• Unifi has been plagued by ongoing pressure from higher raw material costs in fiscal 2018. 
  • CEO Kevin Hall said Unifi began to see a positive impact in the fourth quarter from recent pricing adjustments.
Q4 net income amounted to US$10.8m, compared to $9.7m a year earlier

Q4 net income amounted to US$10.8m, compared to $9.7m a year earlier

Shares in Unifi were up by almost 7% this morning (3 August) as the US yarn manufacturer is optimistic about the year ahead amid a "strong" fourth-quarter after persistently rising raw materials costs took their toll in fiscal 2018.

For the three months ended 24 June, net income amounted to US$10.8m, compared to $9.7m a year earlier. Unifi said earnings were adversely impacted by comparatively higher operating expenses but benefited from a significantly lower effective tax rate.

Net sales increased $10m, or 5.9%, to $181.3m, compared to $171.3m for the fourth quarter of fiscal 2017. Revenue growth was driven by an overall increase in sales volume, led by worldwide PVA product sales.

Meanwhile, gross margin in the period narrowed to 13.2% from 16% in the prior year. Unifi said the decline was driven primarily by higher raw material costs and a less favourable sales mix, in combination with a highly competitive domestic environment. Gross margin increased more than 300 basis points from the third quarter of fiscal 2018, as raw material-related pricing adjustments continued to take hold in the fourth quarter.

For the full year, net income totalled $31.7m, compared to $32.9m for fiscal 2017, while net sales in the period increased 4.9% to $678.9m from $647.3m last year, due primarily to increased global sales of PVA products. Gross margin for fiscal 2018 was 12.7%, compared to 14.5% for fiscal 2017, due primarily to higher raw material costs and a less favourable sales mix in a highly competitive domestic environment.

"Our teams across the globe delivered strong performance during the fourth quarter and finished fiscal 2018 with 5% top-line growth," said CEO Kevin Hall. "While navigating ongoing pressure from higher raw material costs, we capitalised on increased demand from brands and retailers for our innovative PVA offerings, including Repreve. We also are encouraged that gross profit and operating income for the fourth quarter improved compared to the third quarter."

Hall remains optimistic, noting with the firm's core strategy focused on innovation and sustainability, it is excited about the opportunities that remain ahead.

"Building strategic partnerships and deploying our resources efficiently for commercial expansion remain critical to achieving our long-term goals."

Looking ahead, Unifi expects mid-single-digit percentage growth for net sales and mid- to high-single-digit percentage growth for adjusted EBITDA.

"Fiscal 2018 marked a challenging, but promising year, as the strategic investments that we made across the business materialised into accelerated top-line performance, which we believe will be sustainable into fiscal 2019," Hall added. "While higher raw material costs significantly pressured our margins and profitability in fiscal 2018, we began to see a positive impact in the fourth quarter from recent pricing adjustments. As we look to fiscal 2019, we plan for improvement in all our major performance metrics and continued progress against our strategic initiatives and long-term profitability."