Unifi Announces Second Quarter Fiscal 2022 Results, Achieving Strong Sales

Unifi, Inc., makers of Repreve, reported sales grew 23.7 percent in the fiscal second quarter ended December 26.

Second Quarter Fiscal 2022 Overview

• Net sales were $201.4 million, representing an increase of 23.7 percent from the second quarter of fiscal 2021.
• Revenues from Repreve Fiber products represented 40 percent of net sales, which was an increase from 38 percent in the second quarter of fiscal 2021.
• Gross profit was $16.9 million compared to $25.9 million for the second quarter of fiscal 2021. Gross margin was 8.4 percent compared to 15.9 percent for the second quarter of fiscal 2021 impacted by domestic labor and input cost challenges.
• Operating income was $4.6 million compared to $13.1 million for the second quarter of fiscal 2021.
• Net income was $0.9 million, or $0.05 diluted earnings per share (“EPS”), compared to net income of $7.5 million, or $0.40 diluted EPS for the second quarter of fiscal 2021.
• Adjusted EBITDA was $10.9 million compared to $19.2 million in the second quarter of fiscal 2021.
• Adjusted EBITDA for the 12 fiscal months ended December 26, 2021 was $67.1 million compared to $23.7 million for the 12 fiscal months ended December 27, 2020.
• The company repurchased 51,500 shares of its common stock for $1.2 million during the second quarter of fiscal 2022 under a previously announced program.

Eddie Ingle, CEO, Unifi, said, “Second quarter fiscal 2022 sales exceeded our expectations, driven by continued strong international performance, but labor and input cost headwinds for our domestic operations pressured overall profitability results. Our teams in Asia and Brazil have performed very well against a dynamic business environment, while the Polyester and Nylon operations have experienced significant cost and efficiency pressures that weighed on gross profit. However, with continued global momentum allowing Repreve Fiber products to achieve 40 percent of consolidated sales, recent responsive selling price adjustments in the U.S. and Central America, and anticipated productivity improvements across our manufacturing base, expectations for mid- and long-term performance remain strong.”

Second Quarter Fiscal 2022 Compared to Second Quarter Fiscal 2021
Net sales increased 23.7 percent to $201.4 million, from $162.8 million. The Asia Segment achieved record quarterly sales volume, driving a 32 percent increase in revenue. Additionally, the Brazil Segment captured a 14 percent year-over-year revenue increase from favorable pricing and sales mix. Polyester Segment revenue increased 21 percent, due to pricing adjustments associated with a portion of raw material cost increases that occurred in calendar 2021. Lastly, Repreve Fiber product sales reached 40 percent of consolidated sales and continue to meet the ever-growing demand for sustainable textiles, driving underlying portfolio momentum.

Gross profit decreased 35 percent to $16.9 million from $25.9 million. Polyester Segment gross profit decreased $10.5 million as a result of rising input costs and production inefficiencies. Brazil Segment gross profit was consistent with expectations as the local market dynamics exhibit some normalization from the favorable environment in the prior-year quarter. Gross profit decreases were partially offset by the Asia Segment contributing an additional $2.0 million in gross profit from sales growth.

Operating income decreased to $4.6 million, from $13.1 million, primarily due to the decrease in gross profit associated with the aforementioned input cost and efficiency pressures. The decrease in domestic profits adversely impacted the effective tax rate as low earnings from U.S. operations in the second quarter and full-year fiscal 2022 generate a net operating loss for which the full benefit is currently unrealizable. Accordingly, net income was $0.9 million, or $0.05 per share, compared to $7.5 million, or $0.40 per share. Adjusted EBITDA was $10.9 million, compared to $19.2 million, following the cost pressure on gross profit in North and Central America.

Debt principal was $81.6 million on December 26, 2021 compared to $86.9 million on June 27, 2021. In connection with previously anticipated investments in new yarn texturing innovation and working capital to support future growth, cash and cash equivalents decreased to $47.6 million on December 26, 2021, from $78.3 million on June 27, 2021. Accordingly, Net Debt¹ was $34.0 million on December 26, 2021 versus $8.6 million on June 27, 2021.

Year-To-Date Fiscal 2022 Compared to Year-To-Date Fiscal 2021
Net sales were $397.4 million, compared to $304.3 million. Revenues from Repreve Fiber products represented 39 percent of consolidated net sales, compared to 38 percent. Gross margin was 10.8 percent, compared to 13.3 percent. Operating income was $17.8 million, compared to $16.0 million. Net income was $9.6 million, compared to $10.9 million.

Outlook
The following reflects the company’s updated expectations for fiscal 2022, assuming there are no further significant disruptions to global markets, supply chains or the labor market and no further adverse impacts from COVID-19.

• Sales volume and Repreve Fiber sales growth driving net sales to $800 million or more, which would represent an increase of 20 percent or more from the level achieved in fiscal 2021.
• Adjusted EBITDA to range between $60.0 million and $62.0 million, with a larger portion of second-half fiscal 2022 profitability being generated in the fourth quarter ending July 3, 2022 rather than the third quarter ending March 27, 2022.
• An effective tax rate between 40 percent and 50 percent, assuming no significant changes in existing tax legislation.
• Capital expenditures of approximately $40.0 million to $44.0 million, as the company continues its plan to invest in new yarn texturing machinery within its Americas facilities. Such capital expenditure levels will be funded by cash-on-hand and available financing arrangements and are inclusive of approximately $10.0 million to $12.0 million of routine annual maintenance.

Ingle concluded, “Although we face some short-term headwinds domestically that have impacted our performance, I am proud of the way all of our employees globally continue to deliver value and contribute to making Unifi a better company each and every day. We feel that we are better positioned to navigate our domestic headwinds going forward and remain confident in our ability to execute and drive future value for shareholders. Our momentum in Asia and Brazil helped contribute to overall revenue performance exceeding expectations, demonstrating the strength of our dynamic global business model. As the demand for sustainable solutions grows, we will remain focused on capturing momentum towards long-term growth and are excited for the opportunities that lie ahead of us.”

Photo courtesy Unifi/Repreve