Q2 2022 Unifi Inc Earnings Call
Yeah.
Good day and thank you for standing by welcome to unify second quarter fiscal 2022 conference call.
At this time, all participants are in listen only mode.
After the speaker's presentation, there will be a question and answer session.
I ask a question during the session you will need to press Star then one on your telephone keypad.
Be advised todays conference maybe recorded.
If you require operator assistance during the call. Please press Star then zero.
I'd now like to hand, the conference over to a J Edgar Vice President of Finance. Please go ahead.
Thank you Liz and good morning, everyone on the call today is al Carey Executive Chairman, Eddie Ingle, Chief Executive Officer, and Craig <unk>, Chief Financial Officer. During this call management will be referencing a webcast presentation that can be found at unified dot com and by clicking The conference call Link management advises you that certain statements included in today's call.
<unk> will be forward looking statements within the meaning of the federal Securities laws management cautions that these statements are based on current expectations estimates <unk> projections about the markets in which Unifi operates these statements are not guarantees of future performance and involve certain risks that are difficult to predict actual outcomes and results may differ materially from what is expressed.
Forecast or implied by these statements you are directed to the disclosures filed with the SEC on <unk> forms 10-Q, and 10-K regarding various factors that may impact these results.
Also please be advised that certain non-GAAP financial measures such as adjusted EBITDA adjusted EPS adjusted working capital and net debt may be discussed on this call.
I'll now turn the call over to Al Carey.
Well, thanks, a J and good morning, everyone. Thanks for joining this call. So that we could cover the unified second quarter results I'll begin with an overview of the quarter and then I'm going to turn it over to Eddie Ingle and Craig Korea Tour.
We'll take you through the details of our company's performance in Q3 Q2, and then we're going to have a Q&A after that.
So to get started let me just say that I'm enthused about our company's growth potential, especially when you look at the 24% revenue growth in this quarter, but I want to say upfront that the under delivery on profit for the quarter is largely due to U S labor shortages in our plants, which has hampered our ability to produce product to the <unk>.
Customer demand, we expect that to improve and we will talk more about this in the next few minutes.
On the sales front.
Demand for our products continues to be strong in Q2 and it makes it the sixth consecutive quarter of sequential growth. We are ahead of forecast and we achieved $201 million in sales, which is a milestone for us the.
The momentum is going to continue for the next two quarters and we feel confident to say that our revenue forecast could not be raised to $800 million in sales for the fiscal year 2022.
For perspective, Youre going to have to go all the way back to 2003 to see the last time, we achieved $800 million in sales at unify so it's a big move forward for us.
We also expect the trend to continue beyond fiscal 2022, because we now have all three of our regional geographies with positive topline momentum.
And Repreve brand continues to accelerate so in this last quarter.
<unk> got to 40% of our mix, which is the first time, we've achieved that level and the growth on repreve was above 30%.
We also see repreve expanding more rapidly.
Into non apparel products, such as footwear, and automotive and industrial furnishings and PPE. This is something that our team has been working on for about a year and it's coming into reality now and Eddie will talk about that in a little bit.
But our retail brands and our customers are really moving forward with using recycled materials. So that they can achieve their sustainability targets in the 2025 goals in their 2030 goals. So it's been a very positive trend for our business now.
Now a key point for this past quarter.
Our unified sales revenue plus 24% versus a year ago.
But the performance could have been better.
It should have it should have been above 30%. If we had the labor to produce for all the orders that were in hand in the U S plants.
Now this labor shortage is something that is a macro issue, it's affecting our industry and many industries.
The whole issue of higher turnover and difficulty hiring and training people fast enough to get them to replace the turnover our turnover.
People.
That difficulty also comes with an extra cost and it's causing inefficiencies in the plant for the time being and it's also keeping us from producing to the consumer demand.
This dynamic that I'm speaking about on labor has caused about two thirds of our $4 million Miss for EBITDA in the quarter. The other one third comes from not getting all of the pricing passed along to cover our cost in Q2, but I can tell you right now that those <unk>.
The increases have happened by January .
So will the labor issues improve and the answer is yes. Our team has reacted by making sure that we're competitive on wages, we're investing quality training for our new people and we are even experimenting with new methods of managing our frontline teams and all of these things are beginning to work, but it will take a little.
More time as this recent COVID-19 uptick has caused some quarantine and the plants. So that this labor issue will drift into Q3, but should see improvement by the end of Q3 and significant improvement in Q4. For example, two weeks ago, We had 100 people in quarantine and the North Carolina.
