#Yarn & Fiber
UNIFI®, makers of REPREVE®, with improvements in Q2
Second Quarter Fiscal 2024 Overview
Net sales were $136.9 million, an increase of 0.5% from the second quarter of fiscal 2023, driven by higher sales volumes that were muted by lower pricing in response to lower raw material costs.
Revenues from REPREVE Fiber products were $45.7 million and represented 33% of net sales.
Gross profit was $1.6 million and gross margin was 1.2%, representing sequential-quarter and year-over-year improvements through existing cost saving initiatives, successful execution of renewed commercial efforts, and stabilized input costs.
Net loss was $19.8 million, or ($1.10) per share, compared to net loss of $18.0 million. Adjusted Net Loss was $14.7 million, which excludes $5.1 million of restructuring costs, compared to Adjusted Net Loss of $21.8 million for the second quarter of fiscal 2023, which excluded $3.8 million of income tax recoveries in Brazil.
Adjusted EBITDA, which also excludes $5.1 million of restructuring costs, was ($5.5) million, compared to ($13.0) million for the second quarter of fiscal 2023.
Company continued and expanded cost efficiency measures to streamline operations and reduce expenses across the business.
Company recently announced the promotion of key executive leaders to complement the Company’s Profitability Improvement Plan implemented in December 2023, which is focused on streamlining operations and reducing costs.
Adjusted Net Loss, Adjusted EBITDA and Net Debt are non-GAAP financial measures. The schedules included in this press release reconcile each non-GAAP financial measure to its most directly comparable GAAP financial measure.
Eddie Ingle, Chief Executive Officer of UNIFI, Inc., stated, “Our second quarter fiscal 2024 results were in line with our expectations and reflect sequential improvement in our underlying gross profit performance, despite the negative impact from the ongoing challenges in the apparel industry and its supply chains. The recent strategic actions aimed at further reducing ongoing costs, optimizing our operations, and enhancing profitability will strengthen our position for the anticipated recovery in apparel demand in calendar 2024.”
Ingle continued, “Our focus remains on maintaining a disciplined approach to cost management and leveraging operational efficiencies in the short-term environment, but we will continue to invest prudently to support long-term growth and innovation for greater revenues and accretive margins. We are excited about the opportunities across the globe that expand our beyond apparel initiatives and build on our REPREVE Fiber business.”
Second Quarter Fiscal 2024 Compared to Second Quarter Fiscal 2023
Net sales of $136.9 million were relatively unchanged compared to $136.2 million, primarily due to lower average selling prices resulting from lower raw material costs. The Americas Segment experienced modest volume improvement, although sales levels remain below historical averages as a result of weakened demand for fiber in the apparel sector. The Brazil Segment maintained its increased market share with strong sales volumes while facing ongoing pricing pressures from competitive imports. The Asia Segment continued to experience weak apparel demand levels but attained a diverse sales mix.
Gross profit of $1.6 million improved significantly compared to ($8.0) million. Americas Segment gross profit increased $6.3 million, primarily driven by variable cost management efforts and more stable raw material costs. Brazil Segment gross profit improved $1.8 million from higher sales volumes, which were partially offset by unfavorable import pricing dynamics. The Asia Segment continued to demonstrate portfolio strength with a rich mix of REPREVE products, achieving a gross profit increase of $1.5 million and 250 basis points of incremental gross margin.
Operating loss was $17.6 million compared to $19.8 million, aligning with the improvement in gross profit, partially offset by $5.1 million of restructuring costs and $1.3 million of bad debt expense. Net loss was $19.8 million compared to $18.0 million. Adjusted EPS was ($0.81) and Adjusted EBITDA was ($5.5) million, which exclude the $5.1 million of restructuring costs, comprised of $2.7 million related to the dissolution of an unprofitable joint venture and $2.4 million of severance costs.
Fiscal 2024 Outlook
UNIFI expects the following third quarter fiscal 2024 results:
- Net sales between $149.0 million and $154.0 million;
- Adjusted EBITDA between ($2.0) million and $1.0 million;
- Capital expenditures between $4.0 million and $5.0 million; and
- Continued volatility in the effective tax rate.
- Additionally, UNIFI expects sequential improvement from the third quarter to the fourth quarter of fiscal 2024.
Ingle concluded, “While the apparel industry recession has persisted longer than we anticipated, we believe we will see an improved competitive environment moving forward. As one of the strongest textile solutions providers in the world, we stand to expand our global market share and accelerate our financial performance as our industry returns to growth. Further, our recently announced cost reset and commercial improvements should amplify quarterly revenue and earnings on a sequential basis. Our potential in Asia and Brazil continues to shine, demonstrating the strength of our dynamic global business model. As the demand in the Americas normalizes and the industry stabilizes, the results of our recent efforts to strengthen the business will become even more evident as we close our fiscal 2024.”
