Sri Lanka's leading producer of high quality circular knitted fabrics, Textured Jersey Lanka Plc (TJL) reported last week that it intends to use part of the proceeds raised through its Initial Public Offering (IPO) last year on the purchase of an operating fabric mill. According to a report in The Nation, negotiations are already underway with a fabric mill in South Asia.

According to the report, the knitted apparel exporter said in a disclosure filed with the Colombo Stock Exchange that given the changes in the global and local macro-economic environment, immediately after the listing in July 2011, the company's board of directors had decided to hold back the proposed organic expansion within the Avissawella BOI Zone.

"After evaluating different options, the Board feels that TJL's expansion should be by way of acquiring an operating fabric mill within the South Asian subcontinent. Evaluations with regard to these acquisitions are currently ongoing. However a timeline has not been decided yet," the company said.

TJL added that this will provide it with the access to an operating fabric mill and the results would be faster than investing in an internal expansion.

Meanwhile, the reports says, the CSE filing also revealed that TJL had invested a small portion of the funds raised through the IPO in addressing bottlenecks within the production facility which has assisted in increasing capacity as well as improving efficiency.

The Nation says the filing did not specify as to how much money was spent or is needed to acquire the fabric mill in question and that the disclosure further noted that the recent fuel price hike which resulted in a Rs.40 increase in the price of furnace oil has adversely impacted the energy cost of TJL.

"In this respect, the Board is evaluating options on an alternative energy source, including but not limited to coal and bio-mass, which will require an investment by the company into the relevant technology. Such investment will enable the company to enjoy substantial savings to its future energy cost," the disclosure is said to have added.

Source: The Nation