Teejay Lanka extends positive profit momentum to March

Teejay Lanka PLC managed to report a slight increase in the bottom line for the final quarter ended in March 2018, as the weft knitted fabric maker continued its positive march in quarterly earnings it set out in the December quarter.  

Releasing the interim financial accounts for the January-March quarter (4Q18), Teejay Lanka reported a 3.0 percent year-on-year (YoY) increase in earnings to 72 cents a share or Rs.508.4 million, as the group contained overheads while the sales growth strengthened.    

Teejay Lanka, a joint venture between Sri Lanka’s textile giant Brandix Lanka Limited and Hong Kong-listed Pacific Textured Jersey Holdings Limited, suffered declining profits in multiple quarters due to the higher cotton-yarn prices—the firm’s primary raw material—challenging the sale prices and margins, end of tax holidays and higher energy costs.

The company on April 26 said its Chief Executive Officer Sriyan de Silva Wijeratne had decided to step down citing personal reasons, ending his four-and-a-half-year stint at the company.

However, Wijeratne will stay in the company and the director board till July 3 to facilitate the smooth transition of responsibilities to his successor, Shrihan Perera, a former CEO of Brandix Knit Apparel Division, who took office on May 1.

Meanwhile, the sales rose by 13 percent YoY to Rs.6.6 billion while the cost of sales, which largely comprises of cotton-yarn purchases, rose by the same percentage to Rs.5.8 billion.

The gross profit grew by 11 percent YoY to Rs.731.8 million.
The Teejay Lanka share was down 50 cents or 1.70 percent yesterday to end the day at Rs.28.90.  
Teejay Lanka Chairman Bill Lam attributed the group’s performance to a mix of factors from capacity expansion, higher efficiencies, innovations and the group’s growing product portfolio.

The group administrative expenses declined by 15 percent YoY to Rs.293.6 million, while the growth in distribution expenses was contained at 4.0 percent to Rs.35 million.

Meanwhile, for the year ended March 31, 2018, the company, which also has operations in India, reported earnings of Rs.2.27 a share or Rs.1.59 billion, down 19 percent YoY.

The sales grew by 12 percent YoY to Rs.24.7 billion but the gross profit declined by 4.0 percent YoY to Rs.2.95 billion.

The steady cotton-yarn prices, competitive market conditions during the first half of the year and teething issues during capacity expansion challenged the margins, the company said. Meanwhile, the corporate income tax rose to Rs.239.3 million for the year from Rs.52.2 million in the previous year.

Lam said the company’s Indian operations’ capacity expansion has improved significantly and was at normalized performance levels at the end of the fourth quarter.

He also said the group had positioned itself to yield the benefits of GSP Plus and the operations are at optimal capacity.

“Strategies have been initiated to keep pursuing new opportunities from leveraging our regional footing, providing flexible and better solutions and to broaden our customer portfolio,” Lam added.

As of March 31, 2018, Brandix Lanka Limited held a 33.08 percent stake in Teejay, followed by Pacific Textured Jersey Holdings Limited with a 27.09 percent stake.