Polyester yarn maker Unifi Inc., whose Repreve recycled polyester has become a major staple of sustainable apparel in the outdoor industry, said it cut its second-quarter losses 57% on a 17% increase in net sales.
The company said sales rose to $183.4 million for the quarter ended Dec. 23. Net losses declined to $7.7 million, or 13 cents per diluted share, from $18.2 million, or 35 cents per diluted share last year. The loss includes $5.9 million in pre-tax restructuring and severance charges and a $2.2 million write down of assets related to a plant closure.
SG&A expenses remained flat at 6.5% of net sales, despite $1.7 million in severance costs related to the departure of former CFO/COO Bill Lowe.
Unifi said that after years of double-digit declines, the contraction of the U.S. demand for polyester yarns appears to be slowing. U.S. polyester consumption declined 5% in 2007, compared to 8% in 2006 and 14% in 2005. Unifi expects it to contract 4% to 5% this year, but said imports of apparel and hosiery from the Central America Free Trade Agreement countries that use U.S. fiber will replace some of those sales. Such imports grew 4% in 2007 over 2006.
Unifi said its production volume increased 8.6% and that it was able to raise overall pricing by 8.3%. While demand was stronger than anticipated during the quarter, raw material prices also increased much faster than anticipated. The price of MEG, one of two primary ingredients in polyester, for instance, rose 50%, resulting in an overall polyester raw material increase of about 17% from the beginning to the end of the quarter. Due to the unexpected nature of the increase, Unifi could not pass along price increases until the current quarter.
Hosiery and “shape wear” production in the CAFTA region drove up nylon volume 30%. Still, nylon prices fell 4.6% due to a higher mix of lower priced textured yarns used by those mills.
Unifi estimates apparel represented 43% of its total sales during the quarter. Socks and hosiery made up 21%; home and contract furnishings 15%; automotive 8%; and industrial 10%.
Sales of Repreve, its 100% recycled polyester yarn remain a bright spot. The company expects to double production of the yarn to 16 million pounds next year. The company launched Repreve into Asian markets in October.
