UVV - Earnings call transcript Q2 2022

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Operator

Good afternoon, evening. Thank you for standing by. And welcome to the Universal Corporation Second Quarter Fiscal Year 2022 Earnings Call. At this time, all participants lines are in a listen-only mode. All line have been place on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After [Operator you. Instructions] Thank recorded. call today’s note is Please being I to President now speaker would like today, your over Candace first to Formacek, Vice and hand Treasurer. the conference Please go ahead.

Candace Formacek

on remarks. you thank President me me taped be and call through today remain here will of Chairman, this available Airton distribution used This our Johan than not and It not website Brica, call our CEO; these XXXX. for This X, call. answering disclaim telephone you, all joining questions and the Financial Freeman, website or and Operating us. Chief be copyrighted replay. any our our and any we and replay webcast join with may Chief being have on and without authorized of in on live for after Hentschke, transcription Kroner, Other is will our George Officer; permission. replay, brief will is are our Thank Officer, February responsibility and recording,

crisis assume or when economic pandemic, resultant COVID-XX to any forward-looking severity estimated the particular difficult are are only. to to and obligation the forward-looking differ discuss making you as from we about impacts length caution that our we some results ongoing the current our future I statements. today of could note projected knowledge results, be assumptions and the and predict. update no and begin based of This and during that will current so Actual are is statements results I on representative and materially business Before of

risks rates, I March factors conditions, industry XX-K exchange shipments, uncertainties read the are economic timing include, interest to, evolution, and and changes changes rates the Form XX, political for recently consolidation XX-Q quarter. some and structure taxation, in COVID-XX or estimates, the on limited information weather that the to pandemic, regulation can Such but of ended and in fiscal of our ended not market affect most government and the and for XXXX, year you For ongoing urge customer-mandated our and environment, sources.

information have based on and investors, information may reclassification. effort is of In to unaudited our for measures. I you useful provide include an some to subject comments to Finally, the financial is non-GAAP today allocations today

For details on our including to the release. measures, current refer to these earnings press measures, comparable most reconciliations please GAAP

are our We pleased for of the with six XXXX. fiscal first results months year

of are our to continued Ingredients our the results. XXXX have favorable carryover Tobacco prior tobaccos, compared of to results XX, fiscal tobacco XXXX, and sales a to perform making consisting period solid fewer include a higher ended in Operations which months acquisition Operations, improved of Operations Tobacco International, In lower six percentage lamina year. Silva mix same Our October on the margin product the our contributions Inc. well of September and

reduced address where origins COVID-XX diligently in logistical shipments been uncommitted XXXX, slower XXXX. available, XX% vessels time, at of tobacco and with level are availability level have September these our and the while working worldwide shipments container have to tobacco In accelerate vessel with challenges pandemic. below XX% ongoing tobacco To stemming inventories closely some origins from of in total addition, At our inventory challenges, containers customers September inventory we managing availability. uncommitted related we continue was at significantly of tobacco to shipping XX, same our the to of inventories XX,

those were of year sales Our with of first successfully to adapt constantly our and dedicated credit our ability fiscal talented to year of volumes strong XXXX in changing shipments slightly environment I our tobacco relationships crop our we and year fiscal half half lamina the second the fiscal below half to and weighted this just first employees tobacco expect customers. the to be for XXXX in heavily XXXX. our

the per the compared share Turning $XX.X results. months September XX, income ended September $X.XX XXXX, or million per six ended share, months XXXX. was diluted for with diluted for six $XX.X XX, to Net $X.XX the million or

and million fiscal the half income for of XX, detailed compared million Items increased XXXX. in items, costs months impairment diluted September earnings XXXX. by fiscal Other net Adjusted operating September million earnings increased release $X.XX and with also the half September per or six compared adjusted $XX.X for $XX.X income and diluted income in today’s certain the months or XX, quarter for today’s the share, per other earnings the Items of quarter diluted XX, first $XX.X the detailed $XX.X Net $X.X operating and XXXX. XX, share, restructuring respectively, by per ended of in for Other September $X.XX year first to million XXXX, million Excluding $XX.X $X.XX, share compared of non-recurring release, in ended million ended income XXXX, year six to for XXXX, ended was

