Unifi Inc. took the unusual step Monday of issuing a quarterly earnings warning, saying it could experience up to a $400,000 loss in the third quarter.
The Greensboro yarn manufacturer said it also could have net income of $400,000 in the quarter that ended March 25. It is scheduled to release its third-quarter report April 25.
The company projected earnings of a 2-cent loss to a 2-cent gain.
By comparison, Unifi had second-quarter net income of $11.8 million, of which $4.83 million came in large part from the federal corporate tax rate cut that went into effect in late December.
Unifi has its largest U.S. production plant in Yadkinville with about 1,000 employees.
It also has more than 250 employees at a plastic bottle-processing plant in Reidsville and another facility it is preparing to expand as part of acquiring the dyed yarn assets from Triad competitor National Spinning Co. Inc. in May.
The projection of $166 million in third-quarter sales is slightly below the $167.5 million it had in the second quarter. It also had sales of $160.9 million in the third quarter of fiscal 2017, of which $4.6 million came from a foreign currency exchange benefit.
"While third quarter net sales grew 3 percent and show that our growth investments are taking hold, profitability was considerably lower than we forecast when we began our third quarter due to a challenging global cost environment and softer domestic demand," Kevin Hall, Unifi's chairman and chief executive, said in a statement.
The profit warning was not unexpected.
Hall told analysts in Unifi's second-quarter analyst call that Unifi "experienced a rapid rise" in raw material costs during the second quarter, such as a 30 percent increase in petroleum costs.
"We are seeking to counter this through appropriate price increases and improved sales mix through the balance of the fiscal year," Hall said in January.
Hall said Monday that "the operating environment proved even more difficult. These headwinds led to a significant decline in profitability as compared to third quarter 2017."
In January, Unifi adjusted its fiscal 2018 guidance in three main areas: net sales went from a percentage growth forecast of low single digits to low- to mid-single digits; earnings went from a percentage growth forecast of mid-single digits to flat- to mid-single; and capital expenditures from $35 million to $30 million.
Hall said Monday that Unifi "continues to believe its net sales performance will be consistent with its previously announced guidance, but short-term profitability will remain negatively impacted by difficult market dynamics.
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