Earnings call transcript Q3 2023

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Operator

Good afternoon. Thank you for attending today's Universal Corporation Third Quarter Fiscal Year 2023 Earnings Call. My name is Meghan, and I'll be your moderator for today's call. [Operator Instructions]

I would now like to pass the conference over to Candace Formacek, Vice President and Treasurer. ahead. go please Candace,

Candace Formacek

and all Meghan, today. joining thank you, for you us Thank

Officer, me be taped through Freeman, after CEO; brief in Johan Officer; Financial replay. remain and our website will It X, call our XXXX. Chairman, answering Kroner, website webcast here live is Hentschke, Chief George President will Operating questions these Airton on our join being and and May today will This our Chief our are me with and remarks. available on telephone on and

for not call Other any or recording, replay, permission. may transcription we than used of copyrighted is a authorized have and distribution be This disclaim responsibility our not any of and call. this without replay

caution forward-looking knowledge and be differ we Before and obligation I to projected only. you the update assumptions of begin that assume today or statements no estimated our results current are Actual forward-looking to making based and on statements. some representative as any future about could I will are discuss we from that results, materially results, our

factors XX-Q For ended XX, the can XX, on XXXX. as March year the our XX-K urge that read quarter of some I ended affect our for as well XXXX, for you to the information Form estimates, our December

rates or are economic government rates, resources. environment, interest Such in COVID-XX risks changes but regulation shipments, structure changes evolution and and political and and and uncertainties the not exchange ongoing to, in of limited market conditions, include, industry pandemic, customer-mandated and weather taxation, consolidation timing

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

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

Tobacco XXXX, smoothly, prior generally driven periods are XXXX. results fiscal year. and our fiscal in not seeing with ended shipments XX, year December that are the moving we and shipments pleased in strong the by to extremely in are the logistical constraints compared nine months tobacco quarter We same we saw

to diversify for to XXXX. in types quarter conditions and Our to Operations burley tobacco to results tobacco demand tobacco of due significant with ended Short segment the largely also continued leaf months weather Ingredients all an undersupplied contributed in to positively and be December leaf XX, lower There the nine contribute in continues have supply. our leaf crops position. Africa, tobacco currently

of XXXX, our at tobacco As levels uncommitted X% than inventory, less XX, of low exceptionally December our stood level. inventory an

are key we crops fiscal tobacco year several in early, still larger forecasting is in it origins XXXX. Although

segment, we for Operations adjusting their experiencing is Ingredients our softening ingredients demand some inventory In we believe products, our of which due largely to been and recently temporary have customers levels. some of

uncertainties. of chain Some ingredients levels carrying been customers of our because higher supply inventory have

particularly and costs segment deferred costs costs, Increased expansion months XXXX. ended reduced to the XX, Operations product the X selling, Ingredients from of related including administrative sales resources December and our and compensation expenses, for general and our results quarter in acquisitions development

make to long-term to excited our our the of capital significant ingredients enhance capabilities platform. continue remain ingredients businesses about the increase for and and We outlook investments plant-based

are the across considerable vision of synergies making identified progress of some and this on for earlier We ahead the platform operational segment. our achieving

assist our this ingredients to expand and continue Directors XXXX, with X, the February on supplier to in announced value-added experience of appointed us and corporate As we we Board as director new to have extensive a business. space promote

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

XXXX, compared the earnings items million for and XX, nine share per December nine earnings the ended by increased income release, nonrecurring net $X.XX, to in XX, certain months diluted respectively, Excluding detailed XXXX. $X.X today's months December and ended