second September year, quarter increased of October Consolidated million $XXX segment. year and quarter months compared $XX Tobacco quarter to also in million Excluding for non-recurring segment, earnings September quarter better Items restructuring million $XX a and fiscal fiscal items, second the of increased today’s XXXX, the in for compared $X.X diluted earnings million the to in per by and to revenues the and September operating XXXX. year today’s XXXX, acquired quarter XXXX, XXXX by the business higher in XX, operating the product $XX.X increased to in net release the and the Other adjusted share in compared and Items million impairment other ended detailed ended income, XX, the Ingredients earnings by by to detailed of prior $XXX addition the $X.XX, XX, Adjusted and million, ended in costs prices mix Other Operations respectively, XXXX. and in income fiscal for of certain the release, of $XX million periods on sales million respectively, same in six Operations $XXX.X income

the quarter year percentage the Now lower by XXXX, $XX.X to ended periods a as Tobacco in six Operations, year. higher turning shipped. carryover mix on consisting and fiscal shipments lamina the Operations quarter Tobacco XXXX, income compared the lower when high million, volumes same of Tobacco tobacco $XX.X the in in September well September months and and $XX.X to Operations same tobaccos respectively, customers sales operating largely quarter of of margin higher product to shipments September volumes to periods same for months Africa segment the six results to the reduced and segment XX, and services period accelerated carryover XX, of of compared volumes million by prior favorable for the were fiscal to the the some In in $X.X due six second XXXX, in improved of compared ended increased ended last tobaccos, for segment, and XXXX. six months margin million same periods compared prior a to as fiscal Brazil XX, lower months contrast, carryover million increased value-added were quarter, to sales in to the year, a tobacco. the sales amount and

Brazil. of In shipments addition, out reduced vessel slowed availability

million, quarter and Our the quarter currency six Selling, the services increased foreign segment during XX, Ingredients operations September XXXX, months customers in and ended to to the as for compared same well mainly $X.X Operations the million Asia value-added and improved administrative XX, September XX, ended more XXXX, quarter Results for losses higher for comparisons, acquisition. unfavorable quarter Ingredients year, product of six October months the from ended and periods to Operating previous Operations, operating for on as the income remeasurement. XXXX Tobacco respectively, XX, $X.X the due to XXXX. September and million, quarter expenses segment in September months of September million fiscal the general compared the inclusion were XXXX, and in the favorable XXXX. $X.X Silva six for saw the the ended mix, respectively a compared segment for ended was Operations $X.X XX, primarily

demand pandemic. our COVID-XX Operations ended, strong six well suffering and during the pet rebound as volumes been in the Selling, in September the in saw the increased of categories, the sectors have ongoing both addition in Ingredients food XX, the acquired as periods from to expenses year, some administrative quarter six same ended XXXX, and compared human both business. segment For months months and for general the the on and quarter prior that fiscal

forward, supply are to monitor constraints. Looking continuing global chain we

will which significant encounter not XXXX. year However, delays, shipments may into timing time, shipment we this if know at fiscal we do push

rising in inflation, are of constraints are We driving labor rates some which seeing in and costs freight also up costs. locations increases

especially will impact the we the not later increased fiscal the time, Although, costs Operations affect these we of do are know our currently year. at in anticipating this Ingredient significance

XXXX, environmental of of maintain website. performance released on half look move the committed announced year mentioned around second and X, our are our we As global sustainable our same we standards challenges. recently closing which chain despite supply performance ongoing that fiscal goals of chain, Inc. targets the high October At practices labor supply to a and XXXX, of Extracts, into social impacts, remain supporting agricultural Shank’s we time, strong we environmental and purchase on and setting I essential And of available lastly, to the level to

through -- growing questions. and as take to enhances it Brica. this value-added your the At services custom about our bottling, excited by available we available time, over very platform product capabilities. enhances are our our customers are We development it adding it ingredients and packaging acquisition flavors, Turn this to plant-based to plant and

Operator

first the Co. Instructions] & Gurkin from from Davenport The we Thank lines [Operator Ann you. with comes question have phone

So, Ann, please ahead. go

George Freeman

Hi, Ann.

