U.S.-based recycled and synthetic yarn maker Unifi swung to a profit in the third quarter after driven by a rise in sales at its Brazil and Asian units. The company said net income for the three months to March 28 was $4.7 million compared to a loss of $41.1m a year earlier. Sales grew 4.6 percent to $178.9m. Brazil “outperformed expectations again, hitting a record 41.2 percent gross margin driven by strong pricing levels. Sales grew to $25.7m from $21m.” Asia also benefited from an improving business climate and recaptured pre-pandemic momentum, allowing the segment to return to top-line growth and report sales of $48.5m, up from $38.6m.
Unifi said that its Repreve product, which makes fiber from recycled materials such as plastic bottles, made up 33 percent of net sales in the quarter, compared with 29 percent a year ago. The company also hit a milestone of 25 billion bottles recycled into Repreve. Repreve is used by a growing number of outdoor activity equipment clothing companies, including Patagonia, The North Face, Yukon Outfitters, Teva, Stio and Kathmandu.
”Combined with rising petrochemical prices, raw material costs “exhibited a meaningful step-up during the March 2021 quarter”, said the company CEO, Eddie Ingle. Adjusted core earnings for the fourth quarter were expected to be in the range of $12m to $14m, including expectations for Covid-19 uncertainty and raw material cost increases that occurred in the March 2021 quarter that will adversely impact gross profit “due to the inherent lag in responsive selling price adjustments.”
“With those higher costs now in our business, we have been working closely with our customers to ensure that the appropriate selling price adjustments are implemented. We do expect some margin pressure to occur into Q4,” Ingle said.