Teejay Lanka records modest profit growth in December

Teejay Lanka PLC ended four quarters of profit declines to record a modest gain in profits in its December quarter (3Q18) as the higher volumes beat the pressing margins due to competitive prices and the higher yarn prices. 

The company reported earnings of Rs.496.5 million or 71 cents a share for the period, a 5 percent increase from the same period last year.  On a quarter-on-quarter basis, the group registered a 34 percent increase in earnings from Rs.371 million in the September quarter. 

The net profit margin of the group remained at 5.97 percent as of December 2017, well below 8.93 percent it enjoyed a year ago. 

Teejay Lanka said the change in the direction of the bottom line performance was due to higher sales volume resulted from the restoration of GSP Plus concessions and the company performing at optimal capacity. 

The group top line rose by 5.0 percent year-on-year (YoY) to Rs.6.6 billion, the interim results filed with the Colombo Stock Exchange showed.  Besides above, the capacity expansion in the group’s Indian operations also added fillip to the revenues despite the last phase of the capacity expansion facing some teething issues.

Teejay Lanka has two subsidiaries in India—Teejay India and Teejay Prints— the group’s two supply chain partners, which were fully acquired a couple of years ago.
 “However, the cotton price, which is a key component in our yarn, continued its upward trend as the global cotton prices stood strong and continue to increase. The potential profits in the quarter were adversely impacted as a result”, Teejay Lanka Chairman Bill Lam said in an earnings release. 

Lam said the group remains cautious over its future due to challenges that stem from the intensely competitive pricing in the backdrop of increasing raw material prices.

The company invested close to a billion rupees during 2017 for added finishing and knitting capacity in Sri Lanka. 

Meanwhile, for the nine months ended in December 31, 2017, the group reported a net profit of Rs.1.1 billion or Rs.1.54 a share compared to Rs.1.46 billion or Rs.2.10 a share reported during the corresponding period, last year. 

The top line grew by 11 percent YoY to Rs.18.1 billion while the gross profit fell by 9.0 percent YoY to Rs.2.2 billion due to above mentioned challenges.  

The company on January 26 announced an interim dividend of 70 cents a share. This is 30 cents below the interim dividend declared a year ago.  

As at December 31, 2017, Brandix Lanka Limited and Pacific Textured Jersey Holdings Limited held 33.08 percent and 27.91 percent of the company, respectively.  
Stewart Investors Asia Pacific Fund sold 19 million of Teejay Lanka shares during 3Q18, but still remains the third largest minority shareholder with 31.6 million shares or 4.5 percent stake.