Revenues from premium value-added (PVA) products grew 10.1 per cent compared to the first quarter of fiscal 2018, or 14.4 per cent when excluding the impact of foreign currency translation, and represented approximately 43 per cent of consolidated net sales.
During the reported period, gross margin was 11.0 per cent, compared to 14.2 per cent for the first quarter of fiscal 2018, impacted by higher costs, including raw materials, and a less favorable sales mix. Operating income was $5.7 million, compared to $10.2 million for the first quarter of fiscal 2018, impacted by lower gross profit and incremental selling, general and administrative expenses.
Net income was $1.8 million in the first quarter of fiscal 2019, compared to $9.0 million for the first quarter of fiscal 2018. Net income for the first quarter of fiscal 2019 was adversely impacted by comparatively higher operating expenses, $2.9 million less in pre-tax earnings from PAL and a higher effective tax rate. Diluted EPS was $0.10 for the first quarter of fiscal 2019 and $0.48 for the first quarter of fiscal 2018.
"We continued to execute on our strategy of driving sales with our PVA portfolio as our team delivered its sixth consecutive quarter of sales growth. Our PVA portfolio, including the sustainable Repreve platform, continues to distinguish us in the global market. While we are proud of our overall sales growth, profitability fell below expectations as raw material costs rose again. Similarly, profitability for the Parkdale joint venture fell below expectations due to higher cotton costs. We saw sales benefit from our recently acquired dyed business and remain upbeat on the outlook for this venture even though we are incurring some short-term integration costs. Unifi has and will continue to take pricing actions to counterbalance rising input costs while focusing on improving margins by delivering innovative and sustainable solutions necessary to achieve profitable long-term growth," said Kevin Hall, chairman and CEO of Unifi.
The company's second quarter gross profit will be unfavourably impacted by a surge in polyester raw material costs in September, which was driven by higher global demand and tighter supply for polyester feedstocks, and a seasonal shut-down period in December 2018, which will occur in the company's second quarter rather than the third quarter as it did in the prior year. Therefore, the company's expectations for net sales and capital expenditures remain unchanged, while the high end of the range of expectations for operating income and adjusted EBITDA growth has been reduced. Consistent with these expectations, and having greater clarity on the effects of recent tax reform legislation, the company has increased its effective tax rate outlook. However, the company expects cash tax payments as a percentage of income before income taxes to be in the mid-30 per cent range.
"Raw material costs have been rising over the last four quarters, and there was a dramatic jump in polyester costs in September that will place even more pressure on our second quarter profitability. While this rise is clearly a headwind, we anticipate a better relationship between pricing and cost in the second half of the year. This would benefit our third and fourth quarters, returning our profitability to the lower end of our original expectations," said Kevin Hall, Chairman and CEO of Unifi. "We will continue to address input cost pressures with responsive pricing actions, while focusing on increased sales of innovative solutions that we believe will provide us the portfolio differentiation necessary to achieve long-term growth. We look forward to providing more detail on our strategic growth plan for the next few years during our Investor Day on November 15." (RR)
Fibre2Fashion News Desk – India
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