Yarn producer Unifi has posted a second quarter net loss of US$9.1m, which compares to a net loss of $7.7m in the prior December quarter, caused by the decreased demand and higher priced raw material purchased from the first fiscal quarter working its way through the company's inventory.

The prior year quarter included the negative impact of $6.3m in restructuring and severance charges and $2.2m of impairment charges.

Net sales for the current quarter were $125.7m, which represents a $57.7m decrease from net sales of $183.4m for the prior year December quarter.

The company said sales were negatively impacted by the reduced demand caused by sharp declines in consumer spending and compounded by the related effect of excess inventory across the respective supply chains.

In addition, the prior year quarter contained approximately $7m of sales from its commodity POY facility in Kinston NC, which ceased operations during that quarter.

"Retail sales in our primary end-use segments: apparel, home furnishings and automotive, were all down dramatically in the quarter, resulting in a significant buildup of inventory throughout the supply chain," said Ron Smith, chief financial officer for Unifi.

"In response, brands and retailers cancelled orders and fabric mills curtailed production suddenly during the fourth quarter, which dramatically reduced demand for our products. Based on current retail sales estimates, we expect it to take an additional four to six months for this built-up inventory to completely work through the supply chain.

"Accordingly, we anticipate continued pressure on our sales throughout the second half of the fiscal year. We do, however, expect conversion margins and cost to improve during the second half of the fiscal year, and we anticipate continued strength in our sales to the CAFTA region as more apparel production is shifted there from Asia to reduce the overall sourcing cycle."

Net loss for the first half of fiscal 2009 was $9.7m, compared to a net loss of $16.9m for the same prior year period. Net sales for the first half of fiscal 2009 were $294.7m compared to net sales of $353.9m in the prior year period.