NYSE:UVV Universal Q1 2025 Earnings Report $57.52 -0.35 (-0.60%) Closing price 03:59 PM EasternExtended Trading$57.10 -0.42 (-0.73%) As of 06:53 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings History Universal EPS ResultsActual EPS$0.01Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AUniversal Revenue ResultsActual Revenue$597.05 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AUniversal Announcement DetailsQuarterQ1 2025Date8/7/2024TimeN/AConference Call DateWednesday, August 7, 2024Conference Call Time5:00PM ETUpcoming EarningsUniversal's Q4 2025 earnings is scheduled for Wednesday, May 28, 2025, with a conference call scheduled on Thursday, May 22, 2025 at 7:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Universal Q1 2025 Earnings Call TranscriptProvided by QuartrAugust 7, 2024 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Good day, everyone, and welcome to today's Universal Corporation First Quarter Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen only mode, but later you will have the opportunity to ask questions during the question and answer session. Please note this session is being recorded. I'll be standing by should you need any assistance. And it is now my pleasure to turn the floor over to Jennifer Rowe. Operator00:00:28Please go ahead. Speaker 100:00:30Thank you, Jim. Thank you for joining us. George Freeman, our Chairman, President and CEO Eyrton Henschke, our Chief Operating Officer and Johan Kroner, our Chief Financial Officer are here with me today and will join me in answering questions after these brief remarks. This call is being webcast live and will be available on our website and on telephone taped replay and remain on our website through November 7, 2024. Other than the replay, we have not authorized and disclaim responsibility for any recording, replay or distribution of any transcription of this call. Speaker 100:01:05This call is copyrighted and may not be used without our permission. Before I begin to discuss our results, I caution you that we will be making forward looking statements that are based on our current knowledge and some assumptions about the future and are representative as of today only. Actual results could differ materially from projected or estimated results, and we assume no obligation to update any forward looking statements. For information on some of the factors that can affect our estimates, I urge you to read our 10 ks for the year ended March 31, 2024. Such risks and uncertainties include, but are not limited to, customer mandated timing of shipments, weather conditions, political and economic environment, government regulation and taxation, changes in exchange rate and interest rates, industry consolidation and evolution, and changes in market structure or sources. Speaker 100:02:01Finally, some of the information that I have for you today may be based on unaudited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may also include non GAAP financial measures. For details on these measures, including reconciliations to the most comparable GAAP measures, please refer to our current earnings press release. Universal Corporation is off to a strong start for our fiscal year 2025. For the quarter ended June 30, 2024, revenue was $597,100,000 up approximately 15% for both our tobacco and ingredient operations segments, while operating income was $17,200,000 up $6,200,000 or 56% compared to the same quarter last fiscal year. Speaker 100:02:55Our revenue increase in the Tobacco Operations segment was driven by higher sales volumes and prices. Coming out of an exceptional fiscal year 2024, we benefited from continued strong demand from our tobacco customers. We believe this demand will continue to support solid results for the segment for fiscal year 2025. Our strategic decisions to accelerate tobacco crop purchasing allowed us to secure our contracted tobacco in certain dynamic markets, which has positioned us well to meet customer demand. As in previous fiscal years, we expect that tobacco shipment timing and related revenue recognition will be more heavily weighted towards the second half of fiscal year twenty twenty five. Speaker 100:03:41Our uncommitted tobacco inventory levels at June 30, 2024 remained low at about 13%, and we believe that global leaf tobacco remains in an undersupply position. Looking ahead, we expect that recent elevated green tobacco prices will incentivize farmers to increase planting for the next season, potentially leading to more balanced markets in the coming years. We work closely with our contract farmers to provide guidance and support to promote increased production. During the quarter ended June 30, 2024, our Ingredients Operations segment also delivered improved performance, primarily based on increased sales volumes. New product sales have increased across our Ingredients platform, contributing to positive results. Speaker 100:04:31These increased sales combined with general improvement in certain markets and recovery of demand for our core products drove the 15% increase in sales revenue for the segment as compared to the same quarter last fiscal year. As expected, our debt level remained elevated at June 30, 2024. As our committed tobacco inventory, which represented 87% of total tobacco inventories at June 30, 2024, are processed and delivered to customers, we anticipate working capital to unwind during fiscal year 2025. Some financial highlights for the quarter ended June 30, 2024. Net income for the quarter was $100,000 or 0 point 0 $1 per diluted share. Speaker 100:05:18Net