While sales of its Repreve recycled fibers remained strong, Unifi Inc. saw declines in net income and sales in the fourth quarter ended June 26, hurt by currency fluctuations and lower selling prices.
The Greensboro, N.C.-based yarn manufacturer, said Wednesday that net income for the fourth quarter fell 35 percent to $10.2 million, compared to $15.6 million for the fourth quarter of fiscal 2015. The drop was primarily due to $5.1 million of lower pre-tax earnings from its Parkdale America unit, and a more favorable effective tax rate in the prior year period. Parkdale America is a joint venture between Unifi and Parkdale Mills, producing cotton and synthetic yarns.
Net sales dipped 6 percent to $163.9 million in the quarter from $175 in the prior-year period, unfavorably impacted by devaluation of the Brazilian real and lower selling prices due to lower raw material prices.
Unifi said market share gains for its International Segment and a disciplined focus on its premium value added portfolio, included its flagship Repreve polyester and nylon yarns made from recycled plastic bottles, reported operating income in the period grew 16.7 percent to $13.9 million from $11.9 million a year earlier, and that operating margin improved by 168 basis points compared to the fourth quarter of fiscal 2015.
Adjusted earnings before income, taxes, depreciation and amortization rose 9 percent to $21.1 million for the fourth quarter from $19.2 million in the year-ago period. Adjusted EBITDA was $68.6 million for fiscal 2016 compared to $64.3 million for fiscal 2015.
For the year, net income fell 18.5 percent to $34.4 million from $42.2 million in the prior year for fiscal 2015, adversely impacted by $11.3 million of lower pre-tax earnings from Parkdale America and a more favorable effective tax rate in fiscal 2015.
Net sales were down 6.3 percent to $643.6 million for fiscal 2016, compared to $687.1 million last year. Operating income for fiscal 2016 grew 9.6 percent to $42.2 million from 38.49 million, and operating margin improved 96 basis points compared to fiscal 2015.
Gross margin climbed to 14.5 percent compared to 13.2 percent for fiscal 2015, while PVA products surpassed 35 percent of net sales.
Tom Caudle, president of Unifi, said, “We’ve spent the last several years transforming our business and shifting our sales mix to higher-margin PVA products. We remain committed to producing the highest quality, innovative and sustainable products for our customers around the world. This has been the foundation of our success over the past several years and we believe it will continue to be as we grow.”
For fiscal 2017, the company anticipates revenue growth in the low-single-digit percentage range, assuming raw material prices are unchanged; operating income and adjusted EBITDA growth in the low-single-digit percentage range; an effective tax rate in the low 30 percent range, and continuing the current capital investment strategy, with estimated capital expenditures of approximately $40 million.
“We expect growth in our top line in fiscal 2017 based on increased contributions from our international operations, PVA portfolio and our new bottle processing facility, all of which should help offset a soft domestic environment,” said Sean Goodman, chief financial officer of Unifi. “We expect some gross margin pressure in fiscal 2017 associated with initial start-up costs for our bottle processing operation and Recycling Center expansion. We anticipate that the financial benefits of these investments will be realized in fiscal 2018 and beyond. We will continue to invest diligently in our business to position our assets for enhanced returns, to expand internationally, and to continue on a path for long-term growth.”