The first six months of fiscal 2019 consisted of 27 weeks for the company’s domestic operations, compared to 26 weeks in the first six months of fiscal 2018, said a media release by Unifi. 

“As previously announced, the spike in polyester raw material costs in September and October of 2018 and the resulting demand disruption created an even more challenging environment for our regional business, and our performance missed expectations," said Kevin Hall, CEO of Unifi.

“External pressures in the regional business included elevated raw material costs and suppressed demand for certain textured and covered yarns. The volatile nature of these external pressures made navigating the regional environment even more difficult. Internal pressures included the implementation of selling price increases that left us less competitive, elevated inventory levels, and the result of weaker leverage of our cost structure. The combination of these external and internal pressures caused weaker fixed cost absorption and lower operating margins.

“While the ongoing expansion of our PVA portfolio remains paramount to our partner, innovate and build strategy, it is imperative that we compete more aggressively in our regional commodity business to maintain our prominent market position and remain on the leading edge of textile innovation and sustainability. By synchronising our efforts to strengthen our core yarn portfolio alongside pursuing our PVA growth engine, we will remain the innovative and sustainable solutions partner of choice,” added Hall.

Fiscal 2019 for the company contains 53 fiscal weeks, with the additional week included in the first fiscal quarter.  In consideration of profitability pressures from raw material costs that occurred in the first half of fiscal 2019, as well as suppressed demand in certain regions and a weaker sales mix, Unifi anticipates mid-single-digit percentage growth for net sales and operating income between $19.0—$23.0 million.

“Our fiscal 2019 second-half outlook assumes some moderate gross margin improvement due to lower raw material costs and improved sales and production volumes from the seasonality that typically lifts our second-half,” said Hall. “Gross margins in this second-half outlook are expected to benefit from a more favourable price-to-cost relationship. However, lingering competitive dynamics and downward pricing pressure are expected to prevent a full recapture of the recent margin lost during the periods of rising and elevated raw material costs.” (PC)

Fibre2Fashion News Desk – India