income increased by $2,200,000 and diluted earnings per share increased by $0.09 for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023. Operating income of $17,200,000 for the quarter increased by $6,200,000 Selling, general and administrative expenses were up $3,200,000 in the quarter ended June 30, 2024, largely on unfavorable foreign currency comparisons. Some highlights for our operating segments. Operating income for the Tobacco Operations segment increased by $5,600,000 to $14,500,000 for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023. Tobacco Operations segment operating income was up in the quarter ended June 30, 2024, largely on higher carryover crop shipments as well as higher earnings from our Oriental Tobacco joint venture. Speaker 100:06:23Operating income for the Ingredients Operations segment was up $4,900,000 for the quarter ended June 30, 2024. Results for the Ingredients Operations segment for the quarter were primarily were up primarily due to increased sales volumes, which included higher sales of new products as well as some increases in sales of core products, notably fruit juices. Accelerated purchasing by certain customers and lower inventory write down also increased results for the segment in the Q1 of fiscal year 2025 compared to the same period last fiscal year. Test runs and certifications of the processing lines for our Lancaster, Pennsylvania expansion project are progressing well and the facility remains on track to become fully operational in the second half of this fiscal year. Along with the expansion project, we continue to focus on our commercial and research and development teams to enhance the capabilities and specialized products we are able to offer Universal Ingredients' customers. Speaker 100:07:30We continue to expect the project to meaningfully contribute to our ingredients operations segment results in fiscal year 2026. Reducing our environmental impacts remains a key business goal for Universal. Setting scope 1, 2 and 3 greenhouse gas emission targets with the science based target initiative in 2021 and committing to publicly disclosing our progress towards meeting those targets by 2,030 are some of the ways we demonstrate our commitment to sustainability. The credibility of our disclosures is contingent on the accuracy of our admissions data and the methods we use to calculate them. We are pleased to announce that we received independent third party verification of our Scope 1 and 2 admissions data as well as our Scope 3 admissions data associated with tobacco purchased through our supply chain and the methods we use to calculate our emissions. Speaker 100:08:30These important milestones reinforce our dedication to the public and transparent disclosure of our progress towards our goals and the importance of sustainability to Universal. For over 100 years, Universal has successfully managed our business and generated strong cash flows over time under a wide range of market conditions. We continue to leverage our global footprint to alleviate the impact of localized disruptions such as adverse weather. Our proactive approach to understanding and responding to the changing world in which we operate and our deep understanding of our customers' needs will serve us well as we continue our endeavor to deliver consistent results year over year. At this time, we are available to take your questions. Operator00:09:44We'll hear first from Ann Gurkin with Davenport and Co. Speaker 200:09:49Good evening, everyone. Speaker 100:09:51Hey, Anne. Speaker 200:09:52Congratulations on a terrific start to your fiscal year. Speaker 100:09:55Thank you Speaker 200:09:56very much. You're welcome. I wanted to talk start with tobacco and the update about estimated lease production for 2025 and your comments we might move towards more of a balanced supply environment. So that outlook combined with some comments from some of your top customers indicating prices tobacco leaf prices have been up, but expected to moderate going into 2025. I was wondering how I should think about the combination of those two factors as we look forward to fiscal 'twenty six and potential margins for your tobacco segment? Speaker 300:10:38Yes, that's a very good point there. And we are coming out of 2, 3 crops of undersupply. And that, of course, has generated an inflationary green price all around the globe. But what we are seeing now is, for 2025, different weather pattern, mild La Nina, which means a little bit dry in South America and Brazil and some more rain in Africa. So a mild La Nina should produce bigger crops and we have positioned Universal Leaf to increase as we are working with our farmers to increase our own tobacco production in the key markets. Speaker 300:11:23And that should bring a more balanced situation into the tobacco industry. Speaker 200:11:31With the combination of that more balanced scenario, what how does that support your ability to price leaf and keep margins at attractive levels in fiscal 2026? Speaker 300:11:42We will definitely be looking at a reduction in this inflationary green price, green tobacco. And at the same time, we would have also more volume to process in our facilities, reducing our overall fixed cost and believe that we can definitely, in this scenario, maintain our margins. Speaker 200:12:04Okay, great. And then you talked about in the release about consolidating sheet production in Europe. Can you tell me what the potential cost savings are from that effort? Speaker 400:12:20Ed, we can't go into exact numbers here. Certainly, there will