Ann Gurkin

Hi. everybody. evening, Good

Johan Kroner

evening. Good

Ann Gurkin

challenges, listening versus is of I how kind expectations half just tracking to for internal Universal? start positives and wanted comments, the the all number of to the first after

George Freeman

to well. things I regard think uncommitted things. with our very saw inventory XX%, a But at bit going quite you it at well. tract logistical look headwind are We of a if

Ann Gurkin

me sales were quarter to six like than margins have what an So with looks very months like lamina a favorable Ingredients, highlighted, soften from and but tobacco it would mix it segments. all Ingredient sequentially thought lower we seems you strong good maybe like had first first

about how for of half, costs? And should I How I that labor about out and the that think you higher input with so Ingredients? rest called the second the year the given in think should challenges

George Freeman

regard some the constraints, be running But to labor the well. cost Again, are looks headwinds through much, headwinds to but see issues higher won’t system. good. some certainly, due there with there certainly we not it logistical there, as to the that yeah, portfolio Well, are as But, Ingredients. going are

successful some in with regard with customers been and negotiations we’re to certainly had, the contacts the you our So, costs But we’re had incurring passing there. happy we’ve margin think will additional that with that along. the see that we pressure I we’ve have

we think, I the So, storm. will weather

Ann Gurkin

it pricing that and with to like, first seems to volumes the me, picking you’re were quarter customers. conversations. picking I’m having in up So are see up sales glad

in some should of higher I improvements like Ingredients saw or how back in think for about up maybe the catches as with margins the what can pricing half, we So you some the segment? see QX these inputs more

George Freeman

really run difficult what through It’s left that but how the system at we in was to exactly say going to rates. Right. it have it’s sell, the we lower system much

So, it’s there’s there’s -- pressure, it be to no doubt margin to to pressure. there’s about going there’s going be -- going that

going out to is a to and container we $X,XXX, the now pressure. product to you’re you $X,XXX was have have ship China, be paying plus, $XX,XXX that previewed, there If

will out months, we certainly know in exactly How last in this expect at six the So, point exactly much we be don’t turn that. will to time. it

Ann Gurkin

Okay. -- Shank’s congratulations And capacity on is utilization the acquiring? what you the your of you’re asset acquisition, then

George Freeman

of have plenty will there. We capacity

is there platform, -- with lot an value-added. is we growth flavor a stool improvement unlevered Very leg the can to It’s quite a We’re this there potential. And of it the flavors with. the believe margin happy it. way we see really It’s actually what asset possible. lot -- it, about what about of is, we excited we got. third it’s adding do excited we There that

Ann Gurkin

to over realized? you’ve the back accelerate switching Africa can that amount just you quantify and in shipments -- Tobacco, then And Okay. of

George Freeman

was just variance some have negative negative it think more where I normalized. more from last from a last year year, you was this

we expected be. they smaller -- call a this shipment year, were were which faster Africa, the don’t crops I So, it African to than didn’t in

the So but because we is negative really there the year. last -- variants positive

Ann Gurkin

in Africa. not it’s because customers working with vessels have accelerate shipments to you So to access

So it’s there… not like a timing over

George Freeman

would we have not. get We certainly circumstances, them done worked them of to faster themselves we it of have to customers have under agreed, just and Have No. have some ship of the them as quickly as normally, than some us to that help them and with out can. some but out tobacco our probably they help not, asked we

So, third the more If know, we’re fourth out. as back issues heavily the not them, containers we’re or with see worry, Can the year, out vessel that it tobacco issues, get working separate three there. is at where, you space, and the trying weighted towards all with the or quarter whether there quarter. we to we’re end ongoing get we just its logistical vessels, of

that comes Sometimes might the XX. available to wait have there, have vessels and ports boat other XX sometimes port of bypass the flat the and are load for then out they the at, the the that at sit where we’re next containers whenever the that not to you we out then and XX just sometimes take boat containers

our regard But, the So biggest with to again, as is a… year. where that’s worry

Ann Gurkin

tobacco that was And -- okay.

George Freeman

sold. …get

Johan Kroner

Right.

