would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
Home
Textured Jersey Lanka Limited is one of Sri Lanka’s largest and most
profitable weft knit fabric manufacturers, operating a modern
state-of-the- art manufacturing facility in the Seethawaka Industrial
Zone.
The company’s customer portfolio includes several prestigious retail
brand houses such as Marks & Spencer, Intimissimi, Victoria’s Secret,
Decathalon and Tezenis. The company was originally incorporated as a
Joint Venture between Textured Jersey UK and Linea Clothing (Private)
Limited. Linea Clothing was a joint venture between MAS Holdings and
Brandix Lanka.
In 2004, Pacific Textile Holdings of Hong Kong, one of the largest
listed textile manufacturers in the world acquired TJUK’s shareholding
and later the shareholding of the company was further restructured with
Brandix Lanka Limited taking ownership of the entire stake held by Linea
Clothing.
TJ currently produces over 30 tonnes of fabric daily and over 10,000
tonnes of fabric per annum.
Textured Jersey recently announced the launch of its Initial Public
Offer to list 80,000,000 ordinary voting shares on the Main Board of the
Colombo Stock Exchange at a price of Rs 15.00 per share which opened on
July 7, 2011.
The proceeds from the shares issue are to be utilized to expand its
manufacturing facility from its current capacity of 11,000 tonnes per
annum to 15,000 tonnes per annum.
The expansions follows a period of extraordinary growth for the firm
where revenues and net profits recorded five year CAGRS of 25% and 21%
respectively.
Brandix Lanka and Textured Jersey Director and Chief Executive
Officer Ashroff Omar elaborated on the company’s past performance, some
industry headwinds that the company has overcome as well as the longer
term prospects of the business.
Q: How has TJ performed financially and operationally over the
years? What role has its shareholders played in helping TJ become what
it is today, almost a decade since its inception?
A: TJ now manufactures over 10,000 tonnes of fabric per annum
which is a doubling of production since 2007.This has been assisted by a
capacity expansion which took place during 2007 and 08. It has been
successful in growing its customer portfolio to successfully cater to
renowned customers such as M&S, Victoria’s Secret and Intimissimi, which
has been a result of its concentration and zealous focus on quality and
on time production.
In this sense I must mention that Pacific has been an extremely
strong partner in TJs growth story, effectively engaging the company to
continuously grow its quality and delivery by successfully passing on
best practices they have developed in manufacturing within China.
In addition Pacific has in the past had a presence of its personnel
in TJ to assist the Sri Lankan staff in achieving world class standards,
however the local staff have been quick learners, which has enabled
Pacific to reduce the presence of Chinese staff within TJ.
This development that TJ has achieved in its production techniques
and capabilities has naturally transferred towards financial stability
and growth. On a topline basis the company has grown from USD 65.3mn in
FY 2009 to USD 83.2mn in FY 2011.
However the most significant improvement achieved by the company has
been in its profitability which grew from USD 1.3mn in FY 2009 to USD
6.1mn in FY 2011. This is a growth of almost five times in a period of
three years, which I believe is an achievement any company can be proud
of. During the same period the company has grown its net assets from USD
16.1mn to USD 27.1mn.
A point worth mentioning here is the clear focus by the shareholders
of the company towards its growth which is evidenced by the fact that
since its inception the shareholders of the company have not taken any
dividends and have ploughed back all profits towards the company.
However I must assure the IPO investors that going forward the
company has implemented a policy of distributing a third of its profits
as dividends to the shareholders.
Q: As you mentioned TJ caters to a small number of customers.
Is this the correct strategy? Do you not feel that this is a risky
strategy to follow?
A: Yes you are correct in mentioning that TJ is focused
towards servicing a few customers. If I am to elaborate further
Intimissimi accounts for approximately 31 percent of the turnover of the
company whilst M&S and Victoria’s Secret account for 29 percent and 23
percent of turnover respectively. Effectively these three customers
together account for 83 percent of the turnover of TJ.
This is very similar to the profile of Sri Lanka as an exporter of
apparels. The profile of customers of the Sri Lankan apparel industry is
concentrated mainly amongst five to six customers. I don’t believe this
is a risky strategy due to many reasons, with the foremost being that
the relationships that we as a country and TJ as an organization have
built with these customers are longstanding and extremely strong.
These customers understand the structure and mechanisms of our
industry locally and are committed to partnering with us in the longer
term.
Additionally for them as customers, switching to different suppliers
is also a costly affair, due to the level of quality we offer as well as
our ethical and environmentally friendly standards of manufacturing. Sri
Lanka for a fact has more LEED (Leadership in Energy and Environmental
Design) certified factories than any other country exporting apparels
currently.
Q: What impacts do you feel that factors such as the
volatility in cotton prices, exchange rate appreciation and the loss of
GSP + will have on Textured Jersey?