be some cost savings. The number currently for restructuring is between €10,000,000 and €15,000,000 Most of that is non cash. But we're still talking to the workers' council and a number of other things that we need to look at to determine what the exact cost is going to be of that restructuring. We do see some efficiencies there by bringing all that under one roof. Speaker 400:12:50That facility wasn't exactly efficient. So certainly, there are going to be some benefits, but we need to see what that is going forward. Speaker 200:12:59And will those cost savings potential cost savings flow through in fiscal 2026? Speaker 400:13:06That's what we would expect. Yes, ma'am. Speaker 200:13:09Okay, great. And then are you having any issues obtaining shipping containers to move the leaf in the back half of fiscal 2025? Speaker 300:13:19Yes. Lately, and we have seen some of the disruptions. We have seen increased freight and overall logistic cost in some geographies. Of course, this is a lot related to the situation in the Red Sea and the Middle East conflict there. But and also some availability of containers, yes. Speaker 300:13:38But I think and over the COVID period, we managed much more, let's say, strength situation there. And we worked very, very optimistic and very diligently with our customers. And we are being as proactive as we can to avoid any constraint on the supply chain. Speaker 200:14:04Great. And then it's nice to see the strong results for the Oriental Tobacco. How should I think about that for the balance of the year? Speaker 400:14:13And a lot of that has to do with, of course, last year, specifically with regard to the Turkish market, that currency there was whipping around. They were paying some hefty interest rates on the local loans and everything. So it's a very good start for the Oriental, and we expect to see a nice pop up from last year because certainly last year they didn't do so well. But it's going to be more in line with the past. Speaker 200:14:43Okay, great. Waiting in Richmond for Hurricane Debbie, how should I think about that as it moves up the coast? Speaker 300:14:52Well, first of all, our thoughts and prayers are with all the communities that have been affected and potentially will be affected in the next couple of days. So what we know so far, there was a negative impact in some of the production areas in Georgia and Florida, but those are very small production areas. The balance of the production areas where the majority of the volume is located is too early to project as the storm path and pattern continue to evolve. So we are closely monitoring the situation and we will have a clear picture by this weekend. Speaker 100:15:33And I just want to note that the again, the U. S. Represents less than 10% of our tobacco segment results. Speaker 200:15:42Okay, great. We will keep our fingers crossed. Okay. Jennifer, do you have uncommitted worldwide tobacco leaf numbers? Speaker 100:15:49Sure. The worldwide, Fluke cured and Burley uncommitted stocks stood at 21,000,000 kilos at the end of June. That's down 7,000,000 kilos from the end of March. Speaker 200:16:02Okay. And then turning to Ingredients, nice improvement sequentially on your Ingredients segment. Nice to see that pickup stronger than I was expecting. Thank you. How should I think about the full year and potential margin for that segment? Speaker 200:16:17Q1 came in higher than I would have thought. So that's great to see. Speaker 400:16:21Yes. And look, in the Q1, they improved certainly from last year. That was primarily driven by a combination of sale of new products under new contracts. As our investments in the platform commercial sales team and R and D functions are finally starting to pay off there. And also the stabilization in some of the markets we serve and the recovery in the sales of our core products. Speaker 400:16:45So we saw it in both sides. Volume was up nicely. Keep in mind that pricing was down in that most of those areas because of the raw materials have come down quite a bit over the last year or so. For the year, we expect to see continued improvement as new customer contracts ramp up throughout the year. And we expect to see some benefits from the expansion project in Lancaster. Speaker 400:17:14But we don't expect to see meaningful impact until fiscal year 2020 6. So again, last year, we started out down. Were some inventory write downs, so we didn't repeat that this year. So that is a nice pickup there. And again, we're seeing a nice pickup just on volume, and it's going in the right direction. Speaker 400:17:38So we expect that and we hope to continue that momentum. Speaker 200:17:42That's great. So can you get margins back to that mid single digit range by the end of the year, fiscal year? Speaker 400:17:46We certainly hope so. Speaker 200:17:48Congratulations. That's great. What are the new products? Can you give me an example? Speaker 400:17:56There is lots of things we're putting out there. We can't exactly we have lots of NDAs, so we can't exactly be specific about it. But we're putting in all kinds of flavors for a number of customers, different customers. And again, we have signed some beverages. We were producing all kinds of beverages at the moment. Speaker 400:18:24So it's really wide spread. We're throwing a wide net. Our guys are out there trying all kinds of different things. And again, we have been spending a lot of money on R and D and commercial ramping that up. So we hope to see the fruit of that in the next couple of quarters and going into 2026. Speaker 