Teejay Lanka to up revenues to US$300mn with productivity driven capacity boost

Teejay lanka plant

ECONOMYNEXT – Teejay Lanka Plc, a apparel maker which has operations in Sri Lanka and India is planning to grow revenues 50 percent in the next three years, riding a shift of production from China, and output growth based on productivity gains, an official said.

South Asian Shift

“What we are seeing is a movement of orders out of China and the South Asian subcontinent is a key beneficiary gaining from this trend,” Teejay Lanka Director Hasitha Premaratne said.

“Teejay being a fabric player out of the both India and Sri Lanka has been benefiting from this trend.”

In the year to March 2019, Teejay Lanka group revenues grew to 31 billion rupees from 24 billion rupees in 2018, ( 191 million US dollars from 162 million dollars in 2018.)

In the next two to three years, the firm is planning to grow to 300 million US dollars.

In Sri Lanka most export firms call for currency deprecation to gain a price advantage by cutting real wages of factory workers. However, Teejay will boost productivity.

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The firm plans to boost output 40 percent in Sri Lanka.

Productivity based growth

Instead of building new factories, which will also push up fixed costs, Teejay will maximize the use of remaining space in India and Sri Lanka, and replace older machinery with new ones with higher capacity.

The firm will also move to higher value products.

“We will go up the value chain with more sophisticated and innovative products,” Premaratne says.

In July Teejay tied up with LFT in China to produce lace.

Teejay profits grew 62 percent to 453 million rupees in the June 2019 quarter from a year earlier, as revenues grew 19 percent to 8.1 billion rupees, helped by strong orders and also some currency depreciation.

Earnings grew to 65 cents a share from 40 cents for the quarter.

Volatile cotton prices remain a risk for the firm.

Teejay cannot fully pass on cotton prices when prices go up, but it also tries to recoup margins by delaying price cut when cotton prices ease.

Market Penetration

Teejay Lanka’s top customers are Western brands, who have production units mainly in Sri Lanka and India.

Among top brands using Teejay fabric are Marks and Spencer Victoria’s Secret, Intimissimi and Decathlon.

Some of the production that is going out of China is moving to Bangladesh, which is becoming the second largest apparel hub in the world.

Teejay is already making shipments to apparel plants in Bangladesh.

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Africa is another emerging opportunity, which is growing fast from a low base. Last year only about 2 percent of revenues came from the continent. This year it will double.

Many Western brands sell in Asia but their main focus are western markets. To get into Asia, Teejay has been roping in Asian brands like UNIQLO.

“Asia is growing fast and we want to share a part of Asia’s growth,” Premaratne said.(Colombo/Sep02/2019)