Rising raw-material costs overshadowed increased sales for Unifi Inc., contributing to its second loss in the past four quarters.
Unifi, based in Greensboro, has its largest U.S. yarn-manufacturing presence in Yadkinville, with 970 employees there.
On Thursday, Unifi reported a loss of $7.6 million compared with net income of $5.4 million a year ago.
The company reported that sales for its second quarter of fiscal 2012 — which ended Dec. 25 — were up 3 percent to $167.1 million.
However, its cost of sales rose 10 percent to $156.2 million. It also raised its provision for bad debts to $357,000 compared with $86,000 in the second quarter of 2011.
Unifi has been dealing with historically high raw-material costs for more than a year, which also contributed to a $4 million loss in the third quarter of 2011.
Unifi said it also was affected by inventory reductions across its apparel supply chain.
"Although we believe there is still some excess inventory within the supply chain, we expect the effects of the destocking to be significantly less" in the third quarter, said Bill Jasper, the company's chairman and chief executive.
"We are encouraged by the volume improvements we have seen since returning from our holiday shutdown period, and by the easing of polyester raw-material prices."
Because of those factors, Jasper said, "we expect to see continued improvement as we move through the second half of the fiscal year."
Peter Tourtellot, managing director of Anderson Bauman Tourtellot Vos & Co., a turnaround-management company, has said Unifi's revenue could be flat throughout fiscal 2012 because manufacturers are "taking a safe course in managing their inventory" in the sour economy.
"It is clear the company is experiencing a shortfall of orders, but some of the stress may be as a result of a shift in their mix of orders," he said.
"By that I mean less profitable product lines may have accounted for a larger part of their sales for the quarter. If this trend continues, the company will need to look at further cost cuts to stem further quarterly losses."
Jasper said he was encouraged with its Brazilian textile market, customer response to its expansion of its capacity for blending yarn in Central America, and the partnership with Ford Motor Co. to provide Repreve fabric for its all-new Focus Electric vehicle.
"As these and other positive trends continue to develop, we remain confident we are on the right path and will stay focused on executing our strategies," he said.
Michael Lord, an associate professor of management at Wake Forest University, said Unifi is being squeezed on opposite ends of its financial spectrum.
"The economy continues to be soft," Lord said. "They are largely at the mercy of raw-material costs, over which they have very limited control. They also have powerful, price-sensitive customers.
"At least they were able to pass on some of the higher raw-material costs in the form of higher prices. If they can keep prices steady while regaining some volume and keeping costs down, it could turn things around."
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