Teejay ends Q3 with revenue growth of 33% despite challenges

• 66% growth in dividends and Regional Expansion Plans for long term growth

The Teejay Group who recently went through a rebranding process which consolidated its operations in Sri Lanka and the region under the single brand ‘Teejay’, announced a strong revenue growth of 33% over the nine months ended 31 December 2016. The Group recorded a revenue of Rs. 16.4 billion compared to the Rs. 12.3 billion during the corresponding period last year and announced a 66% growth in dividends to shareholders.

Chairman of Teejay Bill Lam said that this was achieved through continually operating at optimal capacity, with a full order booking during the period; and that the growth in the top line was a result of additional orders being canvassed to cater to the future growth stage of the company. Even though there were higher sales, the gross profit growth was only 27%, with Rs. 2.4 billion compared to that of last year’s Rs. 1.9 billion, he added

The Chairman further said that a combination of factors had affected the Group’s gross profit, including the acceptance of extra lower margin orders in preparation for growth, price competition, early investments towards future expansion, the product mix, and the overall impact of steep short term price hikes in raw material. The Group’s profit before tax (PBT) is reported as Rs. 1.6 billion compared to the Rs. 1.4 billion last year, an increase of 16%. This result has been diligently supported by solid cost management and control across the entire group.

Another impacting factor was taxation, as Teejay Lanka’s tax holiday ended in September 2016; while both Teejay India and Teejay Prints ares ubject to tax. The tax bill grew 281%, going up to Rs. 150 million from Rs. 39 million the previous year. Despite this situation, the Group reported an absolute profit after tax (PAT) of Rs. 1.5 billion, compared to the Rs. 1.3 billion last year, showing an increase of 9% during the same period.“The Teejay Group continues to keep a sharp eye on its cash flow disciplines and has carried through a strong balance sheet from the previous quarter, with a cash balance of Rs. 4 billion. The consolidated earnings per share for the Group recorded Rs. 2.10 on a year-on-year basis, showing a growth of 3%, although there was a 34% drop in growth during the quarter under review due to the challenges discussed above,” says Lam.

The Chairman said: “The Group is embarking on its final lap of the second half, setting the foundation for its long-term growth plans. The business is watchful of future market challenges, with a close eye on price fluctuations in the market and increasing changes in the product mix. Despite these short-term impacts which have been somewhat overcome now, our aspirations remain ambitious and aggressive, as we continue to explore new ways of further extending our footprint.”

On a quarterly basis, the Group reported a revenue growth of Rs. 6.3 billion compared to the Rs. 5.6 billion recorded last quarter, showing a growth of 14%. However, gross profits dropped by 15% for the third quarter to Rs. 832 million. Apart from the above, a temporary countrywide stock outage in coal was also a contributory factor, with energy costs rising due to the coal plant not being able to function at maximum capacity during some of the period under review. This resulted in a further deterioration of PBT for the quarter, recording a 20% drop in operating profits. Since the impact of GP could not be adequately mitigated by the tighter overhead controls in place, the Group reported a net profit of Rs. 473 million compared to Rs. 672 million during the same quarter last year.

CEO of Teejay Sriyan de Silva Wijeyeratne says that despite minor setbacks, Teejay will forge ahead with new plans for expansion and growth. “Our aggressive enhancement in Divided with this interim Rs. 1 per share payment is a clear indication of our confidence in the future potential we possess. We aspire to develop a culture of service in manufacturing by creating bonds that matter. We are already investing further in automation and technology, and innovation is at our core.  We are preparing to embrace the future dynamics and trends in the textile industry, especially with the new demand for synthetics and digital prints and we are poised and ready to benefit from those changes. Our expansion plans are moving according to plan, and the company will benefit from added capacity in the near future,” he stated.

“The prospects of GSP+ in the near future would further augment the Group’s progress, as all our added capacity in India and Sri Lanka will become eligible for this benefit,” he added.

Teejay is listed on the Colombo Stock Exchange and supplies some of the best international brands across the world.  The company was named among the Forbes ‘Best under a Billion in Asia’. The Group is backed through shareholding by two leading industrialists: Pacific Textiles, a Hong Kong based company with one of the largest manufacturing facilities in China, and Brandix Lanka, Sri Lanka’s largest apparel exporter, and partners Teejay as a strategic link in the supply chain.