Teejay see decline in net profit over high cotton prices, taxes

Teejay Lanka Plc a Sri Lankan export fabric maker are facing decline in the Net Profit 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. The Group recorded decline in net profit by 37 percent to Rs370 Mn for the quarter ending 30 September 2017 against last year’s Rs590 Mn

Sales rose 16% to Rs6 billion, according to interim accounts filed with the stock exchange.

Teejay Group chairman Bill Lam said that 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 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 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

On the other hand, 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. Moreover, the higher cotton yarn prices persisted, thereby depressing margins compared to the prior year.