Textured Jersey Lanka PLC (TJL), Sri Lanka's leading provider of knit fabric to major global brands such as Victoria's Secret, Marks & Spencer, Intimissimi and Decathlon, reported Rs. 365mn in net profit for the quarter ended 31st December 2012 (3Q FY2012/13), growing 95% compared to the same period last year, as per the financial results released to the Colombo Stock Exchange (CSE).
This has resulted in the company surpassing last year's full year profit in just the first nine months of the current year, a noteworthy achievement given the challenging market conditions. Additionally the company declared a generous interim dividend of Rs. 0.66 per share representing a substantial 62% pay-out.
In his release to the CSE, Textured Jersey Chairman Mr Bill Lam stated that as a result of "innovative and responsive product realignment strategies coming into fruition in the quarter under review, the company was able to achieve much higher sales volumes." As a result of higher margin products being added to the sales mix, combined with industry-leading production efficiencies, lower yarn costs and the depreciation of the Sri Lankan rupee, a substantial increase in gross profit margins was noted in 3Q FY2012/13. Gross profits for the quarter reached Rs. 460mn, a 26% year-on-year increase. According to Mr Lam's statement, "higher sales volumes also compensated for the lower average selling prices, enabling TJL to maintain revenue at Rs. 2.86bn for 3Q FY2012/13, a mere 7% lower than the corresponding quarter in the previous financial year."
TJL's operating profit for 3Q FY2012/13 came in at Rs. 354mn, a significant 55% increase year-on-year. This was largely due to a 23% decrease in administrative expenses and a 24% decline in selling and distribution expenses compared to the same period of the last financial year.
Additionally, TJL recorded a finance income of Rs. 11mn for the quarter, compared to a finance expense of Rs. 40mn during the same period of the last financial year. In his statement, Mr Lam attributed this to TJL's strong balance sheet position as at 31st December 2012, with zero long-term borrowings, Rs. 53mn in short-term borrowings compared with Rs. 1.42bn as at 31st December 2011, and a healthy cash balance of Rs. 2bn.
Mr Lam stated that higher operating profits and a strong cash position allowed TJL to record a net profit of Rs. 365mn for 3Q FY2012/13, up 95% compared with the same period in the last financial year. He also pointed out that as a result of the strong growth in profits, the cumulative net profits for the nine months ended 31st December 2012 reached Rs. 694mn, surpassing the FY2011/12 full year profit of Rs. 628mn.
Looking towards the next quarter, Mr Lam's statement said, "With a strong order book driven by encouraging results from new product lines and continued interest from TJL's top clients, the management is confident in maintaining sales volumes for the next quarter as well. Combined with diligent management of operating costs and overheads, this will keep TJL on track to record strong results for 4Q FY2012/13 and the full financial year."
Commenting on strategic initiatives, Mr Lam stated that "the construction phase of TJL's multi-fuel boiler plant commenced during the quarter. The plant, which will reduce TJL's energy cost substantially, is scheduled to be commissioned during 2H FY2013/14." He also stated that TJL's expansion strategy is moving forward according to schedule. Mr Lam concluded his statement by mentioning that given the positive outcome thus far, TJL's management remains confident that the company will continue to enhance shareholder value and deliver strong results in the coming quarter and end the financial year on an impressive note.
