Textured Jersey 2Q profits dip, upbeat 1H

Monday, 14 November 2011 00:00 - - {{hitsCtrl.values.hits}}

Textured Jersey Lanka Plc (TJL) saw net profits plunge 41% in the three months ending September 2011 to Rs. 78 million as sales increased 38% to Rs. 3.3 billion.

As the company was carrying inventory purchased two to three months prior to the quarter, at a relatively higher price, the profit margin during the second quarter was impacted compared to same quarter last year.

As the cotton price volatility eases off, the company expects profit margins to improve from the current levels, Chairman Ashroff Omar said in his review.

In the first half net profit increased 14% to Rs. 222 million as sales in grew 36 % to Rs. 6.07 billion. The turnover growth was supported by both price and volume increases, Omar said in his review.

“High cotton prices in the global market, compared to last year, resulted in increased selling prices, as the company was successful in passing on a significant portion of the raw material cost increases to its customers,” he said.

Meanwhile, business volumes also improved during the period under review. This was due to further penetration into its key customers. The second quarter alone recorded a 38.8% growth in revenue to Rs. 3.4 billion, compared to the second quarter of the previous year, confirming the strong momentum in business growth, Omar said.

Gross profit increased by 16.5% to Rs. 449 million during the first half of FY2011/12, compared to Rs. 385 million in the first half of FY2010/11. Global cotton prices fell sharply during the first quarter of FY2011/12 and the company had to reduce its selling prices to accommodate this trend. “This was consistent with our policy to increase selling prices when cotton prices were on an upward trend.”

Selling and administration expenses in the six months rose 15% to Rs. 212 million and operating profits improved 17.8% to Rs. 236 million. Net finance cost rose 142.3% to Rs. 14 million and profit before tax grew 14% to Rs. 222 million. The company did not pay tax having no liability.

“Looking ahead, the 3Q order book remains strong and the management team is consciously working towards executing the orders to drive performance,” Omar said. Sri Lanka’s apparel exports have increased 42% over the first eight months of 2011, indicating that Sri Lanka is still gaining market share. The top line momentum during the 2H of FY 2011/12 should continue.

Cost pressures remain challenging, but the management team remains confident of improving the performance to strengthen the fundamental value of the company, he said.

Earnings per share is 38 cents and the net asset value per share is Rs.7.41. The share last traded at Rs. 11.10-Rs. 11.30 levels.