A: Cotton price volatility is an industry wide phenomenon; it
is not one that impacts TJ alone or Sri Lanka alone as a nation. Cotton
prices saw a steep rise during last year, due to a number of natural
factors as well as some heavy speculation in trading of cotton futures.
However prices have seen a dip from about April this year. For TJ raw
material costs account for approximately 60 percent - 70 percent of its
cost structure of which 80 percent - 85 percent is accounted for by
yarn. This is definitely a sizeable portion of the company’s cost
structure and can have an impact on its profitability.
However TJ has been able to pass on a greater portion of this raw
material cost increase to its customers thereby effectively negating the
impact on profitability.
I don’t believe that going forward any adverse changes in cotton
prices will impact TJ negatively due to the fact that this is an
industry phenomenon and one that is very well understood and
acknowledged by its customers.
We as a company are not too concerned about the appreciation in
exchange rate. Whilst it is an issue that does have a negative financial
impact on the company, TJ has been able to naturally hedge itself
against this risk.
This has been due to the fact that most costs incurred by TJ, except
for costs such as labour and utilities, are incurred in US Dollars which
is the same currency that it invoices its customers in. Additionally
most companies that we compete with are also located in economies which
are experiencing an appreciation in its respective currencies. The
Chinese Renminbi is a case in point.
The loss of GSP+ has been proven statistically to not have had a
negative impact on the Sri Lankan apparel industry. As evident by the
figures released since the removal of GSP+, exports of textiles and
garments from Sri Lanka have seen a growth rather than a decline and the
figures for the first quarter of the year are more than impressive.
This also leads us to believe that Sri Lanka’s target of hitting USD
5bn in textile and garment exports by 2015 may even be achieved much
earlier.
Q: Where do you feel the market for the products of TJ are
heading? Does TJ have room to expand?
A: We can break up the market for apparels as wovens and
knits. The market for knit apparels is one that is continuously
witnessing growth.
In Sri Lanka alone the exports of apparels manufactured using knit
fabric has grown 119 percent from 2002 to 2010, whereas the growth in
apparels manufactured using woven fabric has only grown 10 percent
during the same period.
TJ manufactures fabric for use in this fast growing segment of knit
apparel, hence being able to tap into this growth as well. In 2010 alone
Sri Lanka imported knit fabric worth USD 270mn.
The revenue of TJ selling the same fabric is USD 83mn, these two
numbers alone speak for the room that TJ has to expand.
http://www.dailynews.lk/2011/08/03/bus14.asp
profitable weft knit fabric manufacturers, operating a modern
state-of-the- art manufacturing facility in the Seethawaka Industrial
Zone.
The company’s customer portfolio includes several prestigious retail
brand houses such as Marks & Spencer, Intimissimi, Victoria’s Secret,
Decathalon and Tezenis. The company was originally incorporated as a
Joint Venture between Textured Jersey UK and Linea Clothing (Private)
Limited. Linea Clothing was a joint venture between MAS Holdings and
Brandix Lanka.
In 2004, Pacific Textile Holdings of Hong Kong, one of the largest
listed textile manufacturers in the world acquired TJUK’s shareholding
and later the shareholding of the company was further restructured with
Brandix Lanka Limited taking ownership of the entire stake held by Linea
Clothing.
TJ currently produces over 30 tonnes of fabric daily and over 10,000
tonnes of fabric per annum.
Textured Jersey recently announced the launch of its Initial Public
Offer to list 80,000,000 ordinary voting shares on the Main Board of the
Colombo Stock Exchange at a price of Rs 15.00 per share which opened on
July 7, 2011.
The proceeds from the shares issue are to be utilized to expand its
manufacturing facility from its current capacity of 11,000 tonnes per
annum to 15,000 tonnes per annum.
The expansions follows a period of extraordinary growth for the firm
where revenues and net profits recorded five year CAGRS of 25% and 21%
respectively.
Brandix Lanka and Textured Jersey Director and Chief Executive
Officer Ashroff Omar elaborated on the company’s past performance, some
industry headwinds that the company has overcome as well as the longer
term prospects of the business.
Q: How has TJ performed financially and operationally over the
years? What role has its shareholders played in helping TJ become what
it is today, almost a decade since its inception?
A: TJ now manufactures over 10,000 tonnes of fabric per annum
which is a doubling of production since 2007.This has been assisted by a
capacity expansion which took place during 2007 and 08. It has been
successful in growing its customer portfolio to successfully cater to
renowned customers such as M&S, Victoria’s Secret and Intimissimi, which
has been a result of its concentration and zealous focus on quality and
on time production.
In this sense I must mention that Pacific has been an extremely
strong partner in TJs growth story, effectively engaging the company to
continuously grow its quality and delivery by successfully passing on
best practices they have developed in manufacturing within China.
