Unifi Inc. reported sales in the first quarter ended September 27 were down 21 percent year-over-year but increased 64 percent sequentially compared to the fourth quarter of fiscal 2020. The fiber producer also posted a surprise profit in the period.
Net income was $3.4 million, or 18 cents a share, topping Wall Street’s consensus target calling for a loss of 33 cents.
Eddie Ingle, CEO, 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 a 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. 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.”
First Quarter Fiscal 2021 Compared to First Quarter Fiscal 2020
- Net sales were $141.5 million, compared to $179.9 million in the first quarter of fiscal 2020. Results topped Wall Street’s consensus estimate of $126.8 million.
- The sales decline was primarily the result of overall lower global demand, lower selling prices in connection with lower raw material costs, and unfavorable foreign currency translation. The decline was partially offset by volume growth in Brazil due to the operation’s strength and ability to quickly respond to pandemic-related demand fluctuations. Net sales exhibited sequential monthly increases, driving a 64 percent increase over the fourth quarter of fiscal 2020.
- Gross profit decreased to $14.6 million from $17.4 million in the first quarter of fiscal 2020, primarily due to the expected lower sales and production volumes in the U.S. However, gross margin increased to 10.3 percent, compared to 9.7 percent, driven by improvements in both Asia and Brazil.
- Operating income for the first quarter of fiscal 2021 was $2.9 million, compared to $6.3 million for the first quarter of fiscal 2020, primarily due to the pandemic impact on U.S. gross profit.
- Net income was $3.4 million, or $0.18 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. Net income for the first quarter of fiscal 2020 was $3.7 million, or $0.20 per share, and was adversely impacted by a $1.2 million loss from a minority interest investment the company sold in April 2020.
- Net debt was $17.3 million on September 27, 2020, compared to $88.3 million on September 29, 2019. Cash and cash equivalents increased to $78.1 million on September 27, 2020, up from $34.1 million on September 29, 2019. The favorable cash and liquidity positions benefited from the $60.0 million sale proceeds of a minority interest investment the company sold in April 2020 and continued diligence around lowering working capital and capital expenditures.
Acquisition of TSI Assets
During October 2020, the company completed the acquisition of TSI’s air-jet texturing assets located in Virginia. Financial terms were not disclosed. Customers and production activity will transition to the company’s Polyester segment operations in North Carolina during the second quarter of fiscal 2021.
Fiscal 2021 Outlook
For fiscal 2021, assuming no further significant disruptions to global markets or further adverse impacts from COVID-19, the company notes and expects the following:
- 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 COVID-19;
- Entering the second quarter of fiscal 2021, 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, considering any routine seasonal net sales and expense items; and
- Sales of Repreve and value-added products are expected to continue recent growth rates and increase as a percentage of net sales; and $22.0 to $25.0 million of capital expenditures are expected for fiscal 2021.
Photo courtesy Unifi