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JKSB Quarterly Highlights_Teejay Lanka PLC (TJL)_2QFY17

Note:

TJL reported a top line growth of 31% YoY during the quarter with the support of the YoY depreciation of the Sri Lankan Rupee (LKR) and the YoY volume increase stemming from the timing benefits of the consolidation of results from its acquisitions. Comparing to the corresponding quarter in the previous year, TJL's capacity was ~50% YoY higher during the months of July and August 2016 as the consolidation of results from OCI commenced only in

September 2015.

On the other hand, TJL was able to expand its GP margin from 15.5% to 16.8% during the quarter despite certain adverse changes seen in raw material costs and the product mix. Although the timing effects of these acquisitions distort the YoY comparison of operating costs, it can be seen that TJL's distribution costs have declined by 9% QoQ and the increase in administrative expenses have been controlled at 2% QoQ. The improved performance at the GP level and diligent management of overheads helped TJL achieve an EBIT margin expansion from 11.0% to 11.6%.

However, the non-renewal of its operational technical service agreement with OCI resulted in an Rs.19 mn drop in non-operating income and caused pre-tax margins to contract from 11.9% to 11.7%. Furthermore, TJL's effective tax rate increased from 1.6% to 4.4% due to the expiration of its tax Holiday in September 2016, resulting in a contraction in the net margin from 11.7% to 11.2%. Despite the contraction of margins, the significant increase seen at the top line helped TJL's bottom line to grow at a healthy rate of 26% YoY during the quarter.