In addition Pacific has in the past had a presence of its personnel
in TJ to assist the Sri Lankan staff in achieving world class standards,
however the local staff have been quick learners, which has enabled
Pacific to reduce the presence of Chinese staff within TJ.
This development that TJ has achieved in its production techniques
and capabilities has naturally transferred towards financial stability
and growth. On a topline basis the company has grown from USD 65.3mn in
FY 2009 to USD 83.2mn in FY 2011.
However the most significant improvement achieved by the company has
been in its profitability which grew from USD 1.3mn in FY 2009 to USD
6.1mn in FY 2011. This is a growth of almost five times in a period of
three years, which I believe is an achievement any company can be proud
of. During the same period the company has grown its net assets from USD
16.1mn to USD 27.1mn.
A point worth mentioning here is the clear focus by the shareholders
of the company towards its growth which is evidenced by the fact that
since its inception the shareholders of the company have not taken any
dividends and have ploughed back all profits towards the company.
However I must assure the IPO investors that going forward the
company has implemented a policy of distributing a third of its profits
as dividends to the shareholders.
Q: As you mentioned TJ caters to a small number of customers.
Is this the correct strategy? Do you not feel that this is a risky
strategy to follow?
A: Yes you are correct in mentioning that TJ is focused
towards servicing a few customers. If I am to elaborate further
Intimissimi accounts for approximately 31 percent of the turnover of the
company whilst M&S and Victoria’s Secret account for 29 percent and 23
percent of turnover respectively. Effectively these three customers
together account for 83 percent of the turnover of TJ.
This is very similar to the profile of Sri Lanka as an exporter of
apparels. The profile of customers of the Sri Lankan apparel industry is
concentrated mainly amongst five to six customers. I don’t believe this
is a risky strategy due to many reasons, with the foremost being that
the relationships that we as a country and TJ as an organization have
built with these customers are longstanding and extremely strong.
These customers understand the structure and mechanisms of our
industry locally and are committed to partnering with us in the longer
term.
Additionally for them as customers, switching to different suppliers
is also a costly affair, due to the level of quality we offer as well as
our ethical and environmentally friendly standards of manufacturing. Sri
Lanka for a fact has more LEED (Leadership in Energy and Environmental
Design) certified factories than any other country exporting apparels
currently.
Q: What impacts do you feel that factors such as the
volatility in cotton prices, exchange rate appreciation and the loss of
GSP + will have on Textured Jersey?
A: Cotton price volatility is an industry wide phenomenon; it
is not one that impacts TJ alone or Sri Lanka alone as a nation. Cotton
prices saw a steep rise during last year, due to a number of natural
factors as well as some heavy speculation in trading of cotton futures.
However prices have seen a dip from about April this year. For TJ raw
material costs account for approximately 60 percent - 70 percent of its
cost structure of which 80 percent - 85 percent is accounted for by
yarn. This is definitely a sizeable portion of the company’s cost
structure and can have an impact on its profitability.
However TJ has been able to pass on a greater portion of this raw
material cost increase to its customers thereby effectively negating the
impact on profitability.
I don’t believe that going forward any adverse changes in cotton
prices will impact TJ negatively due to the fact that this is an
industry phenomenon and one that is very well understood and
acknowledged by its customers.
We as a company are not too concerned about the appreciation in
exchange rate. Whilst it is an issue that does have a negative financial
impact on the company, TJ has been able to naturally hedge itself
against this risk.
This has been due to the fact that most costs incurred by TJ, except
for costs such as labour and utilities, are incurred in US Dollars which
is the same currency that it invoices its customers in. Additionally
most companies that we compete with are also located in economies which
are experiencing an appreciation in its respective currencies. The
Chinese Renminbi is a case in point.
The loss of GSP+ has been proven statistically to not have had a
negative impact on the Sri Lankan apparel industry. As evident by the
figures released since the removal of GSP+, exports of textiles and
garments from Sri Lanka have seen a growth rather than a decline and the
figures for the first quarter of the year are more than impressive.
This also leads us to believe that Sri Lanka’s target of hitting USD
5bn in textile and garment exports by 2015 may even be achieved much
earlier.
Q: Where do you feel the market for the products of TJ are
heading? Does TJ have room to expand?
A: We can break up the market for apparels as wovens and
knits. The market for knit apparels is one that is continuously
witnessing growth.
In Sri Lanka alone the exports of apparels manufactured using knit
fabric has grown 119 percent from 2002 to 2010, whereas the growth in
apparels manufactured using woven fabric has only grown 10 percent
during the same period.
TJ manufactures fabric for use in this fast growing segment of knit
apparel, hence being able to tap into this growth as well. In 2010 alone
Sri Lanka imported knit fabric worth USD 270mn.
The revenue of TJ selling the same fabric is USD 83mn, these two
numbers alone speak for the room that TJ has to expand.
http://www.dailynews.lk/2011/08/03/bus14.asp
