UFI
#Good morning, <UNK>.
Yeah, hi, <UNK>.
It's <UNK>.
So let's talk about Brazil first.
In Brazil, we've had a couple of things happening in the Brazil market that have really helped our business there.
Firstly, we invested a lot in our PVA capacity to produce PVA product in Brazil, and that investment is really paying off.
We've seen significant growth in the PVA product portfolio in Brazil.
At the same time, our market share has also expanded, particularly in the PVA product area.
But also, at the same time, the market for synthetic fibers in Brazil has expanded compared to the comparable quarter of last year.
I think our comps versus Q1 in Brazil are relatively easy.
Q1 was a relatively low point for the Brazil market, so we have seen the market expand from there.
What's also been happening in Brazil during this quarter, and we saw it in the fourth quarter as well, is the exchange rate environment was beneficial for the mix of products that we manufacture versus products that we import and then resell.
And our margins on the products that we manufacture are higher than the margins on the products that we import and resell.
We also are running at a very high capacity in Brazil because of the high proportion of manufactured products and the high volume we're getting on the PVA products.
Running at high capacity, we get efficiency from our manufacturing facility there as a result of that.
So all of these things came together to result in a very strong performance in the Brazil market.
If you look at Asia, Asia continues to be a growth area for us.
As you know, we have announced expansion into Sri Lanka, we continue to look at Vietnam.
We're very encouraged by the interest that we see from global brands and retailers to supply our PVA product into the Asian supply chain.
And Asia is essentially entirely a PVA market for us, so that's a higher margin market for us.
We expect this market to continue to show growth for us during the remainder of the year.
So in the International Segment, we continue to see both Asia and Brazil performing very nicely this quarter as a result of the factors I just described.
Yeah, so the way we look at it, let's think about Brazil first.
I think we are going to see a continued strong volume in Brazil.
We're very encouraged by the product mix and the market in Brazil and I think we will see continued strong volumes in Brazil.
Remember, though, that our comparables in Brazil are much easier in the first half of the year than the second half of the year, because we did see a pickup in the Brazil market in calendar 2016.
However, we would say that we would expect the margin rates in Brazil to be under some pressure in the remainder of the year relative to the margin rates that we saw in Q1, and the reason being is that now with a stronger Brazilian real, a more stable Brazilian real, the mix of product between domestically manufactured and the imported for resell product will shift a little more away from the manufactured products towards the resell products, and that will adversely impact our margins.
So in summary on Brazil, the volumes should continue to be strong.
The margin rate, though, we'd expect that to decline versus the levels that we saw in the first quarter.
We're also concerned in Brazil about potential changes in tariffs, I think <UNK> referred to these in his script, that could adversely impact our cost structure.
So we're watching that.
That could adversely impact our margins in Brazil.
When we look at Asia, with the Asian business, we think that the margin levels that we have in Asia should be fairly sustainable during the remainder of the year.
Of course, it does depend on the mix of products there, but the margins in Asia should be sustainable during the rest of the year.
Sure.
So the domestic market and the NAFTA/CAFTA region performance for us has been relatively weak this quarter.
We see a very uncertain retail environment, and the key issue for us there is the level of inventory.
Level of inventory has remained at somewhat elevated levels versus historical levels, and this is creating some softness in our supply, that coupled with lower retail sales has impacted us.
In the medium to longer term, we do expect the region to continue to grow.
We're optimistic about the region.
We're seeing a trend towards more regional fast fashion and lean inventory and just-in-time inventory.
We also do benefit from having diverse segments, from apparel to industrial to automotive, so that allows us to benefit as the region continues to expand.
But right now, we are seeing weakness in the domestic market.
A lot will depend on how the winter season goes.
If we have a cold winter, that'll help us in the second half of the year.
But it's a somewhat fragile environment at this point in time.
Oh, thank you.
Good morning, <UNK>.
Yeah, sure, <UNK>.
It's <UNK>.
Let's just start on the pricing.
When you look at the comparable period, you see that raw material prices in Q1 of 2016 were about 15% higher than they were in Q1 of 2017.
And what happened during the course of last year, the 2016 fiscal year, is raw material prices were high in Q1 and they dropped down around 15% by Q2.
So, just as you think about Q2 through Q4, our raw material prices we expect to be broadly in a similar range in 2017 to what they were in 2016.
However, in Q1, we did have a significant raw material price decline of about 15% for virgin materials, and that is the predominant driver of price change in the polyester side.
When you look at this from a volume point of view, our volumes are down by about 4%.
We wouldn't attribute that to a denier change associated with PVA.
That is really related to the retail softness that we're seeing.
You know, in some segments our volume is actually up, and in some segments our volume is down, but overall, the decline that we are seeing is in line with retail softness in the region.
So, thanks.
Look, there is the retail softness, is one factor.
But the nylon decline is more than just the retail softness.
The nylon decline is also consumer preferences.
We are seeing a decline in ladies' hosiery and casual clothing from nylon.
There is that particular decline that we are seeing in the nylon market.
We are also seeing a few segments where some nylon share has been passed to polyester.
Polyester is a less expensive fiber.
Now, we're attacking the nylon situation from two fronts.
One, we're certainly managing our assets to control our cost in that area.
And two, we are working together with our joint ventures partners to develop specialty areas for nylon.
But, as I say, going back to the beginning, nylon supply is more than just retail softness.
There's other factors involved.
And we're seeing that across the board with our customers in nylon.
Yeah, <UNK>.
This is <UNK>.
That is mostly related to our bottle processing facility, and we were talking about going into maybe some food packaging and some other areas for our polyester flake coming from bottle processing, and also potentially some other uses for our recycled polymer at our REPREVE recycling center as well.
You know, we're looking at those markets, and I think we're out seeding those markets right now with product, and that will be a gradual increase over time.
And I guess another end use would be nonwovens as well, for our product.
Thanks, <UNK>.
Thank you, <UNK>.
Yeah, <UNK>, this is <UNK>.
You know, I think we look at that market very positively.
I mean, it's a difficult environment to do business down there because of all the issues that <UNK> and I have discussed previously.
But certainly if market dynamics dictate, I think we would consider future expansion down there for sure.
We are.
Currently, we're very close to full capacity.
We've continued to, as <UNK> alluded as well, we've continued to invest in the capacity, adding PVA capabilities, which we've benefitted greatly from.
And we will continue to do that as needed.
Well, I think Apollo and Nike, for us, at least on the surface, is positive.
It's reinforcement that the brands and retailers are moving programs back to this region.
And, with Nike and Apollo there are other potential entrants to this market coming back, and especially in knitting and weaving capacity that are potentially moving back to this region based on what they're hearing from the brands and retailers.
So we're encouraged about our business long term.
Thank you, <UNK>.
Thanks, <UNK>.
Thank all of you for joining us today.