200:18:44Great. And then it looks like you did pull some business in forward into this quarter. Can you give me a dollar amount? Speaker 400:18:51No, I can't give you dollar amount, but it was nice to see that. It was earlier than we had certainly anticipated. Those lines are now up and running. We have gotten the approvals and the certifications for the aseptic, both on the high and the low asset. So and we have started to produce product for a number of customers, albeit slowly. Speaker 400:19:17So we again hope to see that ramp up throughout the rest of the year and then really meaningful into fiscal year 2020 6. Speaker 200:19:25Great. Okay, great. SG and A for the full year, we have a range of $300,000,000 $310,000,000 Is that fair? Speaker 400:19:33Yes. Look, in the Q1, we were up about $3,000,000 Normally, we'll give you the variances there. Certainly, that was FX related where we were up. Last year, the number was $3.11 We expect to come in below that number fiscal year 2025. Speaker 200:19:51Great. Interest expense was higher and you outlined the increased partially due to the increased debt levels to carry the higher tobacco inventory. So how do I think about that interest expense in the back half as hopefully you ship and sell that tobacco? Speaker 400:20:03Yes, exactly right. And then we'll have see what interest rates do later in the year, whether or not the Fed actually is going to do something. So we do certainly expect to see the unwinding levers to come down later this year. Hopefully, by buying that crop in Brazil earlier, we can ship it earlier as well. We bought slightly earlier in Africa in certain oranges as well. Speaker 400:20:25So hopefully, we can speed that up a little bit and just bring that whole leverage down and that will also help the interest expense later this year. Speaker 200:20:35Great. And CapEx looks like it was moderated a little bit. Any reason for that? Speaker 400:20:39Yes. Well, again, we made some hefty investments in Lancaster. So that all is almost finished. So we do expect that to come down over time. Speaker 200:20:51Great. And then congratulations on your hard work on sustainability and your progress against your goals. That is nice to see. I guess along that same line, you've commented on working with farmers globally to grow additional crops. So I was wondering if you could just flush that out a little bit as to opportunities for your farmer base to grow crops that maybe you could sell throughout your business. Speaker 200:21:14And at what point are you able to ramp up that program? Speaker 400:21:22Ann, as part of our farmer programs, over the last couple of years, we have provided our farmer base, our contracted farmer base with food crops. We have done that for quite some time already. So that is really a sustenance thing there. And we also, in certain markets, provide a market for those products to for them to sell it. So we've been doing that for quite some time, and we're trying to expand that When you saw that video yesterday in the Annual Shareholders Meeting that was specifically in Brazil, but we're doing that already in Africa for a number of years. Speaker 400:22:10So we're just going to continue that where possible. Speaker 200:22:15So it's still on a test mode. Is that fair right now? Speaker 400:22:18No, I don't think it's a test mode. I think we're doing that in the markets where it's possible to do. And again, we're providing it to them for their own use. Now if you are going to take it a step further and you want to look at what we can do on the ingredients side, yes, there is a test mode. We are in a number of origins. Speaker 400:22:45We're trying some things out, certain products that we currently use, that we're buying out of different markets where there might be some issues in the future. Certainly, we love to apply our traceability and sustainability on the ingredient side as well. So that's something that we're certainly looking at and in the long term think that we can achieve some really good results. Speaker 200:23:10That's great. Thank you. Thank you all for your time. Thank you. Speaker 400:23:13You're welcome. Thank you. Thank you. Operator00:23:31And Ms. Roe, we have no signals from our audience. I'll turn it back to you for any additional or closing remarks. Speaker 100:23:39Thank you all for joining us on our call today. Operator00:23:44Ladies and gentlemen, this does conclude today's session and we do thank you for your participation. You may now disconnect your lines. We hope you have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallUniversal Q1 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Universal Earnings HeadlinesUniversal Health Services Q1 2025 Earnings PreviewApril 26 at 9:28 AM | seekingalpha.comFirst Look: Universal Logistics HoldingsApril 25 at 11:38 PM | finance.yahoo.comMassive new energy source found in UtahNEW THIS WEEK: Huge Energy Discovery In Utah The Department of Energy say it could power America for millions of years. And both grizzled oilmen and clean energy supporters love it: Energy Secretary Chris Wright called it "an awesome resource," while Warren Buffett, Jeff Bezos, Mark Zuckerberg, and Bill Gates are all directly invested.April 28, 2025 | Stansberry Research (Ad)EU to probe Universal's $775 million acquisition of Downtown Music, FT reportsApril 25 at 11:17 PM | finance.yahoo.comUniversal Insurance Holdings (UVE) Reports Strong Q1 2025 Earnings GrowthApril 25 at 5:42 PM | gurufocus.comWhy Universal Logistics (ULH) Stock Dropped TodayApril 25 at 5:42 PM | gurufocus.comSee More Universal Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Universal? