Last month, the US Department of Commerce announced preliminary countervailing duty determinations on unfairly subsidised imports of polyester textured yarn from China at rates of 32% or more and India at rates of 7% or more. Preliminary antidumping determinations are expected on 26 June 2019, and final determinations of dumping, subsidisation and injury are expected by the end of calendar 2019.

Imports of polyester textured yarn from China and India, which increased approximately 79% from 2013 to 2017 and which continued to grow during the first half of 2018, remained high during fiscal 2019, creating considerable pressure for companies in the US. “While we continue to see positive indicators in global revenue and momentum in our sustainable and innovative PVA product portfolios, a number of headwinds and shortfalls have reduced our short-term profitability,” said Tom Caudle, President and COO of Unifi.

“These headwinds include unfavourable foreign currency translation impacts, a surge in imports of polyester textured yarn from China following the filing of our October 2018 trade petitions, and softness in certain markets. Amid these pressures, we were pleased to see the Commerce Department's preliminary countervailing duty and critical circumstances determinations. These announcements are critical steps in advancing our efforts to better compete against the subsidised imported yarns that have flooded our market in recent years, and we will continue in our efforts to pursue these important trade actions in the coming months.”

Organisational changes and strategy

The company also reported net loss of US$ 1.5 million for the third quarter of fiscal 2019, compared to net income of US$ 0.2 million for the third quarter of fiscal 2018. Net loss was impacted by a significantly higher effective tax rate, the company reports. But the manufacturer plans to reduce costs and enhance profitability in future periods.

“Separate from the recent trade activity, we have transitioned our leadership team to a leaner and more agile structure with deep roots in operational excellence and a balanced focus on profitability. We also launched and are continuing to execute against a cost reduction plan, which includes a considerable step-down in our run-rate of general and administrative expenses,” said Mr Caudle.

“Our global strategy to Partner, Innovate and Build is creating opportunities for future growth while we take appropriate action to restore profitability in the Americas businesses. This includes increasing the utilixation of our assets, supporting and expanding our sustainable and innovative portfolios, and optimizing the supply chain and cost structure to better deliver efficient and effective solutions to meet the demands of our customers. We remain confident in our path forward and have made calculated changes to our organization that empower our teams and strengthen our ability to remain the leader in synthetic and recycled textile solutions.”

Other results

Net sales in the third quarter of fiscal 2019 increased to US$ 180 million, compared to US$ 165.9 million for the third quarter of fiscal 2018. International revenue growth was led by PVA product sales, partially offset by unfavourable foreign currency translation impacts and softness in Brazil. Domestically, revenue increased primarily as a result of one more shipping week due to the timing of the holiday shutdown occurring within the second quarter of fiscal 2019, partially offset by competitive pressure from polyester yarn imports into the US.

Gross margin was 7.7% for the third quarter of fiscal 2019, compared to 10.0% for the third quarter of fiscal 2018. Operating income for the third quarter of fiscal 2019 was US$ 0.8 million compared to US$ 1.6 million for the third quarter of fiscal 2018. Adjusted EBITDA was US$ 6.8 million, compared to US$ 7.3 million in 2018. Net debt was US$ 109 million at 31 March 2019, compared to US$ 86.3 million at 24 June 2018.

www.unifi.com