Plants. This week, we were 70 that should improve as the weeks go on so we have our work cut out for us on U S labor, but we know what to do we have strong sales momentum in all three geographies, Brazil and Asia as gross profit performance remained strong and Repreve is now 40% of our mix on labor we're listening to.
Our frontline employees.
We're trying to find out.
Make sure that they feel that their jobs are more rewarding and they're proud of where they work and interestingly as we do extensive round tables and the plants. If you ask your people how to accomplish this they have most of the answers and then you have to act on them.
So finally, let me just say this I really like the strong management team that we've assembled here at Unifi I liked the agility that they are demonstrating as we work through all the curve balls that the pandemic has been throwing us over the last two years and because of that I'm quite certain that we're going to be a stronger company coming out of the pandemic than we were going into.
It.
So with that let me turn it over to Eddie Ingle, our CEO , who will take you through more of the details of our performance.
Thanks, Al and good morning, everyone.
Our second quarter fiscal 2022, EBIT results were lower than forecasted just three months ago.
However, the revenue momentum we are seeing in several key areas provides us with a lot to be optimistic about going forward.
We're also seeing volume growth across several market segments and this is encouraging.
However, the quarter it didn't come without its challenges in particular labor and input costs in the U S and <unk> has certainly added unforeseen pressure for our management team and our colleagues.
Yes.
With that in mind I think it's important for me to take a moment to say thank you to all our employees globally for their contributions resilience and hard work as we navigate through.
Towards a full recovery, while continuing to grow our business and deliver goods to our customers.
I'm proud to be part of this company because of the work each of you do on a daily basis.
And moving into the slides will begin on slide three with an overview of the quarter.
As you can see our revenue and volume growth was very positive and is in large part a sign of the continued demand for sustainable materials.
<unk> revenues were up 23, 7% on a year over year basis, which was ahead of our expectations and the outlook, we provided last quarter.
We talked a lot about improving the customer experience at Unifi and I can tell you. It is difficult when you cannot meet the demands of the market.
By our estimate had we not had the labor issues in the U S and could potentially add another $5 million to $10 million in revenue during the quarter.
And while there is a certain level of confidence within unified that we can better service the customer in the second half of our fiscal year. There are several challenges some estimate that continue to weigh into polyester segment.
During the quarter performance was negatively impacted by inflationary pressures from labor and input costs outpacing our pricing levels.
In the U S. Our most significant challenges in labor as Al had mentioned I'm filling the open positions that strong growth has opened up for us remains a primary focus today.
We are doing the right things as an employer and continue to allocate additional resources towards training and retention.
We have implemented new and improved training programs that we feel will lead to better results in reduced labor turnover.
But there is a learning curve I think naturally it takes time for workers to progress and gain the operating knowledge required to run the various machines in the manufacturing plants.
We do expect our current pool of trainees that started in Q2 to continue to increase their productivity and the contributions to be reflected in Q4.
Further our HR team is doing a great job at marketing to our local communities. The open positions. We have today and the expectation is that will backfill the openings with new talent over the next few quarters.
Lastly, we are opening up new overtime related opportunities for our most seasoned personnel.
With all that said of course, it should be mentioned that the escalation of COVID-19 has created additional short term labor constraints for us in our manufacturing plants with up to 5% of our patent workforce currently in quarantine up from last month number of less than 2%.
This is a great excuse me this is creating additional pressure on our domestic labor situation.
But as a country and a global community and as I talked to other Ceos in our industry. It seems that we're all facing the same challenges.
We will continue to prioritize safety and our employees' health at the highest level and eagerly await the time when the omicron impact is behind us.
As we look forward, we expect U S labor challenges continue into the third quarter, but believe the situations had incrementally improve as we move through Q4 and into Q1 of fiscal year 2023.
In recent quarters, we've been proactive in resetting pricing to customers to keep up the increasing costs of raw materials now with the inflation that we've seen in other areas of the business. We've had to institute additional price increases at the beginning of January .
This was driven primarily by labor and other durable materials in the polyester and nylon segments.
These increases should generate significant margin recovery as we move forward.
From a market segment perspective, we are seeing an uptick in the denim markets in Brazil, and as expected a cooling off in the home furnishings and mattress market there.
Our Asian business is stronger than normal in Q2 as apparent to production in Vietnam opened up the energy shortage in China has subsided and the timing of the lunar new year being almost two weeks earlier than last year pushed demand into our fiscal year.
Our fiscal quarter or two.
We saw a volume uptick in the U S and Central America.
Primarily by the demand for quick turn apparel and sock programs.
Our automotive business will slow enrollment in both Brazil, and the U S. Due to the ongoing reduction in the production of light duty cars and trucks.
