Unifi Inc announced that it will close its Kinston, North Carolina facility.
The Kinston facility produces partially orientated yarn (POY) for internal consumption and third party sales. In the future, the Company will purchase its commodity POY needs from external suppliers for conversion in its texturing operations. The Company will continue to produce POY at its Yadkinville, North Carolina facility for its specialty and premium value yarns and certain commodity yarns. Approximately 260 employees will be affected by the closure of the Kinston facility.
"We acquired Kinston in September 2004, which allowed us to remove excess manufacturing capacity of POY and to substantially lower our production costs. The acquisition has returned excellent value for Unifi over the past three years, however continued foreign competition requires that we continue to evolve our business to not only compete, but add value to the business", said William Lowe, Chief Operating Officer and Chief Financial Officer.
"While complicated to execute, it comes down to a simple make-versus-buy decision. In addition to the savings expected from this decision, we gain needed flexibility in our texturing operations. Over the last 9 months, Kinston's inability to operate below a certain minimum has put undue pressure on our texturing operations," continued Lowe.
The Company expects that it will take four to five months to transition from producing POY at Kinston and completing the supply chain logistics enabling a complete shut-down by the end of the calendar year.
Annual savings from the closure are expected to be approximately $12 million. First year savings will be offset by closure costs and will be approximately $2-3 million. The Company further expects that once completed it will be able to reduce its working capital through inventory reductions by approximately $11- 13 million.
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