Teejay ends 2022-23 with 70% revenue growth despite tough H2

Sri Lanka’s first multinational textile manufacturer Teejay Lanka PLC has ended 2022-23 with noteworthy revenue and gross profit growth demonstrating its resilience in the face of external challenges and higher taxation that pressured profits in the second half of the year.

In a filing with the Colombo Stock Exchange (CSE), the Group reported revenue of Rs 84 billion for the 12 months ending 31st March 2023, reflecting healthy growth of 70%. Revenue for the fourth quarter was up 28% to Rs 17.3 billion. The Group said revenue growth was the result of an increase of average selling prices on a YOY basis and the depreciation of the Rupee.

The Group posted gross profit of Rs 6.4 billion for the year, a 39% improvement over the previous year, but witnessed a drop in its gross profit margin from 8.1% to 6.9% in the fourth quarter when compared with the same quarter of the previous year, with capacity underutilisation in all three plants continuing from the third quarter due to the softness in the market, increases in fixed costs due to expansion, and higher operating costs.

The Group’s profit before tax for the year improved by 9% to Rs 3.1 billion, but declined by 54% to Rs 409.1 million for the fourth quarter. Income tax nearly tripled to Rs 984.4 million for the full year, and almost quadrupled to Rs 257 million in the fourth quarter as a result of an increase in the tax rate from 14% to 30%. Consequently, the Group’s net profit of Rs 2.1 billion for the year reflected a decline of 16%, while net profit for the fourth quarter was down 82% to Rs 152.4million.

Despite these challenges the Group ended the year with a noteworthy cash and cash equivalent balance of Rs 11.2 billion, an improvement of 36% over the preceding financial year as a result of liquidation of inventory.

Commenting on the challenges faced by the Group Teejay Lanka Chairman Mr Ajit Gunewardene said: “The volatility in the industry persisted throughout the financial year, with the second half of the year being worse than the first half. The Group remained resilient by implementing strategies and innovative solutions to buffer the effects of these external shocks. Although currently experiencing headwinds, we expect an improvement in the forecast year with a pick-up of momentum in the second half of the year.”

Teejay Lanka CEO Mr Pubudu De Silva said the Group views the upcoming financial year with an optimistic lens. “We have set up the necessary infrastructure and tools to consolidate our services. Digitalization, reduction of costs, new product development, improving synthetic capacity, and the upliftment and empowerment of our human capital will be our priorities going forward,” he said. “The immediate six months are expected to be faced with continuing volatility, but the Group is confident that it has deployed the necessary resources to remain resilient.”

Teejay Lanka was the first textile manufacturer in Sri Lanka to receive membership of the US Cotton Trust Protocol, and is a public quoted company with 40 per cent public ownership. The company is backed by Sri Lanka’s largest apparel exporter Brandix Lanka which has a 32 per cent stake. Pacific Textiles of Hong Kong, whose key shareholder is the Tokyo Stock Exchange listed Toray Industries Inc., owns 27 per cent of Teejay Lanka.