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Universal and other key companies, straight to your email. Email Address About UniversalUniversal (NYSE:UVV) processes and supplies leaf tobacco and plant-based ingredients worldwide. The company operates through two segments, Tobacco Operations; and Ingredients Operations. It is involved in the procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale to manufacturers of consumer tobacco products. The company contracts, purchases, processes, and sells flue-cured, burley, and oriental tobaccos that are primarily used in the manufacture of cigarettes; and dark air-cured tobaccos principally used in the manufacture of cigars, natural wrapped cigars and cigarillos, smokeless, and pipe tobacco products. It also provides value-added services, including blending, chemical, and physical testing of tobacco; service cutting for various manufacturers; manufacturing reconstituted leaf tobacco; just-in-time inventory management services; electronic nicotine delivery systems; and smoke testing services for customers. In addition, the company offers testing services for crop protection agents and tobacco constituents in seed, leaf, and finished products, including e-cigarette liquids and vapors; and analytical services that include chemical compound testing in finished tobacco products and mainstream smoke. Further, it provides a various value-added manufacturing processes to produce specialty vegetable and fruit-based ingredients, as well as botanical extracts and flavorings for human and pet food markets; and recycles waste materials from tobacco production. Universal Corporation was founded in 1886 and is headquartered in Richmond, Virginia.View Universal ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 5 speakers on the call. Operator00:00:00Good day, everyone, and welcome to today's Universal Corporation First Quarter Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen only mode, but later you will have the opportunity to ask questions during the question and answer session. Please note this session is being recorded. I'll be standing by should you need any assistance. And it is now my pleasure to turn the floor over to Jennifer Rowe. Operator00:00:28Please go ahead. Speaker 100:00:30Thank you, Jim. Thank you for joining us. George Freeman, our Chairman, President and CEO Eyrton Henschke, our Chief Operating Officer and Johan Kroner, our Chief Financial Officer are here with me today and will join me in answering questions after these brief remarks. This call is being webcast live and will be available on our website and on telephone taped replay and remain on our website through November 7, 2024. Other than the replay, we have not authorized and disclaim responsibility for any recording, replay or distribution of any transcription of this call. Speaker 100:01:05This call is copyrighted and may not be used without our permission. Before I begin to discuss our results, I caution you that we will be making forward looking statements that are based on our current knowledge and some assumptions about the future and are representative as of today only. Actual results could differ materially from projected or estimated results, and we assume no obligation to update any forward looking statements. For information on some of the factors that can affect our estimates, I urge you to read our 10 ks for the year ended March 31, 2024. Such risks and uncertainties include, but are not limited to, customer mandated timing of shipments, weather conditions, political and economic environment, government regulation and taxation, changes in exchange rate and interest rates, industry consolidation and evolution, and changes in market structure or sources. Speaker 100:02:01Finally, some of the information that I have for you today may be based on unaudited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may also include non GAAP financial measures. For details on these measures, including reconciliations to the most comparable GAAP measures, please refer to our current earnings press release. Universal Corporation is off to a strong start for our fiscal year 2025. For the quarter ended June 30, 2024, revenue was $597,100,000 up approximately 15% for both our tobacco and ingredient operations segments, while operating income was $17,200,000 up $6,200,000 or 56% compared to the same quarter last fiscal year. Speaker 100:02:55Our revenue increase in the Tobacco Operations segment was driven by higher sales volumes and prices. Coming out of an exceptional fiscal year 2024, we benefited from continued strong demand from our tobacco customers. We believe this demand will continue to support solid results for the segment for fiscal year 2025. Our strategic decisions to accelerate tobacco crop purchasing allowed us to secure our contracted tobacco in certain dynamic markets, which has positioned us well to meet customer demand. As in previous fiscal years, we expect that tobacco shipment timing and related revenue recognition will be more heavily weighted towards the second half of fiscal year twenty twenty five. Speaker 100:03:41Our uncommitted tobacco inventory levels at June 30, 2024 remained low at about 13%, and we believe that global leaf tobacco remains in an undersupply position. Looking ahead, we expect that recent elevated green tobacco prices will incentivize farmers to increase planting for the next season, potentially leading to more balanced markets in the coming years. We work closely