Adjusted operating the months million XXXX, million nine December million $XXX.X for income, December ended compared by XX, $XX.X of nine also months XXXX. today's the $XXX.X release, income ended for of increased XX, earnings to in detailed adjusted operating

for $XX.X million was quarter the for or with share share ended per the XXXX. ended or diluted December XX, $X.XX $X.XX million income XX, quarter Net December diluted XXXX, compared per $XX.X

the certain quarter and million December XXXX. for XX, earnings quarter per today's ended nonrecurring compared by Excluding income December respectively, earnings decreased $X.X items XX, net the $X.XX, detailed release, in and diluted XXXX, share to ended

also operating million adjusted the of fiscal $XX.X $XX.X XXXX increased to income, XXXX. of the operating for by quarter million compared income today's of quarter of detailed year release, Adjusted year million third fiscal earnings $X.X in for third

revenues by of the December business XX, acquired $XXX.X Consolidated same XXXX, on the in months the higher $X.X sales ended prices, as billion volumes fiscal the for to and Operations October as year Ingredients addition segment. nine increased tobacco in compared XXXX, well the million XXXX period to in

compared revenues million $XXX.X $XXX.X for were higher an quarter million, on consolidated volumes sales December XXXX, XXXX, XX, prices. increase December and ended the quarter $XXX the to XX, ended tobacco million For of

detail. $XX.X the periods million in Operating $X.X the by million and XX, for to segment year. the to $XX.X million and quarter prior ended fiscal same segment December income XXXX, the compared Operations to months respectively, $XXX Turning Tobacco the nine million, Tobacco Operations. to increased for by

of to Tobacco Operations current primarily segment shipments large crop tobacco. both improved and carryover due results

months prior in the were due down the to margins higher were tobaccos volumes to quarter compared the year, XX, mix Tobacco December sales prior sales Operations same periods were XXXX, of and segment quarters. lower written in While and in ended fiscal in sales the that nine

both of December Brazil same previous year. ended compared XXXX, from periods in the in quarter shipments fiscal XX, and significantly months to carryover the up nine the were crops and current Tobacco

due ended some despite year the the fiscal volumes and compared earlier Africa, XX, sales In XXXX, Tobacco sizes, burley tobacco to same nine lower periods timing shipment months in quarter crop December were to XXXX. in up

months the fiscal periods on year, nine down Results and volumes sales the foreign lower tobacco joint comparisons. currency quarter December to and same compared oriental in XXXX, ended for prior in our unfavorable XX, were the venture

ended the administrative due XX, the higher comparisons, general currency and unfavorable XXXX, December suppliers Tobacco compared months to expenses foreign primarily months provisions costs. higher Operations compensation December segment and Selling, for XXXX, to ended to were the XX, nine higher nine in

to XXXX, due provisions exchange and partially ended For XX, for administrative ended December crop selling, the compensation offset in expenses December segment higher to the to by quarter part general compared largely favorable the quarter Tobacco and comparisons. yields, higher costs XX, Operations XXXX, were suppliers foreign due lower larger to

to the nine increased December mainly XX, was Ingredients as Moving to the XXXX, months million the for $X.X increased for months XXXX, the $XX.X income expenses. for ended October compared Operations. segment higher Ingredients administrative of and nine Operations margins general million and the XX, were ended sales, Operating selling, costs, XXXX from purchase LLC benefits better of the Extract, offset by Shank's December inclusion

ended was of for particularly $X.X lower costs. million the quarter December extracts and quarter XX, for the XXXX, for million XX, income to lower on the compared Operating segment $X.X sales higher sales, XXXX, ended December

our costs year, compensation sales administrative related as general costs periods to costs for nine Selling, the including product deferred segment of December compensation on months higher of XXXX, the well plant-based ingredients to prior expenses the ended and the same from and and platform. development fiscal largely XX, expansion increased in the quarter final compared as capabilities acquisitions in

XX, requirements ended XX, December future our in expanded positioning meet our to needs. expectations, we three refinanced Items, months bank XXXX, December and we we moved XXXX. the successfully with facility for the credit Other XXXX, in capital ended In outstanding us our financial also considerably working year reduced In line beyond our previous quarter our borrowings fiscal peak as

our pillar at is on year of in our business is Report Also, Universal. XXXX our December essential Sustainability available www.universalcorp.com. was website, Sustainability an fiscal XXXX published and

committed as well in activities our to a manner. disclosing consistent are We transparent sustainability our as performance and operational

updated our Sustainability our the We sustainability Report. and are and excited and contained information achievements in about XXXX disclosures new

this to you. we're take At your back Meghan, turn questions. I'll to time, it available

