High cotton prices, taxes trim Sept quarter profits at Sri Lankaâ€™s Teejay
ECONOMYNEXT – Sri Lankan export fabric maker Teejay Lanka Plc reported net profit fell 37% to Rs370 million in the quarter ending 30 September 2017 from a year ago owing to softer demand, higher cotton prices and the ending of its tax holiday.
Sales rose 16% to Rs6 billion, according to interim accounts filed with the stock exchange.
Earnings per share in the September 2017 quarter were 53 cents. The share was trading at Rs37.50 Wednesday.
EPS for the six months to 30 September 2017 were 84 cents with net profit down 40% to Rs590 million and sales up 15% to Rs11.5 billion.
The Net Profit declined due to the challenges in the markets which saw softer demand, coupled with continuing high raw material price escalations and the ending of the tax holiday, and the Group recorded Rs370 Mn for the quarter, against last year’s Rs590 Mn for
Teejay Group chairman Bill Lam said the group was increasing capacity in India with the order book growing especially after Sri Lanka got back the GSP Plus trade concession allowing duty free imports to the European Union.
“The net profit declined due to the challenges in the markets which saw softer demand, coupled with continuing high raw material price escalations and the ending of the tax holiday,” he said.
The higher cotton yarn prices persisted, thereby depressing margins compared to the prior year, he said.
“The commissioning of extra capacity in India is gradually enabling greater volumes of business and certain economies of scale, and further aided by GSP. Thus, the Group increased its profitability quarter-on-quarter by 68%.”
Teejay Lanka also has been impacted with the ending of its tax holiday from September 2016 onwards and both Teejay India and Teejay Prints are now subjected to tax, Lam said.
Taxes within the group increased from Rs27 million to Rs79 million, a 189% increase.
Lam said Teejay Group is “gearing up for its peak quarters, with the GSP benefit already bringing in surges in EU business and expected to strengthen the customer portfolio, and the US base making strong demands for higher volumes.”
(COLOMBO, November 01, 2017)