with our contract farmers to provide guidance and support to promote increased production. During the quarter ended June 30, 2024, our Ingredients Operations segment also delivered improved performance, primarily based on increased sales volumes. New product sales have increased across our Ingredients platform, contributing to positive results. Speaker 100:04:31These increased sales combined with general improvement in certain markets and recovery of demand for our core products drove the 15% increase in sales revenue for the segment as compared to the same quarter last fiscal year. As expected, our debt level remained elevated at June 30, 2024. As our committed tobacco inventory, which represented 87% of total tobacco inventories at June 30, 2024, are processed and delivered to customers, we anticipate working capital to unwind during fiscal year 2025. Some financial highlights for the quarter ended June 30, 2024. Net income for the quarter was $100,000 or 0 point 0 $1 per diluted share. Speaker 100:05:18Net income increased by $2,200,000 and diluted earnings per share increased by $0.09 for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023. Operating income of $17,200,000 for the quarter increased by $6,200,000 Selling, general and administrative expenses were up $3,200,000 in the quarter ended June 30, 2024, largely on unfavorable foreign currency comparisons. Some highlights for our operating segments. Operating income for the Tobacco Operations segment increased by $5,600,000 to $14,500,000 for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023. Tobacco Operations segment operating income was up in the quarter ended June 30, 2024, largely on higher carryover crop shipments as well as higher earnings from our Oriental Tobacco joint venture. Speaker 100:06:23Operating income for the Ingredients Operations segment was up $4,900,000 for the quarter ended June 30, 2024. Results for the Ingredients Operations segment for the quarter were primarily were up primarily due to increased sales volumes, which included higher sales of new products as well as some increases in sales of core products, notably fruit juices. Accelerated purchasing by certain customers and lower inventory write down also increased results for the segment in the Q1 of fiscal year 2025 compared to the same period last fiscal year. Test runs and certifications of the processing lines for our Lancaster, Pennsylvania expansion project are progressing well and the facility remains on track to become fully operational in the second half of this fiscal year. Along with the expansion project, we continue to focus on our commercial and research and development teams to enhance the capabilities and specialized products we are able to offer Universal Ingredients' customers. Speaker 100:07:30We continue to expect the project to meaningfully contribute to our ingredients operations segment results in fiscal year 2026. Reducing our environmental impacts remains a key business goal for Universal. Setting scope 1, 2 and 3 greenhouse gas emission targets with the science based target initiative in 2021 and committing to publicly disclosing our progress towards meeting those targets by 2,030 are some of the ways we demonstrate our commitment to sustainability. The credibility of our disclosures is contingent on the accuracy of our admissions data and the methods we use to calculate them. We are pleased to announce that we received independent third party verification of our Scope 1 and 2 admissions data as well as our Scope 3 admissions data associated with tobacco purchased through our supply chain and the methods we use to calculate our emissions. Speaker 100:08:30These important milestones reinforce our dedication to the public and transparent disclosure of our progress towards our goals and the importance of sustainability to Universal. For over 100 years, Universal has successfully managed our business and generated strong cash flows over time under a wide range of market conditions. We continue to leverage our global footprint to alleviate the impact of localized disruptions such as adverse weather. Our proactive approach to understanding and responding to the changing world in which we operate and our deep understanding of our customers' needs will serve us well as we continue our endeavor to deliver consistent results year over year. At this time, we are available to take your questions. Operator00:09:44We'll hear first from Ann Gurkin with Davenport and Co. Speaker 200:09:49Good evening, everyone. Speaker 100:09:51Hey, Anne. Speaker 200:09:52Congratulations on a terrific start to your fiscal year. Speaker 100:09:55Thank you Speaker 200:09:56very much. You're welcome. I wanted to talk start with tobacco and the update about estimated lease production for 2025 and your comments we might move towards more of a balanced supply environment. So that outlook combined with some comments from some of your top customers indicating prices tobacco leaf prices have been up, but expected to moderate going into 2025. I was wondering how I should think about the combination of those two factors as we look forward to fiscal 'twenty six and potential margins for your tobacco segment? Speaker 300:10:38Yes, that's a very good point there. And we are coming out of 2, 3 crops of undersupply. And that, of course, has generated an inflationary green price all around the globe. But what we are seeing now is, for 2025, different weather pattern, mild La Nina, which means a little bit dry in South America and Brazil and some more rain in Africa. So a