COLOMBO: Sri Lanka based Teejay Lanka, a fabric maker said profits plunged 45 percent to 219 million rupees in the June 2017 quarter from a year earlier with cotton prices up, but its already seeing higher demand from duty free access to the European Market. Revenues rose 13 percent to 5.4 billion rupees but expenses rose at a faster 19 percent to 4.8 billon rupees, shrinking gross margins 17 percent to 604 million rupees.
Cotton prices which rose in the last quarter of 2016 has remained high, Chairman Bill Lam told shareholders. But he expects better prices in the future. “Other factors included competitive sales pricing which prevented us promoting any price hikes and the growth product mix,” he said. “With the expansion in India underway, overheads have also increased mainly through depreciation related costs increasing for the quarter.” Teejay Lanka has ended its tax holiday from September 2016, and group tax had increased to 72 million rupees from 44 million rupees a year earlier. “The overall market remains competitive with the price swings and high demand for low cost products which posed challenges on selling prices and margins,” Lam said. “However, cotton price volatility is expected to ease out during the third quarter of the new financial year. Also with the GSP benefit, a potential surge in EU business is expected and is already being observed.”