So moving to slide four let's talk about Repreve.
Our market awareness continues to grow.
Our customers commitment to sustainable products is clearly expanding.
The results were pre fiber represented 40% of our sales mix during the quarter for the first time, an indication of the strong demand and growing momentum it is experiencing.
Specifically the <unk> Circuit design story collection launched in December is sustainable initiatives that focus on forward thinking design and innovative materials in circularity and mines.
The collection features Repreve, our ocean and multiple items, including the puffer jackets, and asymmetric dress put out slim blazer needed shorts and superfast.
With our momentum in Europe , Germany retailer, Tom Taylor launched a new denim as part of their be part sustainable products collection, including Alexa Skinny Jeans. In addition to the existing line with jacket scarves and from sellers.
Next Costco placements are continuing to grow across prior lease base layers Kirkland signature socks, and even more denim.
Outside of the apparel market de Novo brands has expanded repreve into could jarrod chairs, which is in the top three market share in camping on sidelines seating.
We're excited about the breadth of Repreve and the brand patients that continue to expand.
Now stepping back into the overall business.
Our operating environment remains healthy outside of the U S labor tightness and we have seen no significant disruptions to our operations. Despite the omicron spike.
Customer demand has been stronger across all segments.
We believe our supply chain partners and our competitors are also experiencing the same headwinds that we've mentioned today.
Our performance through these challenges makes us even more optimistic about what we can do during normal business conditions.
Financial performance in Brazil, and Asia business segments remained solid.
The agility of the respective might've mentioned take management teams and reacting to the ever increasing changed in the marketplace.
On a positive note in the U S. The installation and productivity for our new <unk> Kota machines are meeting our high expectations and the impact of the increased efficiency should be noticeable beginning in Q4 and beyond.
I'll close with a quick update on our current trade actions before handing the call over to Craig.
In November 2021, the U S International Trade Commission determined that the U S textile industry had been severely impacted by imports from certain countries.
As a result, the commerce department finalized antidumping duties on all subject imports in December 2021, Accordingly, we continue to look forward to an annual step up in ink sales.
Polyester moving forward.
With that I'll turn the call over to Craig Craig.
Thank you Eddie and good morning, everyone. It's out.
And that's where a lot of positive elements in the just completed quarter and we are focused on the specific actions being taken to.
North American labor challenges.
Demand for our products continues to grow at a very high level and our management team is focused on growing our business for the future.
I'll summarize the financial performance from the quarter as follows we were able to achieve revenue performance ahead of our expectations, while the U S labor and input cost challenges and al described dampened our ability to convert the strong revenue into similarly strong profitability.
That profitability shortfall also unfavorably impacted our effective tax rate because of the step down in overall U S. Based earnings did not allow us to fully benefit from certain U S tax attributes.
Let's turn to slide five of the webcast presentation.
Consolidated net sales increased 23, 7% from $162 8 million to $201 4 million.
Continuing the trend of sequential sales growth since the pandemic began two years ago.
The just completed quarter represents our sixth consecutive quarter of increased revenues and the first time, we've exceeded $200 million in quarterly revenues and over eight years.
For the polyester segment, the single digit volume increase could have been better but was muted by the labor challenges Eddie mentioned earlier.
The price and mix change demonstrates the selling price adjustments that have been made over the last several months in response to rising input costs, although we have not fully normalize the portfolio for todays cost levels.
In Asia sales volume growth demonstrates new and existing programs.
To be successful on the <unk> platform.
While higher pricing associated with raw material costs was offset by a greater mix of lower priced products.
In Brazil year over year price levels, followed market dynamics as this segment continues to exhibit strength in holding prices and market position.
Driving a price mix benefit of 33, 3%, although lower volumes were the result of a comparatively strong quarter in the prior year.
Nylon exhibited stability with much higher sales production volumes and pricing levels to continue its fiscal 2022 coverage.
Turning to slide six for the quarterly gross profit.
The polyester segments $10 $5 million decline in gross profit and weaker gross margin percentage are attributable to the labor and input cost headwinds.
The attributed approximately two thirds of the gross margin decline for this segment to the labor issues and approximately one third to the input cost increases combined with the normal lag for customer pricing changes.
We look forward to this segment quickly recovering in calendar 2022 from the recent pressures.
The Asia segments volume growth led to a two year influenced.
Profit is that segment continued its strong year over year growth trajectory remains a significant component of the global commercial model.
In Brazil, we've maintained much of our recently captured strength demonstrated.
Demonstrated by a decline in gross margin from the exceptionally high 32, 9% to a still very strong 27%.
