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Sri Lanka’s Teejay expects supply chain shake-up, lower cotton prices to help

ECONOMYNEXT – Sri Lanka’s Teejay Lanka Plc, a weft-knit fabric maker for foundation garments which shifted to mask cloth during a Coronavirus crisis says, a global shift in supply chain diversification and lower cotton prices, will moderate the effects of the crisis.

“Looking ahead, the US-China trade tensions could have positive ramifications for garment centres such as Sri Lanka and others within the South Asian region,” Chairman Bill Lam told shareholders in the annual report.

“Supply chain strategising to maintain the total supply chain within a country and mitigating its reliance on a single destination may become a reality in the future, with consolidation within industries also being part of the Covid 19 impact.”

Teejay has shifted to making personal protective equipment (PPE) fabric making.

“This strategic decision was made to ensure that in case COVID-19 lingers for longer than expected or is there is a second wave,Teejay can continue manufacturing masks,” Lam said.

“On the other hand, if COVID-19 is brought under control soon and economic recovery in export markets is seen, Teejay can revert to business as usual, supported by its strong relationships with buyers.”

The firm said its knit fabric for women’s undergarments and loungewear may not “fully impact” the company as they are essentials in comfort wear.

Many end-market stores in the US and EU were closed but there was potential for new PPE customers.

But there has been demand from supermarket customers in the US and EU while there was also demand from Asia, though margins are expected to decline.

Falling cotton prices in recent weeks will help, he said.

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The firm in a stock exchange filing said the Central Environment Authority has made an inquired about the process followed in disposing sludge on July 16.

“We have had discussions with the BOI and CEA and responded to the CEA accordingly,” the firm ssaid.

“We reiterate that the matter has been resolved by Teejay Lanka Plc and that we are carrying out operation with all necessary approvals and guidelines provided for under the Environmental Protection License.”

Teejay Lanka posted profits of 421 million rupzs for the March quarter down from 605 million rupees last year. In the year to March the group posted profits of 2.3 billion rupees, up 26 percent from 1.85 billion last year.