$1.5M PROFIT ENDS NINE-MONTH LOSS STREAK AT CONE
NEW YORK — A strong performance in its denim and khaki fabric business helped Cone Mills Corp. post $1.5 million in net income for the second quarter, breaking a three-quarter losing streak.
Net for the three months ended July 2 was more than double the $714,000 in net income reported in the prior-year quarter.
But earnings of 2 cents a diluted share fell below the 3 cent First Call consensus estimate.
Sales were $161.5 million, off 7.4 percent from $174.5 million. However, the Greensboro, N.C.-based company said that, excluding discontinued operations such as its former yarn-dyed fabrics unit, sales were off 2 percent.
While acknowledging “these earnings are small,” John Bakane, president and chief executive officer, said in a statement that the results should be taken “in light of the tremendous restructuring we have come through in the past 18 months, led by improved results in denim and our Carlisle [printing] facility.
While the margins benefitted from higher run rates at its denim mills, as volume has picked up, it continued to suffer from low pricing. Denim prices fell during the second half of last year, as the entire industry suffered through a slump. While most major denim mills have imposed price hikes in denim this year, they are only taking effect in the third quarter of the calendar year.
The company noted that despite lower prices in the second quarter, operating income for the denim and khaki segment rose 19.2 percent, to $8.7 million from $7.3 million. Sales in the segment were $122 million, off 4.1 percent from $127.2 million. Cone attributed the revenue decline to lower pricing, noting that volume was even with the prior-year period.
“The near-term outlook for our business includes continued strength in denim, offset by a normal seasonal slowing and the recent softening of retail trends in nondenim businesses,” Bakane added. He sketched out a three-part plan to continue to improve results.
The company plans to refinance its 8 1/8 percent bonds to allow it to pay for the construction of a denim plant in Tamaulipas, Mexico.
In addition, it’s seeking to turn around its decorative fabrics business, which took a $300,000 operating loss this year, and to improve efficiencies at its Raytex finishing plant.
For the six months, the company reported a $553,000 net loss, compared with a $10.3 million net loss in the prior-year period. Sales were $303.2 million, off 8.5 percent from $331.7 million.
In Wednesday trading on the New York Stock Exchange, Cone shares fell 1 3/8, to close at 5 7/8.