brand logo

Nike, Uniqlo supplier in Sri Lanka gaining from China slowdown

03 Jun 2022

  • PVH, parent of Tommy Hilfiger, is Teejay Lanka’s top customer
  • Company benefits as production shifts from China due to Covid
Knit fabric manufacturer Teejay Lanka PLC, whose customers include Nike and Uniqlo, is seeing demand pick up, as Covid-related lockdowns in China are causing a shift in production. The company, which produces about 45 tonnes (1.6 million ounces) of fabric a day in Sri Lanka and an equal amount at its facility in Visakhapatnam, India, plans to scale up operations in the neighbouring country by next month, Director Hasitha Premaratne said in a phone interview. “We are seeing strong demand until July,” Premaratne said, attributing this to relocation of fabric manufacturing away from China. Sri Lanka-based Teejay counts PVH Corp. – the parent company of fashion brands Tommy Hilfiger and Calvin Klein – as its top customer, according to its annual report. Still, Teejay faces challenges in a key market and in Sri Lanka. A slowdown in the US economy is expected to impact retail sales of “large apparel companies, and its effects will be seen in the global supply chain, including in Sri Lanka”, later this year, Premaratne said. In Sri Lanka, suffering its worst economic crisis, inflation accelerated more than expected to a record 39.1% in May amid continuing food, medicine, and fuel shortages, while citizens have also had to endure daily power outages that can last up to 13 hours. Teejay is coping by using generators during the electricity cuts to ensure uninterrupted operations. “Already fuel has gone up, and electricity prices are expected to be raised, which will add to cost,” Premaratne said. For now, the local currency’s depreciation is expected to offset the rupee cost increase, thereby “keeping the overheads intact at a dollar level”. Brokerage First Capital, while retaining a buy on the stock, downgraded earnings for the financial year ending March 2023 to Rs. 3.6 billion ($10 million), and for the year after to Rs. 5.7 billion, considering higher commodity prices and the resultant impact on margins. “We expect yarn prices to gradually stabilise by the beginning of FY24, while increased focus towards the high margin synthetic fabric by TJL and enhanced market share through increased volumes to cushion the negative impact stemming from cost pressures,” Hiruni Perera, an analyst at First Capital, wrote in a note. Teejay Lanka reported a net income of Rs. 826.2 million for the fourth quarter, up 8.6% from the same period a year ago. (Bloomberg)


More News..