Following is an interview with Teejay Lanka CEO Shrihan Perera, which is a part of an interview series of S&P SL20 companies conducted by the Colombo Stock Exchange in partnership with Mirror Business.
Excerpts:
What are the key milestones Teejay Lanka PLC has achieved so far in 2019?
Financial year 2018/19 has been a very fruitful year for Teejay. We were able to achieve many milestones operationally and financially.
Team Teejay was able to secure orders from two of leading global apparel brands: Nike (the world’s most valuable apparel brand) and Uniqlo (Japanese based, the largest casual wear brand in Asia). This expands our strategic customer portfolio to 8 leading retail brands from Europe, USA and Asia. Our customer portfolio includes PVH (CK and Tommy), Calzedonia (Intimissimi & Tezenis), LBrands (VS), Decathlon, Marks & Spencer, Nike, Uniqlo and LIDL.
With the help of our valued customers we were able to double our business during the last 5 years to US$ 100 million and we are well on our way to cross the US$ 200 million mark by 2020.
We were also able to secure the ‘Best Exporter Award – Textile sector’ at the 2019 Presidential awards presented by the Export Development Board of Sri Lanka. This was our debut vying for this prestigious award and this achievement reiterates the journey of growth Teejay was able to accomplish the past year.
Another key milestone was the implementation of the “Operational Excellence” (OE) journey, through which we were able to establish the Sales & Operations Planning (S&OP) tool enabling seamlessly integration of our Supply Chain planning and monitoring functions. This eliminates wastage, implements the use of standardized software tools and conforms our processes to world class standards.
Please outline the three most important macro trends that you believe will impact the industry you operate in?
One of the key topics shaping the global business landscape in recent times has been the US–China trade discussions. These discussions have to compel retailers to seek alternate sourcing destinations and this had a positive surge on the order placement into this region.
One of the foremost trends making waves at the fashion industry is sustainability. Our customers demand more accountability from its value chain partners of product creation. To facilitate these requirements Teejay has already taken initiatives and have created a carbon neutral product. This philosophy of innovation is embedded in our DNA, and we will continue to create sustainable business models concentrated on eco - product developments and innovation.
The most important macro trend which impacts Teejay is the cotton price fluctuations. We were faced with continuous hikes in cotton prices during the past 24 to 30 months which significantly impacted our profitability.
The first half of 2019/20 saw cotton prices stabilizing and we expect to see this trend continues during the short to medium term.
Could you elaborate a few growth prospects for the company going forward and how you intend to capitalize on these growth opportunities?
With the increasing potential in the leisure sector, there is a growing opportunity in the synthetic market. Our initial investment in synthetics already yielded phenomenal product capabilities while fully optimizing capacity with orders from PVH and Intimissimi. Our 2nd phase synthetic investment will be done in India to fully capitalize the growing demand for these products.
We also expect growth in demand from our new strategic customers namely Uniqlo and Nike. With the “Narrow and Deep” strategy we focus on creating partnerships with our customers. Therefore, we are motivated to create a strategy of growth with our valued partners.
Another such growth area we will be capitalizing on, will be the focus on sustainable products and innovation. As mentioned earlier with the increased demand for Green products Teejay has already made headways with the introduction of fabric produced from recycled PET bottles. This fabric has already been sold to CK PVH, and our skillful development teams are working on creating many such innovations for the future.
As the next significant boom in the apparel sector is expected in Africa and Bangladesh, we are preparing to use the strategic location proximity to our advantage through our vendor partnerships. With the help of our key vendors Brandix, MAS, Hirdaramani and Omegaline we were able to venture into these new and exciting locations and capitalize
on this opportunity.
In your opinion, what challenges do you anticipate in the industry that you operate in?
The main challenge facing our industry is the cotton price fluctuations. As mentioned previously the prices have been volatile during the past 2 to 3 years andhave stabilized the first half of this fiscal year, but the impact from any price fluctuations will be high as Teejay has a high dependency on cotton yarn.
Another main challenge which Sri Lanka must prepare to face is the eligibility to GSP plus. Currently Sri Lanka has been graduated to the status of ‘upper-middle-income economy’ and since we remained in this status for the past 3 years there is a distinct possibility of Sri Lanka losing the GSP plus benefit in 2023. Therefore the industry must prepare for this inevitable future and invest on low cost structures and upgrade the value propositions to compete in the global market.