Despite the headwinds pressured our U S operations, we are pleased with the combined Brazil, and Asia double digit percentage increase in both sales and gross profit.
That great performance is even more prominent in the six months comparison on slide seven and eight.
Slide seven shows the consolidated six months sales increase of 36% versus the year ago period.
By a healthy combination of volume pricing and mix across our segments.
Slide eight provides a gross profit overview for the six month comparison.
Sean here.
Yes. Your segment was pressured by the previously discussed headwinds.
Asia segment exhibited an increase in gross margin with recent mix and efficiency gains.
In the Brazil segment exceptional performance is highlighted with a $4 $9 million increase in gross profit.
Moving on to slide nine which provides a brief update to our balance sheet and capital allocation priorities.
We ended the second quarter was zero borrowings on our ABL revolver, which had an availability of $69 million as of December 26 2021.
Under our balanced approach to capital allocation, we expect to continue to invest in the business to drive innovation and organic growth maintain a strong balance sheet and remain opportunistic with share repurchases and or M&A opportunities.
As noted on this slide and as we described in the press release.
About $1 2 million to.
Repurchased 51500 shares under the previously announced share repurchase program.
Before I pass the call back to Eddie I will remind everyone that unify will be hosting an investor day event next month February 16th at our manufacturing facilities in North Carolina.
We look forward to interacting with the investment team by providing an opportunity to hear from several members of our leadership team under the backdrop of a world class facilities for those who cannot attend in person. We will also webcast the event.
I'll now pass the call back to Eddie to take us through the last slides of the presentation and make some final comments.
Thank you Craig.
We conclude today's call I'd like to finish with slide 10 of the presentation and discuss our outlook and expectations for the second half of the fiscal year.
As disclosed in our earnings release, we have issued guidance for the remainder of the fiscal year and we remain confident in achieving these targets despite near term challenges in Q3.
As we've highlighted on this call are revenue numbers have exceeded our expectations, leading us to increase our previous topline outlook for the fiscal year 2022.
Still we must continue to work through all of the global uncertainties, including ongoing labor pool constraint in our domestic segments. The omicron variant and the impact of the pandemic and the inflationary pressures on packaging and supply costs.
We anticipate uncertainties in certain in the near term, but are confident in our workforce as well as a new trainings are in place to better prepare our staff.
Despite these uncertainties our strong revenue performance from the second quarters supports our belief in continuous improvement throughout fiscal 2022.
For the full year fiscal 2022, we expect sales to reach $800 million of more an increase of 20% from fiscal year 2021 revenues.
Given this quarter's profitability results, we've adjusted our fiscal 2022, EBIT forecast slightly lower but we believe our recent pricing initiatives will help us make up a fair amount of the recent challenges.
Our capex outlook remains consistent with the first quarter and should be fall in the range of 40 million to $44 million.
Sustainability remains a key area of focus of our business and.
And we are pleased to see the demand increase for recycled products is it readiness around the market of sustainable products continues to grow now.
Knowledge around the importance of sustainable products continues to be moving markets on a global scale.
We look forward to continuing our path of long term organic growth through our global business model and aim to capture the necessary demand for more environmentally conscious materials.
We will now open the line for questions.
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
Withdraw your question. Please press the pound key.
Our first question comes from Chris Mcginnis with Sidoti.
Hey, good morning, Thanks for taking my questions and obviously, a nice quarter on the topline obviously I understand the pressures on the bottom line.
I guess just to dig in a little bit more on the pricing.
And raw material inflation.
Did I hear you right. After January price increase that you will be on <unk>.
Par with where the pricing is now and how do you see pricing play out over the next maybe 12 months.
And then maybe can you also discuss a little bit more around the waiver.
It sounded like maybe more personnel versus mandates you just dig into the issue around that labor and how hard expensive, maybe retain labor or find labor.
Yes, two questions. Thanks for those Chris.
On the pricing side you have been on these calls for many years and you.
You have heard over the years that we've we've lagged generally speaking as prices go up and we.
These are slow to give up pricing as raw materials drop.
We have been raising prices over the last.
Nine 910 months and we took the step to basically catch up.
All of the pricing that was necessary at the beginning of January .
So we do please.
It's been difficult for our customers it was difficult for our sales team.
Those prices have been passed on effective January <unk>, and you will see us going forward to be more reactive.
As raw material costs go up and.
Other inputs costs go up in the future.
Jumping to the labor side of things.
It's.
Q2 was very.
Dramatic as you can see from the the margins and it was it was a result of what happened over the summer catching up to us.
We had been working as well on changing how we approach the hiring how we approach the training.
And.
Big initiative for Us.
