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Unifi loss widens, but turnaround seen

Greensboro, N.C. – Unifi Inc., a producer of polyester and nylon yarns, recorded a sharply widened quarterly loss of $16.5 million, more than four times the size of a year-ago deficit of $3.8 million.

Sales tumbled by 17.9%, to $156.9 million from $191.1 million last year, a daunting shortfall of $34.2 million, as the yarn producer worked off a glut of higher-priced partially oriented yarn (POY) in the supply chain.

Margins approached the vanishing point, narrowing to 1.7% from 4.9% during the same period a year ago. Gross margin dollars fell by 72.0%, to $2.6 million from $9.4 million last year.

Bill Lowe, coo and cfo, said earnings were hurt “by the lingering effect of higher priced POY inventory and a significant decline in POY volume during the quarter,” problems largely behind Unifi now. Lowe said, “The inventory adjustments that took place throughout the supply chain during the December appear largely complete, and our POY and texturing plants are now running at expected capacities. We anticipate operating at these higher run rates and also expect to achieve mix-related benefits as well during the March quarter.”

In a big plus for the company, leading to lower interest costs ahead, Unifi slashed its debt by 22.0%, or $58 million, to $206.1 million from $264.1 million, after a May refinancing.

Brian Parke, chairman and ceo, said, “We continue to make excellent progress with our operations in China . We have many products now being sampled by critical new customers and larger scale trials are being requested. On the cost side, we have made changes that will reduce our operating costs approximately $2 million in the coming year, which will help us reach our goals. The momentum is building from the market side, and downstream opportunities are beginning to turn into solid orders.”

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