One of the foremost challenges in this industry is the intense competition which is driven mainly by cost. We at Teejay are not only competing for customers within the boundaries of Sri Lanka but are facing global competition. To withstand this challenge, we must continuously improve our product portfolio and quality while reducing our cost structure. Our customers are continuously searching for novelty products with easy access
which are cost-effective.
In the Sri Lankan context another major challenge faced by the industry is the infrastructure restrictions within the industrial zones (for Teejay its Seethawaka zone where we operate) we have a restriction on water and effluent.
These points act as a bottleneck for plants like Teejay to expand within Sri Lanka. Without the necessary investment and underline support in infrastructure the industry will struggle to grow. However, growth in India will be an option for Teejay in the future as the infrastructure expansion can continue unhindered; the major capacity enhancements having already taken place.
Focusing on the shareholder, what efforts and initiatives are you taking to drive shareholder value?
At Teejay, we are committed to conforming our processes to world class standards, concentrating mainly on lean manufacturing. This was achieved mainly through the implementation of the S&OP tool and from our journey of Operational Excellence. With the support of these two key initiatives we were able to make significant process improvements to reduce wastage and generate a seamless and end to end visible process.
We also adapted a new “Narrow and Deep “strategy with key 8 strategic Brands. This enabled us to aligned our goals with the customers requirements and create a strong sustainable partnership with our customers. This will enable us to expand business and enhance our capabilities and begin a journey of growth with our partners.
At Teejay we also believe that we need to evolve and adapt to the changing environment by enhancing our capabilities and sharpening our strategies. Sticking to our mantra we have ventured in to new and exciting Lace fabric business by creating a MOU with Luen Fung Textiles.
This collaboration will significantly enhance our product portfolio and enable us to offer a versatile product range which brings Teejay closerto being a one stop manufacturing destination for fabric.
Finally, what is your message to the shareholders of Teejay Lanka PLC?
Teejay has a very illustrious history in this industry and we will be celebrating 20 years of excellence next year. We were able to withstand the turbulent periods with resilience and maintained business with integrity and trust, producing quality products we are proud of.
We reached US$ 100 million mark in 2013/14, 14 years after commencing business and the US$ 200 million mark in 2018/19 swiftly 5 years after reaching the first milestone. Our growth has been rapid and we will continue our journey of growth by reaching
US$ 300 million by 2021/22.
We also took steps to grow organically by way of internal expansions and inorganically by acquiring Quenby Lanka (Teejay Prints) and Ocean India(Teejay India).
Teejay took charge of both plants and with a remarkable turnaround was able to generate profits within the first year of acquisition and thus establishing itself as a regional player.
We have made many significant investments in technology and modernizing the plants to create a sustainable business model by way of using less power and water.
At the heart of it all lies our most valuable asset, our people who consistently keep redefining boundaries, embracing possibilities, and welcoming new ways of looking at our business. We always place a high emphasis on their growth and wellbeing. We make sure our workforce is best in class by way of providing all employees with year round customised
training programmes.
We groom them for positions of future leadership and provide them stability by creating clear career paths, a road map for their future and succession plans.
One such customised programme we are providing for our staff and associate carder employees with, is the diploma & certificate programme in affiliation with Sri Lanka Institute of Textile and Apparel (SLITA).
The total cost for this programme is borne by the company and we encourage all employees to enroll for this programme for their career progress.
Teejay is also focused on giving back to the community through our strong CSR programmes. Our CSR footprint is primarily focused on the development of the vicinity which is concentrated on water and sanitation projects. These initiatives are headed by our top management and embraced by our employees with enthusiasm, as giving has always been part of Teejay culture.
At Teejay we also take care of our own, through the ‘Reach Beyond’ programme we evaluate employees whose standard of living needs improvement and we support them financially to
uplift their life standard.
Our Group is focused on a ‘Narrow & Deep’ strategy with all our strategic customers and this momentum of growth is expected to continue as our strategic customers collaborate with Teejay in our journey of growth. Together with maximum capacity utilization and the positive changes done in the product mix your Group is en route to reach its Mission of achieving US$ 300 million by 2021/22.
