Teejay Lanka reports losses in 1Q amid drop in sales volumes

Fabric maker Teejay Lanka PLC reported losses for the quarter ended June 30, 2023 (1Q23) amid a considerable decline in the group’s top line performance.

The group reported a loss of Rs.1.19 per share or Rs.853 million for the quarter under review, compared to earnings of Rs.1.74 per share or Rs.1.2 billion reported for the corresponding period of the previous year.
The group revenue fell 41 percent year-on-year (YoY) to Rs.13.9 billion. Teejay attributed the sharp decline in revenue to drop in sales volumes, rupee appreciation and fluctuations in raw material prices.
It posted gross profit of Rs. 283 million for the period, which it said is a demonstration of resilience in a period where industries were challenged with volatilities. 

Teejay’s gross profit margin reduced to 2 percent for the period, in contrast to 6.9 percent reported at the end of the fourth quarter of 2022-23.

“Capacity underutilisation that persisted in all three plants due to the softness in the market had played a contributing role in the mentioned decrease,” Teejay said.

“Further, the capacity expansion that took place in India introduced similar pressures as in the previous quarters while fixed costs incurred during the period too left a notable impact on the group’s GP margin,” it added. 

The administration and distribution costs of the group for the period under review decreased by 21 percent and increased by 16 percent respectively. 

The Teejay group took the initiative to establish presence in Bangladesh, and the costs associated during the said project led to the increase in distribution costs. Similarly, the capacity expansion that took place in Teejay India in the previous year led to the increase in administration costs. 

Teejay experienced a reduction in inventories during the quarter and is now at low levels, which is a positive sign as the entire supply chain has lowered its inventory levels.

“We continue to evaluate the ongoing changes in market dynamics and have begun implementing new long-term strategies and innovative solutions to navigate the effects of identified pressures, volatilities and challenges,” Teejay Lanka Chairman Ajit Gunewardene said.

Teejay Lanka CEO Pubudu De Silva added that digitalisation, setting and implementing a strong ESG framework, reduction of costs, new product development to improve revenue, improving synthetic capacity, and the upliftment and empowerment of human capital, thus enhancing resourcefulness, are considered the group’s priorities, going forward.
The company is backed by Sri Lanka’s largest apparel exporter Brandix Lanka which has a 33 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.