Unifi has second quarter to forget

By Staff -- Home Textiles Today, 1/26/2004 12:00:00 AM

GREENSBORO, N.C. —

With the woes of the U.S. textiles industry backing up along the supply chain, yarn-producer Unifi Inc. recorded a steep drop in second-quarter sales and a sharply widening loss of $9.2 million, more than four times the size of a year-ago deficit of $2.2 million.

Sales at the big producer of textured polyester and nylon yarns tumbled by 9 percent, to $183.7 million from $201.9 million, a shortfall of more than $18 million.

As sales headed south, margins came under pressure, contracting to 2 percent from 7.4 percent a year ago, a drop of 540 basis points, or 5.4 percentage points. Gross margin dollars dropped off by 75.5 percent, to $3.7 million from $14.9 million.

Supplying some of the margin pressure, a pre-tax benefit from fiber producer DuPont — included in the margin — was reduced by 10.3 percent, to $7 million from $7.8 million during the year-before quarter.

When measured as a percentage of sharply falling sales, operating costs climbed by 50 basis points, or one-half of a percentage point, to 7 percent from 6.5 percent a year ago. But the company has continued to cut away at costs, and measured in absolute dollars, expenses were whittled down by 2.7 percent, to $12.8 million from $13.1 million last year, generating a cash savings of $340,000.

Pressured downward by the falling sales and the severe margin contraction, Unifi swung to an operating loss, recording an operating deficit of $9.1 million, compared with a year-ago operating profit of $1.8 million.

On the plus side, Unifi pared down inventories and interest expense.

Unifi Inc.