Textured Jersey Lanka PLC (TJL), Sri Lanka's leading provider of knit fabric, has delivered an impressive Rs. 1.02bn in net profit for the full year ended 31st March 2013 (FY2012/13), an increase of 62% year on year, as per the latest results released to the Colombo Stock Exchange (CSE). A combination of a strong order book consisting of major customers such as Victoria's Secret, Marks & Spencer, Intimissimi and Decathlon, improved operational efficiencies and strict control of overheads supported by a strong balance sheet allowed TJL to surpass the Rs. 1bn milestone in net profit for the year. Besides this impressive performance, Textured Jersey has also maintained its generous dividend policy and paid out an interim dividend of Rs. 0.66 per share in March 2013, representing a pay-out of 62% of its 9 month profit ending 31st December 2012. Further, its share price has outperformed the ASPI with an increase of 54% during the 12 month period ending 6th May 2013 versus a 13% increase in the ASPI.
For the quarter ended 31st March 2013 (4Q FY2012/13) TJL reported a profit of Rs. 323mn - a 48% year-on-year increase. However, as per the release to the CSE by the Chairman of TJL, Mr Bill Lam, although the company achieved improved efficiencies and a better product mix, quarterly margins were affected by a rise in cotton prices and the typical lag in selling price adjustments. As a result, gross profit for the quarter came in at Rs. 355mn - a 31% decrease year-on-year. In addition to this, according to Mr Lam's statement, during the corresponding quarter last year TJL benefitted from a sharp drop in cotton prices, which makes the year-on-year decline during 4Q FY2012/13, more pronounced. However, on an annual basis, the improved margins during the year resulted in gross profit for FY2012/13 remaining at Rs. 1.3bn, a marginal 1.5% below last year's figure despite revenue for the year being 10.5% lower compared to last year.
Referring to the overheads, Mr Lam stated that "TJL maintained a tight control on overheads, reducing administrative expenses by 64% and selling and distribution expenses by 12% in 4Q FY2012/13 compared to the same period in the last financial year." Despite this, due to the lower quarterly gross profit, TJL's operating profit for 4Q FY2012/13 was Rs. 288mn, a 21% decrease year-on-year. The annual operating profit for TJL, however, was 15% higher than the previous year, reaching Rs. 956mn for FY2012/13. Mr Lam attributed this to the strict approach taken towards cost control during the year.
Additionally, TJL recorded a finance income of Rs. 33mn for the quarter, compared to a finance expense of Rs. 112mn 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 March 2013, with zero long-term borrowings, Rs. 371mn in short-term borrowings compared with Rs. 657mn as at 31st March 2012, and a healthy cash balance of Rs. 2.21bn.
Mr Lam stated that tight control of overheads and a strong cash position allowed TJL to record a net profit of Rs. 323mn for 4Q FY2012/13, up 48% compared with the same period in the last financial year. He also pointed out that this, combined with an impressive performance during the rest of the year, pushed TJL's net profit over the Rs. 1bn mark to Rs. 1.02bn for the year ended 31st March 2013, a 62% year-over-year increase.
Further, according to Mr Lam's statement, a strong order book with new product lines and continued interest from TJL's top clients will enable the company to maintain sales volumes for the next quarter as well, and as TJL begins to pass through cotton price increases, the management expects to regain margins in the coming quarters.
Commenting on the strategic initiatives, Mr Lam stated that "the construction phase of TJL's multi-fuel boiler plant is progressing according to plan. 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 with detailed evaluations to ensure strong Return on Equity (ROE). 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 the next financial year.