Unifi posts third consecutive quarterly profit
Originally Posted on Friday, April 30, 2010 | By Richard Craver
Reposted from The Winston-Salem Journal
Unifi Inc. moved closer to its first profitable year since 2000 with a third consecutive positive quarterly performance.
The Greensboro company reported yesterday that it had net income of $771,000 in its third quarter of fiscal year 2010, which ended March 28, compared with a loss of $33 million a year ago.
Diluted earnings for the quarter were 1 cent a share, compared with a loss of 53 cents a share a year ago.
The company also said it plans to spend $8 million and add up to 25 jobs related to a project aimed at providing more recycled products for its Repreve yarn line, according to Ron Smith, its chief financial officer.
Unifi had a 30 percent increase in revenue to $154.7 million. It cited improved market conditions across all of its key segments and improved retail demand for its products in apparel, furnishings and automotive fabrics.
“Our domestic business is improving, and Brazil continues to exceed projections,“ said Bill Jasper, the president and chief executive of Unifi.
“Our aggressive cost reductions and disciplined task-based improvement process continue to contribute significantly to our improved cost basis and the strength of our balance sheet,“ Jasper said.
There were no earnings forecast for Unifi. The company has had limited coverage by analysts in the past 18 months. Its share price dropped 3 cents yesterday to finish at $4.13.
Bryan Hunt, a senior analyst for Wells Fargo Securities, said that Unifi is benefiting in particular from increased automobile sales, and the bankruptcy of three contract dye companies in 2009.
“Despite recent increases in raw-material prices, we believe the outlook for profitability in fiscal year 2010 is much improved,“ Hunt said.
Even though net income was down from the first and second quarters of fiscal 2010, “turning profitable always is better than continuing losses, so it’s a good trend,“ said Michael Lord, an associate professor of management at the Wake Forest University Schools of Business.
The Repreve line, introduced in 2006, has been a major sales and branding factor in Unifi’s turnaround in the past two years. The company makes polyester chips – about the size of a Tic Tac breath mint – from fiber waste, a byproduct of yarn production.
A percentage of post-consumer plastics, such as soda, water and 100 percent PET bottles, have been used, along with recycled filament nylon, staple polyester and performance fibers.
A projected doubling in demand for Repreve fabrics in the short term convinced Unifi of the need for the 50,000-square-foot operation within nine months. It will operate in Yadkinville, where Unifi has its largest manufacturing presence.
Smith said that the goal is broadening the recyclable material available for the line though new technology. A longer-term project, he said, is developing a strategy to recycle used fabrics and garments after buttons, zippers and fabric finishes have been removed.
“We are hearing from the end users of our apparel fabrics that it’s great if we’re recycling bottles and post-consumer and post-industrial waste,“ Smith said.
“But they say there’s a lot of waste out there with fabrics and garments that could be used as well, and would make for a compelling story to consumers.
“That way, that old sweatshirt or sweater in your closet could have recyclable potential,“ he said.