Sri Lanka’s Fabric Sector Feels Global Squeeze despite Resilient Profit Margins

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By: Staff Writer

August 06, Colombo (LNW): Sri Lanka’s textile and fabric manufacturing sector is facing subdued global demand and declining production volumes, even as some leading players like Teejay Lanka PLC continue to maintain profitability through strategic cost management and international partnerships.

The overall industry, which plays a crucial role in Sri Lanka’s industrial export portfolio, has seen a slowdown in recent quarters due to weakening global retail markets, inventory corrections by buyers, and inflationary pressures in key export destinations such as the United States and Europe.

According to the Export Development Board (EDB), Sri Lanka’s textile and garment exports generated USD 5.1 billion in 2023, with woven fabrics and knitwear contributing significantly. However, a notable deceleration in orders has been observed during the first half of 2025.

Teejay Lanka PLC, a key player with operations in Sri Lanka and India, reported mixed performance in its June 2025 quarter despite these global headwinds. The group posted a 2% year-on-year increase in revenue, reaching Rs. 15.78 billion, driven largely by financial gains and strategic cost reductions rather than production volume growth.

According to its interim financials, the company’s cost of sales declined by 3% to Rs. 14.5 billion, helping offset some of the impact from lower production volumes. Gross profits still fell by 3% to Rs. 1.25 billion, reflecting weaker output across the industry.

Group administrative expenses surged 37% to Rs. 957 million, though a financial gain of Rs. 250 million—up from Rs. 114 million a year ago—bolstered bottom-line performance. Finance costs fell 21% to Rs. 86 million, aiding a 33% rise in pre-tax profits to Rs. 364 million. Net profits rose 31% to Rs. 207 million.



However, the company’s standalone Sri Lankan operations fared less favorably. Revenues dropped 15% to Rs. 8 billion, cost of sales mirrored this decline to Rs. 7.3 billion, and gross profits shrank by 10%. This reflects a broader trend across the domestic manufacturing sector, which is struggling with underutilized capacity and shifting order patterns.

Looking forward, Teejay remains cautiously optimistic, citing upcoming changes to the U.S. Harmonized Tariff Schedule (HTS) as a potential disruptor or opportunity for Sri Lankan exports. The company emphasized that its diversified global presence and strong links with international brands continue to provide it with agility in navigating the evolving trade landscape.

As the sector awaits a rebound in global demand, strategic agility, technological upgrades, and market diversification are expected to be critical for Sri Lanka’s textile and fabric industry to remain competitive.

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