Sri Lanka’s Hela Clothing to strike global partnerships
Sri Lankan apparel maker Hela Clothing, pitching to trade 20 per cent in the company for a multi-billion public equity share, is upbeat on striking international strategic partnerships to better manage their supply chains for future growth.
Dilanka Jinadasa, CEO Hela Clothing (Pvt) Ltd in an interview with the Business Times said the company has learned some valuable lessons during the COVID-19 pandemic in navigating business in an unpredictable time. "With moving COVID-19 hot spots, we managed to move manufacturing to different factories in various locations."
The international brands that Hela Clothing work with had permitted them to move manufacturing to different factories if there were coronavirus outbreaks in a particular factory. Hela caters to an elite clientele including leading global brands such as Tommy Hilfiger, Calvin Klein, Michael Kors, and VF Corp with its 11 factories located across Sri Lanka, Kenya, and Ethiopia.
"We partnered with manufacturing facilities in Tanzania and in Egypt to use their infrastructure to manufacture brands that we service," Mr. Jinadasa explained. Partnering with the facility in Tanzania was strategic in that it is a country that is the fifth largest organic cotton grower in the world.
A similar partnership in Egypt made sense as Egyptian cotton is one of the best quality cottons globally. Also, the quick turnaround times in logistics to the US and European markets from these countries made sense to venture into them, Mr. Jinadasa added. "They are some of the best logistics hubs in terms of serving our markets in Europe and the US. "It takes three days to ship to Europe from Egypt and four hours to ship the raw materials from Tanzania to Kenya to the manufacturing facility owned by the company.
Venturing into these countries was also a turning point in terms of going closer towards the customer. "We want to keep our footprint closer to the customer and manage our supply chains better as we go along – essentially striking partnerships such as the ones in Tanzania and Egypt with countries that have manufacturing facilities closer to the markets we serve in the US and Europe. The pandemic showed that managing the supply chains is of utmost importance in an unprecedented time while making the first-mover advantage in the countries that we went into partnerships with," Mr. Jinadasa said.
Hela Clothing saw US $74.6 million revenue growth in the second quarter of this year, up by $78.7 per cent year on year. Mr. Jinadasa said this is the historically highest revenue recorded by the company on a quarter-to-quarter basis. The gross profit for the same period was up by 43.9 per cent year on year to $ 11.1 million. The profit after tax was recorded at $ 2.2 million for the second quarter, up by 58.2 per cent year on year.
A lot of this growth came from existing customers, Mr. Jinadasa said. The company which was a US$ 3 million business in 2012 now has a revenue forecast of $234 million for this year. "But we expect to hit $250 million by year-end," he said noting that despite the pandemic infused fallout accelerating operating profits at $3.9 million, up by 41.6 per cent for Q2 depicts the exceptional performance across all manufacturing facilities in Sri Lanka and Africa and strong cost controls in both intimates and kids clusters in the business.
The capital raising exercise through the initial public offering (IPO) due soon for the company to be listed on the Colombo Stock Exchange will help them forge these partnerships further. "We need to do the value addition, design, supply chain management etc. here and do the mass manufacturing elsewhere to bring in the US dollars to Sri Lanka. We need to treat Sri Lanka as a hub/ headquarters."
The IPO will help fund the digital platform consolidation of Hela Clothing. In July, the company started this consolidation process, according to Mr. Jinadasa. Balance sheet restructuring is also on the cards post IPO, to help the company to grow in a risk-free manner. In addition, the company will automate non-value-adding functions to have a consistent workflow and intends to invest in a fabric mill to strengthen Hela's supply chain security.