U.S.-based company has included Brazil in list of operations to receive slice of $100m this year

07/29/2022

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Eddie Ingle — Foto: Carol Carquejeiro/Valor

Unifi, a U.S.-based polyester textured yarn maker, has included Brazil in the list of operations to receive a slice of $100 million this year. With a plant in Alfenas, Minas Gerais, the company expects to expand by up to 50% the capacity of the Brazilian operation and increase local production of yarns made entirely from used plastic bottles. Part of the funds will be set aside for the United States and El Salvador.

“We have not disclosed exactly how much of the investment is coming to Brazil, but the money we are spending is quite expressive to expand business here by 40% to 50%,” CEO Eddie Ingle told Valor. Here, the manufacturer sells especially yarns that supply the clothing, automotive and furniture markets.

Such optimism about Brazil, he says, lies in the country’s fast economic recovery. According to the executive, the first impact of the pandemic was a sharp drop in revenue. “Our business in that period, between April and June, fell 50% around the world. In Brazil, it fell 70%. It was very dramatic. But Brazil seems to recover much faster than the rest of the world,” the executive said.

In the nine months through March, Unifi’s Brazilian operation reported $91 million in sales, up 25.3% year-over-year. The company’s fiscal year 2022 ended in June, but the data have not been released yet. Globally, sales revenue grew 24% to $598 million.

This recovery is mainly due to the change in the global supply chain scenario, says Mauro Barreira Fernandes Jr., who is taking over as Unifi’s chief executive for Brazil. He will replace Lucas Rocha, who is retiring. “The industry was very dependent on imported yarns,” Mr. Fernandes Jr. says.

Social distancing measures slowed sales of clothing, but boosted items for home, such as mattresses, sofas, and chairs. This helped to keep up demand. Now, the recovery of clothing and footwear sales is driving orders.

“As we produce here and have a large stock, we are able to supply the industry, which has replaced imports,” the Brazilian executive said, adding that the company’s market share increased to 17% from 11%. In Brazil, there are few companies that compete directly with Unifi, such as the Spanish company Antex. The main competition comes from imported products, according to the company.

Another issue, he points out, is that foreign brands, especially in the apparel industry, are producing locally, with outsourced manufacturers. Nike, Adidas, Reebok, and Puma are among these companies. The growing production of the Brazilian apparel industry is driving the business of yarn manufacturers in the country, he says.

According to data from the Brazilian association of artificial and synthetic fiber producers (Abrafas), the country ended 2021 with an installed capacity to produce 239,300 tonnes of polyester, including 108,900 tonnes of textile filament. The production totaled 83,400 tonnes, with more than 82,000 tonnes sold in the domestic market. However, 279,000 tonnes are still imported to meet a consumption of nearly 360,000 tonnes of polyester textile filament. In 2019, the year before the pandemic, 259,000 tonnes were imported, while 75,000 tonnes were produced and 70,000 tonnes were sold by domestic manufacturers in the domestic market. Consumption was also lower: 332,600 tonnes.

The sales growth, however, was also followed by higher costs. In Brazil, despite the higher revenue, the profit was virtually stable in relation to the previous year, totaling $24.5 million. The sales costs grew 37%.

According to Mr. Ingle, in the case of Brazil, part of the recovery already seen in Unifi’s business is due to investments in new equipment. Six new machines are already in operation.

The updating of the machinery will allow the company to have more energy efficiency and produce a greater variety of yarns. “It is also faster equipment. We can process the yarn at a much higher speed than with the existing equipment.” The money will also be used to expand storage capacity and for physical expansion.

One of the company’s main objectives is to increase local production of Repreve, a yarn developed by Unifi and made entirely from post- and pre-consumer PET (polyethylene terephthalate) plastic. The product was launched in 2007 and already accounts for 37% of Unifi’s global sales, although it is still far from a double-digit level share in Brazilian revenues. Since its launch, 33 billion bottles have been transformed into synthetic fibers, Unifi says. These yarns are used in clothing, furniture, car seats, and shoes. The goal is to transform 50 billion bottles by 2025.

*By Raquel Brandão — São Paulo

Source: Valor International

https://valorinternational.globo.com/