Operator

with you. of Ann the comes & first Company. from line Thank Instructions] [Operator Davenport Our Gurkin question

Ann Gurkin

Is you in mainly said I to ingredients wanted and due to anything just in with start and slowdown else derivatives of the for use the want and is FruitSmart. those walk of I extracts, beverages? was kind slowdown going it to market any the I the And see think different but end if with there sales. segments through the on. Candace, segment Begin

Johan Kroner

it inventory that's off it's right Where seeing No. Johan. and the we're we're and -- seeing COVID just slowdown is is, to where just temporary. a really believe is have trying because Ann, uncertainty bunch of and everything, really sell that they're now, where we it there in the customers additional

Ann Gurkin

strong, seems is end growing it for Because market the to strong ingredients Okay. specialty very double digits. me

I there? from you very seeing pull-through So, is strong. was inventory that are that also -- thought segment the reduced

Johan Kroner

that we the but right partially bit do bit. the a you're We about, of it's quarter quarter, we uptick, it's rest saw rest there's talking will through this you're an a what have again, the see the in all products point what of believe just down to and temporary But time. little on of the year. it but depending at Again, in products, truly

Ann Gurkin

I fiscal Ingredients the Okay. about business? How think do for 'XX

Johan Kroner

a remains significant we're received That making seen. we upside. -- quite investments, to be some positive. bit really But looks We're it of doing

incurring to order So, in we're costs speed. get that, up really some excited that we're additional all but about well to as

have to the sales holding year. We the good. So, just are throughout looks it Margins up nicely. see do what

Ann Gurkin

compensation company, whole It never 'XX? I I some then, that Okay. how out. maybe this know factors I -- that that. how about fiscal Do of or about quarter. don't to terms that Shank's for about in number know million, expenses the fiscal that think should and payments how seemed maybe run was into to different SG&A, in these do some have for I and 'XX, think $XX slightly under And of of that and take flow that

Johan Kroner

are there's there. variables on. are things Well, inflationary certainly lots going as Exchange comp up, costs always, of rates, that in

only moment, looking and We're on hiring But and like the at I we're up efficiencies ramping for other we're do. everything. some side, things again, before, ballpark. can the hand, in always said we the ingredients So,

now, increase at, it. looks So that [Technical But will about in amount of right we're the Difficulty] where

Candace Formacek

Are you… Ann?

George Freeman

lose we you, Did Ann?

Candace Formacek

Meghan?

Operator

Ann has that seem muted does line? her It

Candace Formacek

Unmute, Ann.

Operator

Ms. can Gurkin, hear you us?

Candace Formacek

another question, an along moment we or for move back if can in, take Meghan? in extra we get Maybe can can there dial Is she her. back

we have you If someone can... else,

Operator

Okay. There are [Operator questions no further Instructions] registered.

Berman. Neuberger of Our with line Reynolds next Chris question from comes the

Chris Reynolds

in ask less afternoon. I to be it then the combustibles the sort wondering segment. of it towards though. showing weak. and be doesn't Congratulations up smoking of tobacco general how wanted to economic seems general consumption. about tobacco on numbers your about commentary good question And you trends That conditions appear can I'm view because just a pressured sort some give then global if of being just continues Good and to And like you quarter. you

you if consumption update maybe just but year? growth, for view you guidance give how your global with an could trends industry conservative fairly been this always You've on

Airton Hentschke

it's And about products numbers. Yes. generation we're out I the Chris, positive our the products, of combustible about of all positive different you Asia. still side. time, new Europe different new there, know, course, these same we the cigarettes. from consumption reported and and see a we consumption positive vaping major there see but mean, in customers market, whether of very if we different as combustible out the there, to But and dynamics products markets. in remain We At are heat-not-burn the course. overall, which market Americas, very U.S. separate it's