Ann Gurkin

details, about seeing and call That’s with given positive curious patterns can uncommitted of COVID with any out, for was chains expectation in global itself built order Sure. what’s year positive balanced supports concerns mean, I customer year this and supply crop I to strongly historically. if I about order But versus low there a environment. kind last that’s inventory your orders, is happen. macro patterns going and the very lease customers… don’t but guess a you some trend change pretty I just for this Sure. you know any last and year tobacco then customers not of are with specific kind was

George Freeman

Yeah.

have… Of course we

Ann Gurkin

…as you look this year? at

George Freeman

our side. they basically market combustible -- national recent and …Performance in customers stayed stable a and the from on on most disclosures, the is the market

We We expected. a that if play okay. order some really inventory and look And before. always there is additional some uncommitted a from did we that It industry. tells than in were where story uncommitted, have that got good to So role the confirm at customers. level, and you of better we is is our that level it

delivering -- to and additional Now looking it, the raw our that next space the our there continue we do specially to and the to seeing sell really that Africa see opportunities services gain happy see material on market occupy yeah. to volume, need to they But customers also We we increasing Burley for crop share. year are expand forward, customers. opportunities and we it we have and

us. we see positive a yeah, there for So, outlook

Ann Gurkin

then your And there there? was I shortage a Okay. wrappers, of cigar heard how business was

George Freeman

Yeah.

three We have opportunities. we deliver. orders invested to continue we and have in the a are those our have that now committed we quite and to -- substantial wrapper good position resources seeing from side. yes, it, in are on very the we last expense customers we two continue doing -- is there years years or crops, It that There

Ann Gurkin

Okay. And how joint is looking? the venture Oriental

George Freeman

share. supply Oriental our and market see balance on we increase there regarding opportunities we also see market the Oriental that in situation demand, to market a and

Ann Gurkin

you heat growth? what that’s call have the I your, products. think not any Do all I used leaf tobacco business, reconstitute expanding in given Okay. interest burn in

that -- interest for So given in presence market, you your in do the to is growth expand that… there

George Freeman

Yeah.

are… We

Ann Gurkin

…segment?

George Freeman

we in of are of And areas and of actually invest looking Yes. there there the some bigger well. to opportunities a Yes, segment participation that we we have into market. do that as see these

Ann Gurkin

that in you do or acquisitions you will space? that would So make organically

George Freeman

Organically.

Ann Gurkin

Organically.

I the for Okay. you Tobacco for think help thank back wrong How quarter? And then there on you got it and I SG&A, anything on segments? half, about SG&A, this me can should the you comments commented, SG&A with the both Ingredients

Johan Kroner

currently see, turned to do. Well, as and… right again, you lot SG&A can it’s And is a

Ann Gurkin

know. I

Johan Kroner

considerable the variance it’s impact But remember, on negative this you there, quarter, which nicely. quarter. tracking had a … again,

adding, at. -- we tracking with add of course, but make we’re I to the will business Silva Ingredients the think where happy we’re Yes, specifically think of well. fairly will SG&A, its the

Ann Gurkin

Okay. leaf an And do update? tobacco you worldwide Candace uncommitted then number, have

Candace Formacek

at same… There’s the not we’re still so that an update and on

Ann Gurkin

Okay.

Candace Formacek

from before, number … million. June was XXth XX which

Ann Gurkin

Okay.

for all taking appreciate time. really a Thanks your lot. you questions. my Thank I Okay. all

George Freeman

Thanks, Ann.

Johan Kroner

Thank you.

Candace Formacek

Thank you, Ann.

Operator

further [Operator Instructions] time. We Ann. had you, Thank this questions have no at

like back would it to Candace. I to hand So

Candace Formacek

for thank on call us and all joining Brica, you a our evening. today. you, Have good Thank

Operator

That Thank you for conclude call. today’s joining. will

now disconnect lines. may your You

Candace Formacek	Vice President and Treasurer
George Freeman	Chairman, President and CEO
Airton Hentschke	Chief Operating Officer
Johan Kroner	Chief Financial Officer
Ann Gurkin	Davenport & Co.

Universal (UVV) 4 Nov 212022 Q2 Earnings call transcript