The government justified the decision to raise the bill limit, as the demand for bonds have waned and their yields also remain higher than the bills. 
The Central Bank forecasts the rates and the yields to come further down in tandem with inflation through the end of the year.