Really implemented mid Q2, and that's why we're confident in saying as we move through Q3 and Q4, our labor situation is going to be much improved.
We don't we don't think.
The labor shortage, we were expecting a big bump up in applicants at the beginning of September when a lot of the benefits were at fault enough, we didnt see that but.
But that wasn't.
That wasn't really an impact on our business I think it was just the fact that across the country and North Carolina included.
People just they saved up enough money we're.
We're not sure what it was but we are totally approaching how we are onboarding employees. How we are training our employees and how we are interacting marketplace. We've got good pay rates we've got.
Operations, we've got clean clean workplaces to.
So it's a matter of us.
Which is what we're doing improving on our training and our retention plans.
A couple of to answer your question and Chris I'd, just now approaching that.
For one more in here.
The actual turnover rates have improved.
As we get to as we got to the end of the calendar year.
And the trainees had been retained better than we've been doing in the past. So we feel like we're making some progress and then.
<unk> locked in the Covid comes back in and we have all these quarantines in the month of January now the good news is they seem to be coming back.
I'm very optimistic because we asked employees, what they needed and we've taken those costs.
Spent the money and how we if we could just get our turnover rate back to where it needs to be those costs get absorbed into the business quite handily. So I'm.
I'm optimistic, but it's been it's been a difficult one.
Great No I really.
I appreciate the insight and then just a question on <unk> and that growth, obviously been phenomenal for a long time.
And it sounds like with the guidance for $800 million Theres, even more behind that can you just talk about maybe your order book and how Thats playing out and is all the demand large largely related to reprise.
Well as you saw we had a record.
Pre percentage at 40% that is a big part of our growth. There is growth of course because of the price point management, we've been doing the price adjustments, we are making over the last several months, but I think more importantly, the volume growth that we saw in Asia.
Which is predominantly repreve really reflected.
The market sentiment around sustainable products every quarter, we go by we add more and more.
Brands.
Jumping onto the safety and security and trust in this.
<unk> brands, and I think thats whats reflected in and Youll see in Brazil.
There will be growth.
In Q4 from a volume perspective, you will see in the U S growth in Q4 also so we are expecting.
Volume growth as we move through the remaining part of our fiscal year as well as upside on the.
The pricing side.
Great. Thanks for taking my questions and ill jump back in queue.
Thank you. Thank you thanks, Chris.
Our next question comes from Daniel Moore with CJS Securities.
Sorry about that thank you and good morning, and thanks for taking the questions.
Wanted to maybe just follow up on that last train of thought which is the 30% growth you saw in reprise in the quarter.
Any more detail in terms of price versus volume.
And similar or same question for the 20% plus expected revenue growth for fiscal 'twenty two.
Yes sure.
If you look at.
Where a lot of the volume growth was it was in Asia.
And the volume growth.
Was in line with the revenue growth and it was mainly because we just adopting.
More programs and it's across the platform of products that we have we've grown out the product portfolio in Asia.
Beyond our normal textured yarn to staple fiber to many of the different types of products.
It's reflective of the interest that the market has in Repreve and we're really excited about that because we see that that momentum is going to continue on.
Throughout the fiscal year of course, the Chinese new year lunar new year is coming up and that happens every year of course.
But where we're certainly seeing growth as we move through Q3 past the lunar new year I need to Q4.
In China, and like I said that.
In Brazil, we are expecting volume growth in Q4.
Interestingly enough I think we're going to even though we started off from a small base in Brazil, we're going to double our revenue sales are pre revenue in Brazil year over year.
In that region. So we're excited about that and then in the U S. Once we get our labor situation improved by Q4, we will be producing more patterns. Our expectation is we'll be producing more pants and.
A lot of those pounds will be brief.
Yeah.
This is an anecdote, but Dan Walmart has begun to work on these recycled materials quite a bit and we just had an announcement that they passed the 1 billion model Mark, but it's amazing the kind of tonnage. They can do because they went from fairly low on that scale to all the way to 1 billion bottles and they could get to 2 billion.
Bottles, if they decided to put their shoulder behind that so that's just one little indicator, but an important one.
Got it that's helpful.
And obviously you've been more aggressive you've had to be in terms of pricing to try to protect margins.
And put cost increase and now labor challenges and inflationary pressures.
Maybe just talk about the.
<unk>.
The conversations with customers. So you are seeing any more pushback.
Several rounds of price increases in this.
More significant one in January .
Yes.
It has been very difficult for our sales team.
As it has been obviously for our customers, but at the end of the day.
I think most of our customers have said everybody else is doing it so.
I think.
In the past we've been.
We have been more.
<unk> two sort of bite the bullet and just pass on increases as has happened that has changed I think the customers seeing a new unify.
