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TJL Demonstrated Its Operating Excellence by Doubling Net Profits

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Core Tip: Textured Jersey Lanka PLC(TJL),Sri Lanka's premier manufacturer of knit fabric,demonstrated its operating excellence by doubling net profits for the quarter ended 30 Septem

Textured Jersey Lanka PLC(TJL),Sri Lanka's premier manufacturer of knit fabric,demonstrated its operating excellence by doubling net profits for the quarter ended 30 September 2012(2Q FY2012/13),as per the financial results released to the Colombo Stock Exchange(CSE).The company recorded a net profit of Rs.157mn for the quarter versus Rs.78mn during the same period in the last financial year,a feat achieved despite the slowdown in the global economic environment.

TJL was able to improve margins at every level for the quarter.Gross profits reached Rs.210mn for 2Q FY2012/13,up 7%year on year,despite a 29%decline in sales revenues.Gross profits were also up 10%year-on-year for the first half(1H)of FY2012/13 as well.In his release to the CSE,Textured Jersey Chairman Mr.Ashroff Omar cited improved production efficiencies,stricter management of overheads,lower yarn costs and the Sri Lankan rupee depreciation as the reasons behind this improvement.

Operating profits for 2Q FY2012/13 increased by a significant 86%compared to the same period in the last financial year.This was achieved through a substantial 49%year-on-year reduction in administrative expenses and a 43%reduction in distribution expenses for 2Q FY2012/13.These reductions were attributed to stricter cost controls and a reversal in provisions.

Additionally,through strong cash flows and working capital management,TJL was able to reduce debt and generate a finance income of Rs.7.1mn for the quarter,as opposed to a Rs.2.4mn finance cost during the same period in the last financial year.Mr.Omar mentioned that this was achieved through a significant reduction in short-term borrowings to Rs.178mn as at 30 September 2012 from Rs.1.7bn as at 30 September 2011,and the complete elimination of long-term borrowings.

The combined result of margin improvements through operating efficiencies,frugal cost management,strong working capital and cash management enabled TJL to record an impressive 101%year-on-year increase in net profits for 2Q FY2012/13.Net profits were also up 48%year-on-year for 1H FY2012/13 as well.

Looking towards the next quarter,Mr.Omar's statement said,"Even though market conditions are likely to remain challenging next quarter,management is confident of a boost in sales volume owing to a strong order book with renewed interest from TJL's top clients,which include Victoria's Secret,Marks&Spencer,Intimissimi and Decathlon".He also mentioned that TJL was likely to continue on a strong profit growth trajectory for the next quarter as well,owing to the diligent management of operating costs and overheads.

On a more strategic note,Mr.Omar mentioned that the conceptual designs and regulatory approvals for TJL's multi fuel boiler plant have already been completed and construction is expected to commence in 3Q FY2012/13.

Once operational,this project is expected to reduce TJL's energy costs substantially.Further,according to the statement,the acquiring of a fabric mill within the region as a part of TJL's expansion strategy is moving forward according to schedule.

Mr.Omar concluded his review by stating that the management of TJL remain confident that with the current diligent planning,process streamlining and efficient controls in place,the company will continue to enhance shareholder value and deliver strong results in the coming quarter as well.

Textured Jersey is a Public Limited Liability Company with two of the best brands in the industry as major shareholders,Pacific Textiles and Brandix Lanka.

Brandix Lanka is the country's largest apparel exporter servicing the world's finest brands,and partners Textured Jersey as a strategic link in the supply chain.

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