Wing Tak Bill Lam, a director of TJ and the company’s majority shareholder Pacific Textiles (PT), Hong Kong’s CEO (Pacific has a 45.6% stake in TJ pre-IPO) said that investments would be in the purchase of energy saving and water conservation equipment.
TJ, which makes knitted fabrics, plans to raise Rs. 1.2 billion from this IPO. Post IPO (the IPO opens on July 7), PT will have a 40% stake in the company and Brandix, the country’s top garment exporter with a US$ 400 million turnover, a 30% stake, and the public, the balance 30% stake.
Brandix’s Group Finance Director Trevine Jayasekara told this reporter that buyers are increasingly going for green products, though expensive. The garment industry’s major markets are the USA (41%) and EU, the rest, Ashroff Omar, CEO/director of Brandix Group and Chairman of TJ, told reporters.
Green products are the future, said Jayasekara.
“But last year the industry exported US$ 280 million worth of garments to other countries,” Ashroff added.
Lam said that investments in superior machinery and automation will not result in the pruning of staff. Fabric manufacture, unlike garment manufacture is not labour intensive, he said. “For instance PT which is a US$ one billion annual turnover company employs only 6,000;” he said.
Ashroff said that on the other hand Brandix which is a garment manufacturer and exporter making a US$ 400 million turnover, employs five times that number, a figure of 30,000.
Lam said that the knitted wear industry, which main raw material is cotton, in recent times underwent a turbulent period due to rising prices on account of actions by speculators, which jacked up prices by as much as 200%. Since then prices have had stabilized.
He however said that Sri Lanka’s climatic conditions precluded it from growing cotton plantations.
Shehan Vitharana, TJ’s Director Operations told reporters that during the last five years, the company’s top line had grown by 114% and as the end of the 2011 financial year it stood at US$ 83 million. Its net profit in the review period grew at an even faster rate, at 206%, to end the year under consideration at US$ six million.
Its business partners include top international brands such as Intimissimi, Marks & Spencer and Victoria’s Secret.
Meanwhile Ashroff said that Sri Lanka’s apparel exports are valued at US$ 3.4 billion and comprise 41% of its total exports. The Joint Apparel Association Forum, the industry’s apex body, has set a target of US$ five billion by 2015.
“But considering the first three months growth, we may meet that target much earlier,” he said.
Ashroff further said that in the recent past, whereas woven garments had grown by 10%, that of knitted garments had had grown at a far faster pace, at 119%. He also said that Sri Lanka imported US$ 270 million worth of knitted fabric despite the fact that his company produces US$ 80-90 million worth of that product. TJ expects to grow to a US$ 150 million company, its prospectus said.
Ashroff further said that despite setbacks in 2001 and 2009, apparel exports, by and large have had grown. Exports have been targeted to grow by 50% in the next five years. Regional exports of knitted apparel are in the region of US$ 17.8 billion. “TJ’s intention is to export to the region, we are in a growth region,” he said.
Among the primary reasons for listing is the need for expansion, said Ashroff. “We also don’t want to just borrow from banks,” he added.
In China, one gets mills producing about 8-10,000 metric tons, but in this region, one doesn’t get a single mill of that size, Ashroff said.
TJ’s prospectus further said that Sri Lanka is amongst the countries offering the cheapest labour, thereby creating a competitive advantage to its apparel makers.
However, Sri Lanka will be unable to depend only on the availability of low cost labour. Going forward, the industry will have to venture into other avenues such as increasing labour productivity in order to retain position in the global export market, it said.
The apparel industry currently imports over 40% of its raw material requirements. The development of apparel zones with fabric mills, washing plants, printing facilities and other backward and forward linkages is vital to sustain the industry, the prospectus added.
http://www.thesundayleader.lk/2011/07/03/tj-to-invest-in-green-technology/