And I think it's not just unified the assuming that it's our competitors and it's there are other suppliers that are out there in the marketplace. So I think this disinflation that happens.
A shock to our system.
And we recognize that we have to be responsible and pass those costs on as quickly as possible and we're doing that now and like I said, it's been painful for us for our customers.
We're not alone.
And for the most part of your competitors are following suit that was my follow up question, yes, yes. They are individually.
Alright last one as you projected.
Projected previously 20 million incremental revenue from the tariffs in 'twenty two.
Are you seeing early indications of that taking hold in.
How's your visibility around that today versus maybe six months ago.
Yes, we are getting a lot of.
Interest from customers who've had traditionally been importing a lot of yards from from overseas.
We are taking those calls and we are beginning the process of.
Having the commercial relationships and pricing those items out and that's when we expect starting in Q4 too.
<unk> start seeing that volume come through.
Okay very helpful I'll jump back with any follow ups.
Okay.
Our next question comes from Gus Richard with Northland.
Yes, thanks for taking the question just wondering.
What is the price and availability of recycled.
Plastic at this point.
Yes.
It is interesting in Q2.
It had been slightly lower than what was in our Q1.
For various reasons, we are seeing an uptick.
Which is normal for this time of year as the collection rate.
Reduced.
And as because of weather and also because people are just contributing drinking less.
Thats water or soft drinks during the colder temperature.
So we as normal prices are growing up for PBT, there is pressure on supply.
As I said on many calls we.
The ability to buy the materials, we just have to pay more for it.
But it's not.
As expected.
And then.
Can you give us a sense of.
Your cost of goods.
Percentages labor at this point.
Well it depends on the product, we have some products, where theyre not too labor intensive.
And there are some products that are.
Whats.
Our challenge has been to make sure we have the right labor at the right place.
Our installation and we haven't talked about this but our installation of our Evo <unk> case as.
As we expand that.
In our planting yadkin grow is taking labor pressure off so that's why we've said on the call in Q4 part of the reason, we're seeing we're expecting less labor pressures, because they'll have more and more of the igo GSK running which is a more.
So it has higher productivity levels per person per pounds per hour.
So.
It's a difficult question to answer but.
Certain areas. It is a significant part of our cost, but raw material has always remained the largest part of our cost.
By far.
Got it got it and I'm assuming that the new.
Texturing machines.
Neat fewer operators per per pound or one operator can.
No.
Manage more systems.
The older versions.
Yet as higher productivity within your liquidity.
Yes.
And then the last one for me.
Yes.
Topline growth can you just sort of parse out how much of that is pricing and how much of that is false.
Volume.
Yes.
Yes for the just completed quarter puts.
Put some details in there on slide five and does go through and say that in the just completed quarter roughly about eight percentage points of that growth came from volume.
The rest of it really came from pricing a little bit of favorability from FX and thats, mostly in China because of the strength of their currency, but basically in this just completed quarter.
The majority of what we saw was from price, but we still saw also eight 8% volume increase as well.
Got it got it. Thank you that's it for me.
Yeah.
Thanks Gus.
Our next question comes from Marco Rodriguez with Stonegate capital.
Good morning, everybody. Thank you for taking my questions.
Good morning, Mark.
Morning, Martin Good morning, guys I have a couple of quick just follow ups a lot of the questions have been asked and answered, but just kind of circling back on.
The inflationary pressures the pricing increases that you've been able to implement and you made some comments to an earlier question about.
Pretty much everyone was when the kind of the same boat. Most people are expecting this and everyone's kind of pushing these prices through.
I was wondering if you can maybe share any sort of anecdotal information maybe that you're receiving from your clients, perhaps as to what what sort of impact on increasing prices is doing to retail demand and what sort of the expectations are there as we look forward. The next few say six to 12 months.
We haven't had.
We haven't had any of our customers are Andy I should probably have had no breakthrough customers say because of your price increases the demand will drop we're still seeing very strong demand.
We can't predict what's going to happen at 12 months, but today the price increases have not impacted.
The demand of our products.
And it's because I think there's two reasons one there's still a lack of inventory in the supply chain.
And two in the U S and in Central America, because of the supply constraints that are going on there's a lot more we believe the brands are trying to move more business into the region.
So they can get quick turn products so for us our local.
The fact of our local and U S. <unk> America is helping us.
Really I guess keeping up the demand in the system.
Yes.
Got it very helpful.
And then look at other recent winner.
I'm sorry go ahead.
I am sorry, I was just going to say it.
Looking at other categories in retail.
Consumers seem to be willing to pay.
