DUPONT SENDS WARNING AS TEXTILE FIRMS FACE DIRE ECONOMIC OUTLOOK
Byline: Scott Malone / With contributions from David Lipke
NEW YORK — As the economy continues to drag along, U.S. fiber and fabric firms seem to be getting hit the hardest along the pipeline.
So, as three major textile firms reported their quarterly results on Wednesday, the consensus was that things in the textile industry are likely to get worse before they get any better. DuPont, Cone Mills Corp. and Unifi Inc. all said they were in the red for the recently ended period, a day after Burlington Industries reported similarly downbeat results and forecasts.
“We do not believe the second quarter marked the bottom of the current U.S. market downturn and we believe that conditions will continue to deteriorate into the third quarter,” Ann Gualtieri, vice president at Wilmington, Del.-based DuPont, said in a conference call with financial analysts.
DuPont warned it expects worsening economic conditions at home and abroad for the manufacturing industry to drive third-quarter earnings down by about 70 percent. The firm also disclosed that since April it has eliminated 6 percent of its workforce, about 5,500 staff jobs — substantially more than the 4,000 positions it said it was going to cut. About half of those cuts — in addition to 1,300 jobs at outside contractors the company has eliminated — have come from DuPont’s nylon and polyester businesses.
Gary Pfeiffer, senior vice president and chief financial officer, said, “we do think the downturn has caused a fundamental shift in the U.S. geography for the apparel business, particularly on the nylon side.”
DuPont Apparel & Textile Sciences president Steve McCracken, commenting on the overall state of business said, “Let’s say it’s not good. You can see it, just in watching the bankruptcy notices every day.”
The company said that earnings at its Apparel & Textile Sciences unit, which is now part of the company’s specialty fibers division, were off 85 percent in the quarter. McCracken noted that figure was depressed by many restructuring charges. Excluding those, he said results would have been “significantly better, but still down.”
As a whole, DuPont reported a net loss of $213 million, or 21 cents a diluted share, for the second quarter. That figure was lowered by $645 million in one-time charges and gains. A year earlier, DuPont had earned $688 million, or 65 cents a share. Net revenues were $7.21 billion, off 11.3 percent.
Also burdened by charges, Greensboro, N.C.-based Cone, which earlier this year eliminated 14 percent of its workforce, recorded a net loss of $26.5 million or $1.08 a diluted share for the second quarter. A year earlier, the mill had earned $431,000 or 2 cents a share, including $33.6 million in charges.
However, the company also experienced heavy margin erosion due to pricing pressure and its need to reduce plant schedules to cut inventory. The consolidated statement of operations actually showed a gross loss of $999,000 for the quarter after charges. Net sales were $135.2 million, off 16.3 percent.
Cone president and chief executive John Bakane said, “Business continues to be slow and unpredictable. At some point, however, inventories will be cleared and demand should improve.”
Yarn texturizer Unifi, also of Greensboro, warned that it expected to break even at best for the current period. For its fourth quarter ended June 24, the company recorded a net los of $15.6 million, or 29 cents a diluted share, compared with earnings of $11.3 million, or 20 cents a share, in the prior-year quarter. Net sales were $255 million, down 24.7 percent.
Unifi also said “it is difficult to project how long it will take to work through the excess inventory that is currently in the pipeline.”