UNIFI INC Q2 FY2025 earnings call

• Sales trends have shown improvement starting in January, with customers more optimistic about demand and improved inventories post-holiday. - Decided to close one US plant, with production transitioning to other facilities, improving fixed cost utilization and profitability for North America, and plans to sell the plant to reduce debt. - Making progress on beyond apparel efforts, including military and carpet sales, and circularity/textile take-back innovation beginning to gain traction. - REPREVE had co-branding initiatives, partnerships with brands like Guess Europe, The North Face, and New Balance, and was awarded the 2024 Just Style Excellence Award for Product Launches in circularity for ThermoLube. - Tariffs on Canada were announced, with Mexico and Canada delaying tariffs by 30 days and dialogue with the US government ongoing, impact on business uncertain.

In the Americas segment, net sales were up 3% compared to the prior year due to traction from recent sales growth initiatives, though impacted by September hurricanes in the southeast US. Brazil segment continued to perform well with robust sales levels, representing the best-performing segment for the past year. Asia segment saw net sales decline by approximately 7% year over year due to unfavorable economic conditions and pricing pressures in China. REPREVE represented 31.31% of sales in the second quarter, a slight decrease compared to the previous year, largely driven by macroeconomic pressures in China.

• Expect net sales and adjusted EBITDA to increase in the third quarter of fiscal 2025. - For fiscal 2025, net sales are expected to be in line with fiscal 2024, with second half performance improving over first half. Profitability metrics expected to improve year over year, with second half fiscal 2025 underlying profit generation partially offset by US manufacturing transition costs. Capital expenditures expected to range between $14 million and $16 million, including costs related to transition activities.

• Uncertainty around tariffs, including the situation with Canada, Mexico, and China, and their potential impact on the business. - Continued headwinds in the Asia segment due to unfavorable economic conditions and pricing pressures in China.

Q: Regarding sales volume drivers in Americas and Brazil segments, are higher sales from existing clients or new clients?

A: In Brazil, it's across existing clients with growth in textured polyester demand. In Americas, Central America saw growth, with beyond apparel items like military and carpet just starting.

Q: Potential from carpet and military markets and timing?

A: Saw activity at the tail end of calendar 2024, expecting growth in these segments in calendar 2025, with additional capacity installed in fiscal Q4.

Q: When will Asia segment return to historical performance?

A: Q3 expected to be similar to recent performance, but Q4 expected to see improvements, with forecast for growth in calendar 2025.

Q: Tariffs and impact on company?

A: Uncertain, but Central America may benefit from tariff threats, and de minimis ruling could be positive if changed.

Q: Annual cost savings from Madison facility closure?

A: Can't disclose specific number yet, but expect material savings from reducing fixed costs and labor man hours, with tax value around $29 million and book value around $9 million.

Q: Square footage of Madison facility?

A: Right around 950,000 square feet