And take on the new prices across the board I'm, not just talking about apparel or our business is surprising.
We see that continuing for 12 months at least.
Got it very helpful.
And then circling around on the demand for Repreve.
You've obviously.
Ben the flag bearer, if you will from the recycling and sustainability aspects.
The particular product and it seems to be obviously doing very well and youre getting a lot of high revenue growth rates.
Percentage of your revenue is increasing for Repreve.
Just kind of wondering if maybe you could talk a little bit about.
What sort of competitive reactions you may have seen given the success that <unk> had and if you can maybe talk a little bit about the current competitive landscape would be helpful.
Yes, so were previous.
As an ecosystem.
It is.
Recycled inputs, but it's also as you've heard from us before it's a trusted product.
Because of the fact that we have.
Fiber offering technology, a tracer because of the fact that we have.
Our own fair.
Clarification, you Trust verification system that we've just announced.
Clarify that the fabric or the yarn and now the product that you are making.
Is made from Repreve.
And the fact that we have third party certification.
Yes. This is recycled content and the fact that in the U S.
<unk> report says that.
Our recycled polyester actually even has less carbon footprint than.
Our competitors all of that together and the fact that we have great.
Service from our brand sales team, calling on these retailers and were able to give the the brands.
Collateral to help them co brands Theyre sustainable story, along with a brief.
That's what makes us different from everybody else.
We are very far apart from our competitors that are just selling recycled.
Polyester and nylon yarn.
Got it very helpful and is there an expectation, perhaps I'm just kind of along those lines of thinking I mean.
How big of a lead do you think you guys might have in terms of what youre able to provide to your customers.
Competitors' abilities.
But we just keep investing in our.
Marketing, we keep investing in our co branding which are investing in.
Working on markets that are going beyond our traditional.
Apparel markets, So I think the.
The investments, we're making in people too.
Get to new markets.
To expand Repreve is working both in Asia.
And in the U S.
So.
I don't compare us to our competitors, who are setting normal recycled products.
And I think the differentiator is the it's the entire package that we have.
Got it very helpful.
Some of these retail brands that are big as they get closer to.
Aiming for their targets for 2025, it come to the realization that they need.
Need to make sure they can.
To defend that these are actually recycled materials. So they don't want to be greenwashing and our tracer.
It really helps.
That case, so I think we ended up having a real competitive advantage advantage with the tracer.
Understood I appreciate your time, thanks, guys.
Thanks Mark.
As a reminder, if you'd like to ask a question at this time that is star then one.
Our next question comes from David Silver with CL King.
Yes, hi, good morning.
I had kind of several quest.
Questions, mostly on type of follow up but.
First first question would be on the anti dumping.
<unk>.
Decisions that have been made in.
I'm just borrowing from my experience with antidumping duty.
Actions and other products for other companies I've tracked but typically it takes a long time to get the fine to the final decision, but the final decision usually does.
Impact to the trade flows pretty directly.
And in the in your release, you comment on the $20 million or more.
Annual revenue boost and you study purely pricing.
As the source of that but I think in your comment to previous question.
You focused more on incremental demand. So I'm just wondering maybe if you could just take a step back and just talk about how you believe the.
Final anti dumping duty decisions are going to impact the market like what percentage of imports or the total market that's relevant to unify as represented by the four countries mentioned.
And maybe in <unk>.
Addition to pricing deal.
What kind of.
Improvement in volume potential do you see thank you.
Yes, so as I said, we do expect to pick up about $20 million in revenue.
And the Air force are in at a lower price than some of the more commodity type type items. So the pricing damage prices over those up those products. What we are seeing is a lot more interest.
These companies, who either have been buying from an importer.
Distributor or buying directly from the company out of Asia.
<unk>.
When you're when you've been used to buying imports for a long time. There is a transition that has to take place.
We had.
As we talked before we had antidumping cases against India, and China that moved this business over a lot of it over to these four countries that we talked about.
We are seeing a lot more phone calls come through a lot more interest in trying to figure out.
What products, they should buy from us and what volumes and like I said, we are we're still expecting to get the volume as we move into Q4 of our fiscal year and then beyond that for the rest of the year.
From a pricing point of view like I said they are at the lower lower end of the price range because other than our commodity running gum.
Turning on products.
Okay great.
And then maybe I just have a question about.
I guess I'll call it the cadence of price increases so it sounds like you've been a little bit trying to catch up with.
The cost environment.
And you believe Youll get back fully beginning in January but I'm just wondering just in general if there are other significant moves in costs.
That you need to recapture like what is the cadence for implementing a price increase and then seeing it fully implemented.