mild La Nina should produce bigger crops and we have positioned Universal Leaf to increase as we are working with our farmers to increase our own tobacco production in the key markets. Speaker 300:11:23And that should bring a more balanced situation into the tobacco industry. Speaker 200:11:31With the combination of that more balanced scenario, what how does that support your ability to price leaf and keep margins at attractive levels in fiscal 2026? Speaker 300:11:42We will definitely be looking at a reduction in this inflationary green price, green tobacco. And at the same time, we would have also more volume to process in our facilities, reducing our overall fixed cost and believe that we can definitely, in this scenario, maintain our margins. Speaker 200:12:04Okay, great. And then you talked about in the release about consolidating sheet production in Europe. Can you tell me what the potential cost savings are from that effort? Speaker 400:12:20Ed, we can't go into exact numbers here. Certainly, there will be some cost savings. The number currently for restructuring is between €10,000,000 and €15,000,000 Most of that is non cash. But we're still talking to the workers' council and a number of other things that we need to look at to determine what the exact cost is going to be of that restructuring. We do see some efficiencies there by bringing all that under one roof. Speaker 400:12:50That facility wasn't exactly efficient. So certainly, there are going to be some benefits, but we need to see what that is going forward. Speaker 200:12:59And will those cost savings potential cost savings flow through in fiscal 2026? Speaker 400:13:06That's what we would expect. Yes, ma'am. Speaker 200:13:09Okay, great. And then are you having any issues obtaining shipping containers to move the leaf in the back half of fiscal 2025? Speaker 300:13:19Yes. Lately, and we have seen some of the disruptions. We have seen increased freight and overall logistic cost in some geographies. Of course, this is a lot related to the situation in the Red Sea and the Middle East conflict there. But and also some availability of containers, yes. Speaker 300:13:38But I think and over the COVID period, we managed much more, let's say, strength situation there. And we worked very, very optimistic and very diligently with our customers. And we are being as proactive as we can to avoid any constraint on the supply chain. Speaker 200:14:04Great. And then it's nice to see the strong results for the Oriental Tobacco. How should I think about that for the balance of the year? Speaker 400:14:13And a lot of that has to do with, of course, last year, specifically with regard to the Turkish market, that currency there was whipping around. They were paying some hefty interest rates on the local loans and everything. So it's a very good start for the Oriental, and we expect to see a nice pop up from last year because certainly last year they didn't do so well. But it's going to be more in line with the past. Speaker 200:14:43Okay, great. Waiting in Richmond for Hurricane Debbie, how should I think about that as it moves up the coast? Speaker 300:14:52Well, first of all, our thoughts and prayers are with all the communities that have been affected and potentially will be affected in the next couple of days. So what we know so far, there was a negative impact in some of the production areas in Georgia and Florida, but those are very small production areas. The balance of the production areas where the majority of the volume is located is too early to project as the storm path and pattern continue to evolve. So we are closely monitoring the situation and we will have a clear picture by this weekend. Speaker 100:15:33And I just want to note that the again, the U. S. Represents less than 10% of our tobacco segment results. Speaker 200:15:42Okay, great. We will keep our fingers crossed. Okay. Jennifer, do you have uncommitted worldwide tobacco leaf numbers? Speaker 100:15:49Sure. The worldwide, Fluke cured and Burley uncommitted stocks stood at 21,000,000 kilos at the end of June. That's down 7,000,000 kilos from the end of March. Speaker 200:16:02Okay. And then turning to Ingredients, nice improvement sequentially on your Ingredients segment. Nice to see that pickup stronger than I was expecting. Thank you. How should I think about the full year and potential margin for that segment? Speaker 200:16:17Q1 came in higher than I would have thought. So that's great to see. Speaker 400:16:21Yes. And look, in the Q1, they improved certainly from last year. That was primarily driven by a combination of sale of new products under new contracts. As our investments in the platform commercial sales team and R and D functions are finally starting to pay off there. And also the stabilization in some of the markets we serve and the recovery in the sales of our core products. Speaker 400:16:45So we saw it in both sides. Volume was up nicely. Keep in mind that pricing was down in that most of those areas because of the raw materials have come down quite a bit over the last year or so. For the year, we expect to see continued improvement as new customer contracts ramp up throughout the year. And we expect to see some benefits from the expansion project in Lancaster. Speaker 400:17:14But we don't expect to see meaningful impact until fiscal year 2020 6. So again, last year, we started out down. Were some inventory write downs, so we didn't repeat that this year. So that is a nice pickup there. And again, we're seeing a nice pickup just on volume, and it's going in the