Domestic RPET Sales Surge as Unifi Counters the Effects of the Textile Slump

Unifi, based in North Carolina, found a ray of hope amidst a challenging business landscape last year with increased sales of recycled PET flakes and chips in the Americas. The company, a significant player in the PET recycling sector, operates a plant in Reidsville capable of recycling 130 million pounds of PET bottles annually. The resultant RPET is either converted into Unifi's branded yarn "Repreve," used in textiles, or sold as flakes and chips to external manufacturers.

During a recent conference call with investors, Unifi's CEO Eddie Ingle highlighted that while the company has historically sold resin and flakes, these materials were mainly seen as feedstock for the Repreve line rather than standalone products.

In the 2023 fiscal year, Unifi encountered a slump in textile demand globally, resulting in significant losses. Factors such as reduced consumer spending, inventory cuts by retailers and brand owners, and COVID-19-related restrictions in China contributed to this setback.

The company's financials for the fiscal year ending on July 2, 2023, reflected a 24% decrease in net sales to $624 million and an 82% drop in gross profit to $14 million compared to the previous year. In contrast to a net income of $15 million in the prior year, Unifi reported a net loss of $46 million.

Unifi's Executive Chairman, Al Carey, acknowledged the high inventories in the retail sector, particularly in apparel, due to reduced consumer spending on non-essential items like clothing. He anticipated a gradual rebalancing of consumer spending and projected that retailers' destocking efforts would conclude by the end of the calendar year, leading to a resurgence in orders to Unifi.

Despite the overall slowdown in the textile industry, Unifi observed robust adoption of chip and flake products in the Americas during the fourth quarter of 2023. Although recycled flake and chip prices are lower than those of finished fiber, Ingle emphasized that the profit margin on these sales is healthy and surpasses the company's standard gross profit margin.

Ingle also highlighted the versatility of their recycled resin, which is converted into yarn at an impressive rate of 3,000 meters per minute, finding applications in nonwoven, film, and specialty packaging sectors.

Looking ahead to the 2024 fiscal year, Unifi aims to continue supporting chip and flake sales to diversify revenue in its Americas Segment. However, the Repreve line's contribution to total sales has been gradually decreasing, constituting 30% of total sales in the past year, down from 36% in 2022 and 37% in 2021.

To address financial constraints, Unifi plans to reduce capital expenditures, aiming for under $16 million in the 2024 fiscal year, down from $36 million the previous year. The company had initially planned to invest $100 million across three fiscal years to purchase advanced yarn texturing machinery, but a renegotiation deferred further spending to a later timeframe.

Unifi's strategic decision to delay equipment purchases reflects a prudent approach to match capital expenditures with expected business growth, considering the prevailing subdued sales and facility utilization levels.