Unifi said its quarterly results reflected strong sequential growth, driven by an agile global business model and a culture of innovation.
In a Nutshell: Unifi Inc., a manufacturer of recycled and synthetic yarns, said its seeing a gradual improvement in all aspects of its business and even made an acquisition to boost polyester production capabilities.
Unifi noted that at the end of the quarter, debt principal was $95.4 million, while cash and cash equivalents were $78.1 million, resulting in net debt of $17.3 million, a reduction from $23.6 million on June 28 and a record low for the company in more than 20 years.
In October, Unifi completed a strategic acquisition of the air-jet texturing assets of Texturing Service LLC to enhance and expand the company’s existing textured yarn capabilities. Customers and production activity will transition to Unifi’s polyester segment operations in North Carolina during the second quarter of fiscal 2021. Financial terms were not disclosed.
For fiscal 2021 ending June 30, assuming no further significant disruptions to global markets or further adverse impacts from Covid-19, the company said the initial recovery in net sales and profitability in the first quarter of fiscal 2021 appears consistent with the improvements in the apparel industry, in spite of the lingering challenges of the pandemic.
Entering the second quarter of fiscal 2021 this month, Unifi said net sales trends are encouraging and are expected to continue to improve. Should these trends remain, growth in profitability is expected to follow at commensurate rates.
Sales of Repreve and value-added products are expected to continue recent growth rates and increase as a percentage of net sales, and $22 million to $25 million of capital expenditures are expected for fiscal 2021.
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Sales: Net sales for the first quarter ended Sept. 27 fell a year-over-year 21 percent to $141.5 million, but increased 64 percent compared to the previous quarter.
The decline was primarily the result of lower global demand, lower selling prices in connection with lower raw material costs, and unfavorable foreign currency translation. This was partially offset by volume growth in Brazil due to the operation’s strength and ability to quickly respond to pandemic-related demand fluctuations.
Revenue from its Repreve fiber products represented a quarterly record of 35 percent of net sales compared to 31 percent in the prior-year period.
Earnings: Net income dipped to $3.4 million, or 18 cents per share, and included a $1.2 million income tax benefit resulting from a $2.7 million net benefit in connection with recently passed high-tax exception rules. This compared to year-ago net income of $3.7 million, or 20 cents per share, which was adversely impacted by a $1.2 million loss from a minority interest investment the company sold in April.
Gross profit decreased to $14.6 million from $17.4 million in the period, mainly due to the expected lower sales and production volumes in the U.S. However, Unifi’s gross margin increased to 10.3 percent compared to 9.7 percent thanks to improvements in Asia and Brazil.
Operating income for quarter was $2.9 million compared to $6.3 million for the year-ago period.
CEO’s Take: Eddie Ingle, CEO of Unifi, said, “Our first quarter of fiscal 2021 results were better than anticipated and demonstrated the resilience of our business and the agility of our global model. We experienced sequential improvement in revenue during each month of the quarter and the pace of our recovery has been reassuring. We also achieved an expansion of gross margin by 60 basis points year-over-year, which was quite an achievement given ongoing pandemic-related volume pressures.
“Interest in our sustainable solutions remains high, as exemplified by Repreve fibers reaching 35 percent of our net sales,” Ingle added. “In the quarters ahead, our team will remain intently focused on the customer experience, driving new and innovative sustainable solutions, and returning to long-term growth. I am confident that our diverse global operations, strong management team and solid financial position will enable us to regain our momentum throughout fiscal 2021.”