right direction. Speaker 400:17:38So we expect that and we hope to continue that momentum. Speaker 200:17:42That's great. So can you get margins back to that mid single digit range by the end of the year, fiscal year? Speaker 400:17:46We certainly hope so. Speaker 200:17:48Congratulations. That's great. What are the new products? Can you give me an example? Speaker 400:17:56There is lots of things we're putting out there. We can't exactly we have lots of NDAs, so we can't exactly be specific about it. But we're putting in all kinds of flavors for a number of customers, different customers. And again, we have signed some beverages. We were producing all kinds of beverages at the moment. Speaker 400:18:24So it's really wide spread. We're throwing a wide net. Our guys are out there trying all kinds of different things. And again, we have been spending a lot of money on R and D and commercial ramping that up. So we hope to see the fruit of that in the next couple of quarters and going into 2026. Speaker 200:18:44Great. And then it looks like you did pull some business in forward into this quarter. Can you give me a dollar amount? Speaker 400:18:51No, I can't give you dollar amount, but it was nice to see that. It was earlier than we had certainly anticipated. Those lines are now up and running. We have gotten the approvals and the certifications for the aseptic, both on the high and the low asset. So and we have started to produce product for a number of customers, albeit slowly. Speaker 400:19:17So we again hope to see that ramp up throughout the rest of the year and then really meaningful into fiscal year 2020 6. Speaker 200:19:25Great. Okay, great. SG and A for the full year, we have a range of $300,000,000 $310,000,000 Is that fair? Speaker 400:19:33Yes. Look, in the Q1, we were up about $3,000,000 Normally, we'll give you the variances there. Certainly, that was FX related where we were up. Last year, the number was $3.11 We expect to come in below that number fiscal year 2025. Speaker 200:19:51Great. Interest expense was higher and you outlined the increased partially due to the increased debt levels to carry the higher tobacco inventory. So how do I think about that interest expense in the back half as hopefully you ship and sell that tobacco? Speaker 400:20:03Yes, exactly right. And then we'll have see what interest rates do later in the year, whether or not the Fed actually is going to do something. So we do certainly expect to see the unwinding levers to come down later this year. Hopefully, by buying that crop in Brazil earlier, we can ship it earlier as well. We bought slightly earlier in Africa in certain oranges as well. Speaker 400:20:25So hopefully, we can speed that up a little bit and just bring that whole leverage down and that will also help the interest expense later this year. Speaker 200:20:35Great. And CapEx looks like it was moderated a little bit. Any reason for that? Speaker 400:20:39Yes. Well, again, we made some hefty investments in Lancaster. So that all is almost finished. So we do expect that to come down over time. Speaker 200:20:51Great. And then congratulations on your hard work on sustainability and your progress against your goals. That is nice to see. I guess along that same line, you've commented on working with farmers globally to grow additional crops. So I was wondering if you could just flush that out a little bit as to opportunities for your farmer base to grow crops that maybe you could sell throughout your business. Speaker 200:21:14And at what point are you able to ramp up that program? Speaker 400:21:22Ann, as part of our farmer programs, over the last couple of years, we have provided our farmer base, our contracted farmer base with food crops. We have done that for quite some time already. So that is really a sustenance thing there. And we also, in certain markets, provide a market for those products to for them to sell it. So we've been doing that for quite some time, and we're trying to expand that When you saw that video yesterday in the Annual Shareholders Meeting that was specifically in Brazil, but we're doing that already in Africa for a number of years. Speaker 400:22:10So we're just going to continue that where possible. Speaker 200:22:15So it's still on a test mode. Is that fair right now? Speaker 400:22:18No, I don't think it's a test mode. I think we're doing that in the markets where it's possible to do. And again, we're providing it to them for their own use. Now if you are going to take it a step further and you want to look at what we can do on the ingredients side, yes, there is a test mode. We are in a number of origins. Speaker 400:22:45We're trying some things out, certain products that we currently use, that we're buying out of different markets where there might be some issues in the future. Certainly, we love to apply our traceability and sustainability on the ingredient side as well. So that's something that we're certainly looking at and in the long term think that we can achieve some really good results. Speaker 200:23:10That's great. Thank you. Thank you all for your time. Thank you. Speaker 400:23:13You're welcome. Thank you. Thank you. Operator00:23:31And Ms. Roe, we have no signals from our audience. I'll turn it back to you for any additional or closing remarks. Speaker 100:23:39Thank you all for joining us on our call today. Operator00:23:44Ladies and gentlemen, this does conclude today's session and we do thank you for your participation. You may now disconnect your lines. We hope you have a great day.Read morePowered by