Is it does it differ by customer or region, I mean, I'm imagining Brazil they are used to.
Price swings and devaluations and whatnot it might be different in other markets. So just in general when there is a meaningful price or cost a cost issue.
That.
Affects the industry.
What is the lag that.
Unified typically six before you can recoup that.
A formal price increase.
Yes.
Brazil.
You can see this from our numbers they have been very reactionary to increases and the biggest increase they've had to experience it was around the.
Raw material.
Inflation has occurred there and they've been very.
Quick two to pass on those costs Asia.
Again, it's been generally speaking as cost increases we've been able to pass that along and that's why.
You've seen the margins being pretty stable. They are in fact, the margins have increase there as the quality of the product.
Product mix, we're selling has improved in Asia.
And then here in the U S. It's where it's been much more of the.
Harder process on a longer process to pass on all of the increases.
And in the past with generally just talk to our customers around the cost of raw material increases. This last increase was was different because we are not just talk to us. If you can just talk about raw materials, but you also talk about the other costs.
Manufacturing costs labor and packaging and oil and all that stuff that goes into making our products.
And going forward, you can expect us to be more reactive here in the U S.
Americans than we haven't in the past.
Okay and then just thank you for that and then just the last one but regarding your.
Investment in new yarn texturing machinery.
Would you say that that the equipment is fully <unk>.
Stalled and commissioned and operating now or.
Where are you on the on your in terms of reaching the.
Completion, I guess of that investment and upgrade and upgrading program.
Yeah, we've been installing equipment steady steadily since the beginning of our fiscal year.
We will be making at our Investor day in a couple of weeks, we've been giving a lot more detailed information about.
The timing.
And the size of that.
Capital investments. So can you just hang on a couple of weeks there and this is David here.
To hear a lot more information about that but we're at the very early days right now installing that equipment.
Got it okay, well that would be very interesting to see close up then alright. Thank you very much I appreciate it.
Thank you, Dave and thanks, David.
Our next question comes from Daniel Moore with CJS Securities.
Thank you again covered a lot of ground in one or two more quick ones.
Obviously, north American polyester margins have clearly significant room for recovery just talk about your confidence in the sustainability of margins you are generating in Asia and Brazil.
Whether there is still some long term upside potential there.
Yes, I've got in terms of Brazil.
We've seen the last three quarters four quarters.
As we've communicated and reduction in the gross margin there and we've been able to maintain that margin for much longer than we'd expected, but overtime in the next couple of quarters.
Returning to more normal margins, but as I said, the volume should be increasing in Brazil in Q4.
That will offset the decline in margin.
In Asia, we've been very steady here in the U S.
In Central America.
<unk> has been.
We do expect to see a significant recovery in margins beginning this quarter because of the pricing initiatives we've taken.
And then as we move through the next six months as we improve the productivity.
Workforce as we get stability in the.
Number of the turnover and the number of new employees and to get that training behind us we do expect to see margin improve as we improve our productivity.
So instant pricing beginning of the quarter and then over the next six months improvements in our manufacturing costs to increase the margin.
Helpful and lastly for me.
Look forward to more detail on the Evo cooler investments and where that will take you.
Any more sort of preview around the types of things we might hear at the upcoming analyst Investor day not necessarily.
Specific metrics, but what type of longer term targets or goals.
But.
Yes. Good question, Dan I think really for us we're continuing to.
Work toward that day as a time for us to really give more details on the strategy of unified beyond just a quarter to quarter reporting so that will be a big component of it.
<unk> will be a big component of what we're planning to do we also plan to talk quite a bit about sustainability and how that plays in with Repreve demand.
And in doing that in the context of actually allowing folks to see the facilities and CD Evo coolers and other machinery that we have specifically in our yadkin. Both facilities. So we really planned it out to be a pretty.
Full day as far as giving investors and interested parties more details around who unify is what we're doing and what makes us different.
Alright look forward to it thanks for the detailed color.
Thanks, Dan.
That concludes today's question and answer session I would like to pass the call back to management for closing remarks.
Thank you Liz and thank you everyone for participating today, our momentum is clear and we believe we're set up for a strong second half for fiscal 'twenty. Two our next earnings release for the third fiscal quarter ending March 27th is tentatively scheduled for Wednesday April 27th after the close of the market with a conference call to follow the next morning Thursday.
April 28 at 830, a M. Eastern time, thanks again for joining today's call.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Yes.
Yes.
Yes.
Okay.
And then.
Yes.
Okay.
Okay.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Thank you.
Okay.
Okay.
Okay.
Yes.
Okay.
Right.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Yes.
Right.
[music].
Yeah.