Operator

Our Investors. of Northeast with line next the from Bruce comes Monrad question

Bruce Monrad

fiscal I'm some might your maybe guess I inventory on reference that indications then, on the reason going to of of elevated And asking I on script in you forward Can terms were that? basis for 'XX, also there that step mean made inventories were mean pricing. And a a year question, I is looking little add think a what comparison A and for are color think in of would favorable. maybe what sort crops the levels because of you that, part that pricing?

there's in, what's outlook the crop and how fit please? if So that color to that any or does add on

Airton Hentschke

an that's markets positive where in operate, our key see seeing as crop especially markets, we base sizes where play role there. there. Bruce. well are promote in these out pharma important because tobacco the we And increased we Certainly, we What production key with we

tobacco that course, of -- we and again, in cost, do in increase market. costs to fertilizer on we hitting prices, crop, see inflationary And this from farmer. different, the What have prices terms costs seen every is in of that these

as demand, So remain there. about -- seen we but very the positive you have

that lose our many, Our uncommitted any in like or now. request opportunity is for level to inventory to some inventory because we customers any about years. additional It's many X% our We want have below uncommitted lowest have don't right there.

other areas, So positive. and confirmed. we even In this well have other remain sizes are well. and that sizes crop the some they're crop But started XXXX like about process, they positive looking areas, cycle, still Africa some as developing, is growing the positioned some crop we so. into been so In Universal the increased for not areas, remain

Bruce Monrad

And I further. Great. bit maybe if little could a --

big to had have you to might customers, terms wanting to think fair, couple and sailing I'm So inventories describe a that of and they of they a inventory, sort want shipping or your stepping here, picture, would that? the end clear been? of for lots make up And back, you that rebuild issues a So customers saying the tailwind in I of there's be do for cycle But life. like. your years have how of it there's problems we've can Would that and right like? in long have unfair would say if that your where an of indication of would you customers worth couple to years' structural transport be

Airton Hentschke

We has seems come durations. we What each have and its seen down. transport strong. And demand has see logistics No. customer own cost policies that substantially on that, of again, inventory and on their is the to be don't

So, their in adjustments don't duration no. see big policy, adjustments we --

Operator

Ann is question follow-up a Gurkin from Davenport & next Company. Our with

Ann Gurkin

new but bank that know rate, I on all don't that about you you credit if variable is the fixed floating talked rate refinance that facility, a or have facility?

Johan Kroner

are on future. just and to some decided see we do and whole of knowing where of fix rates where current we Based it But... Ann. fixed the to with Fed it, this the not the going is thing, We some more if in wait

Candace Formacek

in The details Q. the be will

Johan Kroner

Correct.

Ann Gurkin

-- I Q. how in fast tell it fixed much I is can't couldn't the enough read to see

Johan Kroner

About Yes. XX...

Ann Gurkin

Yes.

Okay.

expense fiscal go So rates happens. depending should on in 'XX, interest rate up, up go what should

Johan Kroner

going but of yes, we certainly up were that have rates depending there on hedges are our certainly rates all during -- positive borrowings the up working borrowings have and up, Again, we Yes. some certainly offset, the of capital some old were place, in we require, that might the and year. the are

Ann Gurkin

some down some how you segment due 'XX? for I in you a said the fiscal margin tobacco to mix, And 'XX think of I less looking progression was the fiscal little should I Margin was think, for than Right. bit quarter, versus maybe carryover, this wrote tobacco.

