Unifi’s net sales for the fiscal fourth quarter rose 3 percent to $217.6 million, driven by pricing actions in the U.S.
In a Nutshell: Unifi Inc., a producer of Repreve recycled fiber and synthetic yarns, said Thursday that its expectations for fiscal 2023 through June are that the first quarter will show the greatest pressure on profits. It expects its performance to improve throughout the year.
Overall sales volume and Repreve fiber sales growth are forecast to drive net sales between $855 million and $885 million, which would represent an increase of 5 percent or more from the level achieved in fiscal 2022 ended July 3.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is projected at $48 million to $57 million. Unifi said this range anticipates that current headwinds from customer demand patterns, as well as input cost dynamics, will be most pronounced in the Americas segment and will continue for at least the first half of the fiscal year.
Capital expenditures of approximately $35 million to $40 million are expected, as Unifi continues investing in new yarn texturing machinery within the U.S., El Salvador and Brazil. This will be funded by available financing arrangements and are inclusive of approximately $10 million to $12 million of routine annual maintenance.
“While there is short-term uncertainty with regard to global demand and inflation concerns that will pressure our first half of fiscal 2023, our team remains focused on executing our strategic plans,” CEO Eddie Ingle said. “We continue to make investments in and are realizing initial benefits from our new yarn texturing machinery within our U.S., El Salvador and Brazil manufacturing operations. Adoption of our Repreve fiber products continues to grow as we support numerous customers with their sustainability endeavors. We continue to make progress with innovative approaches to the labor challenges that have impacted many businesses in the U.S. In addition, we remain diligent with pricing actions to offset inflationary pressures.”
Sales: Net sales for the fiscal fourth quarter ended July 3 increased 3 percent from the same period in fiscal 2021 to $217.6 million, driven by pricing actions in the U.S. in response to inflation and higher input costs.
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The Americas segment generated a double-digit percentage increase in revenue due to stable product demand amid higher selling prices. The Brazil segment increased revenue by nearly 50 percent, as the comparative period included the unfavorable impact of pandemic-related lockdowns in Brazil.
The Asia segment generated strong underlying revenue performance considering the significant pressure from the current and ongoing pandemic-related lockdowns in China. Fourth quarter and fiscal year 2022 each contained an additional fiscal week.
Revenues from Repreve fiber products represented 31 percent of net sales compared to 38 percent in the fourth quarter of fiscal 2021. Repreve products comprised 36 percent of fiscal 2022 net sales compared to 37 percent for fiscal 2021, with fourth quarter and fiscal 2022 product revenues adversely impacted by pandemic-related lockdowns in Asia.
For the year, net sales were $815.8 million–the highest annual sales level in more than 10 years–compared to $667.6 million in fiscal 2021.
Earnings: Net income for the quarter fell 73.9 percent to $3.5 million, or 19 cents diluted earnings per share (EPS), compared to net income of $13.4 million, or 70 cents diluted EPS for the fourth quarter of fiscal 2021.
Gross profit was $18.4 million compared to $27.4 million for the fourth quarter of fiscal 2021. Americas gross profit decreased $3.1 million as a result of rising input costs and lower manufacturing productivity.
Brazil gross profit declined $4.8 million, consistent with Unifi’s prior expectations, as the local market dynamics exhibited some normalization from the exceptionally strong environment in the prior year period, and raw material cost volatility adversely impacted the fourth quarter of fiscal 2022. Asia gross profit was impacted by the current and ongoing pandemic-related lockdowns in China, while the gross margin rate remained robust with underlying Repreve product demand.
Gross margin was 8.4 percent compared to 14.9 percent in the prior-year period.
For the year, net income was $15.2 million, compared to $29.1 million in fiscal 2021. Gross margin was 9.9 percent compared to 14 percent.
CEO’s Take: Ingle said: “Our fourth quarter fiscal 2022 results were consistent with our expectations, as we generated double-digit top-line growth and continued to navigate a volatile macro environment. This marks our third consecutive quarter of over $200 million in sales, and we are proud of how our teams around the globe continue to leverage the resilience and agility of our business model.”
“As we look to fiscal 2023, we remain focused on executing our growth strategy, which includes accelerating innovation, expanding our Repreve branding, growing our market share and penetrating new markets,” Ingle added. “Additionally, we will remain diligent in aligning pricing to stay ahead of inflation, and we expect to continue to make progress towards a stronger and more profitable U.S. business in the quarters and years ahead.”