Teejay stays on trajectory in 3Q with net profit of Rs.778.4mn

Top textile manufacturer Teejay Lanka PLC has reported a profit before tax of Rs.951.8 million and a net profit of Rs.778.4 million for the third quarter of 2020-21, achieving a growth of 12 percent and 8 percent, respectively, over the corresponding three months of the previous year.

The quarter’s performance also reflects the continuing trajectory of improvement since the start of the current financial year. Teejay Lanka converted the first quarter’s net loss of Rs.31.5 million to a net profit of Rs.631.3 million for the second quarter and its net profit for the third quarter represents a further increase of 23 percent over the preceding quarter.

While improving the net profit, Sri Lanka’s only multinational textile producer posted a revenue of Rs.8.5 billion for the three months, down 4 percent over the corresponding quarter of 2019-20 and a decline of 3.4 percent over the preceding quarter but the company has expressed confidence that it is on course to achieve its target of becoming a US $ 300 million business in the years ahead.

The impact of the extreme adversity of the first quarter of the year however continued to be visible in the group’s results for the nine months ending on December 31, 2020. Revenue was down 16 percent to Rs.22 billion, pre-tax profit declined by 26 percent to Rs.1.748 billion and net profit for the period at Rs.1.378 billion reflected a negative growth of 30 percent, according to the financial statements filed with the Colombo Stock Exchange (CSE).

Teejay Lanka PLC has declared an interim dividend of Rs.1.65 per share to be paid to all shareholders for the year.

In his observations on the group’s performance, Teejay Lanka Chairman Bill Lam said the operational excellence initiatives launched throughout the company had resulted in greater control of non-operational and non-strategic costs and enabled the group to reduce distribution and administration expenses by 21 percent and 4 percent, respectively, compared to the corresponding quarter of the previous year. 

“However, greater emphasis was given to added health and safety-related expenses to keep our employees safe,” Lam said.

“The safety of our workforce is the number one priority of the group and we will continue to invest in all activities to protect employee well-being as the risk of COVID-19 continues.”

Teejay Lanka CEO Pubudu De Silva disclosed that in line with the group’s target of achieving a revenue of US $ 300 million as well as the growing opportunity of orders moving to the South Asian region, Teejay has ventured into a new and exciting expansion project in Teejay India, which entails construction of a new production plant with warehouse facilities and an investment in flexible machinery, which can convert from cotton production to synthetic material production. 

With this new development set to take place in two phases and completed by 2022, Teejay foresees that it will be able to increase its overall daily production capacity by 20 tonnes, to reach a production level of 55 tonnes a day, which is a 57 percent increase in daily capacity, he said.

“We have seen a growth momentum from all our strategic customers and vendor partners and this is expected to continue into the future,” De Silva said. 

“The group is continuing its focus on developing exciting new innovative products, keeping synthetic activewear and sustainability at the forefront. This has enabled us to attract many new customers,” he added but cautioned that the price hikes of raw materials, in particularly cotton, coupled with the delays experienced on the global logistics map, would pose challenges to Teejay in the months ahead.

Teejay Lanka continued with the practice of maintaining a strong balance sheet in the quarter reviewed and recorded a net cash balance of Rs.8.2 billion, as at December 31, 2020, keeping the company net debt free.