XX how to margin this So, over the XX segment. I'm about to not say, months for sure tobacco next, think

Johan Kroner

into Brazil where It's too out. strong early and as for pointed started and that, Ann. is, get doesn't there it it But just hopefully remains go everything, that is and Airton crops year. demand, was certainly situation we the where a it the last market if

we have cooperate the positive. So, it's crops the whether yet. again, we believe we'll areas, The But it really in Hopefully, are all early. continue ground some African ground and in And to in we'll it to even don't looks see. have there.

we margins out there we of volumes the some last determine to we need those year, that what we months. in down the and certainly, can inventories that But are and moved everything. to what this do had yes, of and we we'll mix get some have do written So the nine require. And hopefully,

Ann Gurkin

Okay. And uncommitted number, then worldwide Candace? inventory

Candace Formacek

Ann, level. the down unsold worldwide are at from XX/XX, June rate at $XX million and stocks is the $X burley which million flue-cured

Ann Gurkin

inventory, That level your customers. were a you is you your inventory with Okay. keep for then that Universal little usually at for reserve X%. And just given saying low

So, me kind through of that? process can you thought behind the walk

Johan Kroner

be a little to more we on and you. certainly fully Airton We Ann. agree little pointed the to that tobacco because there, questions moment. to out we able one the bit we customers, like offer of have wasn't have at just other very just to with prefer It

and at will we all If we weather the strong again, to trying additional the that yet, like we're in so, certainly on the of are because crops looks then volume all them for And XXXX moment. some positive, can demand will get we not crop. it and ground get -- the that. but the up I certainly But working where cooperates some said, we're certainly even that, is

Ann Gurkin

Okay. And you fiscal any for CapEx then range that? for 'XX? Do have plans

Johan Kroner

the between $XX to the enhance we're giving and capabilities make No. for $XX to We're million next platform and investments significant looking at again, -- the because months, ingredients million we're that's have. in XX that we some the

Ann Gurkin

And Okay. then platform, ingredients remember million, for that if the the that synergy correctly. number is $XX I

Johan Kroner

No.

to going where there We're synergies across we're platform, all put which, a we to have to platform. We in addition talking SG&A that have be that's number. the that mind have again, some some not the need of hiring where we do the sales and able the synergy out R&D operational some people folks, But cost. things do to with these about you

Ann Gurkin

Okay.

you put number? target So a out haven't

Johan Kroner

not. have we No,

Ann Gurkin

time Okay, California. a great. for are could the I'm update nicotine on I with how of working standards 'XX. your kind combustible sale the effect in an later smokable just maybe for California's world position set in you a and like curious. guess, well-banning the environment. in I year from customers, And transition customers is last here of menthol then reducing your heat-not-burn the into volatile on or thing bracing volatile being menthol, just of Universal? how a year what assets ban to with you beginning went for I'm and tobacco potential products thoughts And what be and landscape smoke-free just time is to

Johan Kroner

on outlook so earlier, combustibles just but remind, relisten. the to addressed not you Airton Well, Ann has

Airton Hentschke

segments. operations sheet us developing, but there still all and about opportunities the course, working markets But AmeriNic, also there. operate and is business. of do very And in is with see we Universal wrappers heat-not-burn that nicotine these What also hard see which material on of within not we liquid continues -- for today. do that quarters overall. it's segment for combustible the positive cigar market, demand in the binders for cigar in remain the also increased are the as strong our for our previous to production there we stated market we to Yes, the Europe increase And we

but So positive -- this about market. remain we

Johan Kroner

from addition, X% consumption right, less China. And standpoint, edge mind, worldwide in a -- U.S. the in than it's is keep just cigarette

still talk but things, starting into of type just very with the U.S. for when us, they So lawsuits this to about customer and we important here regard that to have in going keep certainly legal, mind don't to in just are happen that. what's insight

Operator

currently Instructions] [Operator questions are at There waiting this no registered. further time. I do questions are There additional no apologize.

Candace Formacek

okay. That's

Sorry, I didn't mean to you. in jump on

Just the to say, we to quarter. forward in going talking and listening usual. appreciate in, to thanks as the time you We your look folks was to Bye-bye.

Operator

the for Thank your Universal XXXX quarter fiscal rest call. a year participation. Corporation concludes day. Have third your earnings you wonderful of That

Universal (UVV) 8 Feb 232023 Q3 Earnings call transcript