Unifi shrugs off US weakness in Q2

Unifi has booked what it says was a strong second-quarter

US yarn manufacturer Unifi has booked what it says was a strong second-quarter boosted by the performance of its Brazil and Asia operations, which offset weaker conditions in its domestic market.

Earnings amounted to US$4.6m in the three months ended 25 December, compared to $6.5m a year earlier. This included a year-on-year decline in earnings of $0.3m from the group's Parkdale America spinning division.

The company also divested its 60% interest in Repreve Renewables during the quarter, which at the transaction date had a net asset value of $2.2m. 

Gross margin in the period, meanwhile, increased to 14.3% from 14% in the prior year, while net sales dropped slightly to $155.2m from $156.3m last year. A strong PVA performance in Asia and Brazil mostly offset weaker sales in Unifi's domestic market. 

"We are pleased with another quarter of solid results, as strong performance internationally counterbalanced headwinds in the domestic market, driven by weak retail sales and elevated inventory levels," said Tom Caudle, president of Unifi. "In the short term, we expect margin pressure in the international segment due to increased import tariffs on raw materials for our Brazilian operations, and we expect domestic market conditions to remain difficult. As a result, we now expect fiscal 2017 results to be broadly consistent with fiscal 2016."

Looking forward, Caudle said there continue to be "attractive international growth opportunities" for the company.

"We also believe that our collection of technologically advanced assets in the US positions our domestic business to thrive over the mid-term, as our customers seek a speed-to-market advantage that imports cannot offer. Lastly, we continue to invest in product innovation and brand relationships to expand our growing PVA and Repreve portfolio."