Universal (UVV) 4 Nov 222023 Q2 Earnings call transcript

Hello, thank you for your patience and a warm welcome to Universal Corporation’s Second Quarter Fiscal Year 2023 Earnings Call. My name is Louisa, and I’ll be your operator today. [Operator Instructions] And I have the pleasure of turning the call today to Candace Formacek, Vice President and Treasurer at Universal Corporation. Candace, please go ahead.

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

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

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

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

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

about fiscal Moving to remained tobacco XXXX our how is strong and the for are developing. and ingredients both our plant-based year quarter. Demand products excited very we

We amounts September in in of particularly availability, XXXX. are months ended quarter where ship tobacco large to both seeing improvement we’re the and in XX, able six shipping carryover Brazil,

also very plant-based our with ingredients investment We strategic our pleased remain in platform.

levels Operations XXXX Our six driven higher compared in deliver Ingredients higher September earnings the ended seasonal fiscal our sales XX, year. fiscal the we peak expect working we same fiscal XXXX by the the diversifies quarters. and over for debt two year through We believe requirements and results to both quarter a and are our months next prior in reduction in periods capital considerable

We have in seen receipts working XXXX. significant October capital already

as September tobacco margin enabled Brazil shipments. we tobacco year, shipped increased the amount vessel during enable which levels weighted Operations September comparable segment we in half six for tobacco, the levels some to XX, periods in in of a quarter tobacco container compared quarter. tobacco. was and the of particularly driven to six XXXX the fiscal significantly prior tobacco the large are received reduce income to us year our from and carryover our debt fiscal and fiscal availability by the are of us and Our customers. XXXX Operating September XXXX the lower A the ship XX, our up shipped months elevated portion quarter shipments, Improved ended second to from should for greater our was payments months tobacco Tobacco ended second XX, with

tobacco All an some around global types having are certain currently challenges we world, we in of in position. shipping While the still are leaf of easing are the encouraged undersupply shipping constraints. areas by

at our September committed has conditions, largely opportunities We customers by due and limited been were XX% tobacco Burley our our weather Africa, crops XXXX. our for nearly desired leaf tobacco which XX, inventories customers tobacco to sales have in to diligently worked particularly there. sale secure have the short to

XX, Our for Demand the ingredients on segment and Ingredients and our continue ingredients remained products plant-based Operations again strong capitalize we delivered September quarter in to six results XXXX. synergies healthy months across platform. ended

We seen increases, and for particularly raw have margins have materials cost held labor, up nicely. inflationary but

The or range the compared As six personnel working income in six ingredients’ share, or for diluted investing the September product of million months continue XXXX we the $X.XX $XX.X ended across to the $XX.X platform. income, capabilities to Net the per their results. per established turning million XX, are ended promote $X.XX to and grow offerings with these businesses and find sales was development by diluted products, net with months September success for key XX, expand to share platform full XXXX. our

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

quarter higher the increased detailed by year September the compared earnings ended XXXX respectively increased XXXX. to Adjusted revenues million to item second quarter to items million income diluted fiscal million, XXXX. $XX for and compared costs $X.XX, and the $X.X quarter in prices, as Excluding period net ended in six year earnings operating earnings same XXXX tobacco the the XXXX share and income other of Operations for fiscal by restructuring in and Consolidated on ended per September release to compared also by million addition by income quarter the the detailed the fiscal XXXX $XXX.X XX, October and billion respectively million, and $X.X today’s non-recurring volumes operating XXXX today’s Ingredients $XXX up XX, the million of in million in to well of months for year second $X.X as adjusted $XXX $XX.X release, segment. sales increased impairment quarter of other XX, certain acquired business in and September for

for increased the Tobacco Operations the prior in by respectively million, compared largely shipments year. million results due segment months current segment the to improved detail. carryover million XXXX substantial to fiscal by the XX, September six Operating and both same and crop ended $XX.X Tobacco to Turning $X.X of the periods income $XX.X million tobacco. to Operations $X.X and segment quarter to for

same year. compared in XX, impacted negatively crop and sales tobacco. to from segment quarter shipments While months to sales Unfavorable quarter US fiscal and ended XXXX ended volumes the six the to higher XX, months periods dollar XX, comparisons were also XXXX Carryover up September Operations’ September in were and Tobacco Operations due Brazil in tobacco prior results six segment the same XXXX. September lower The fiscal months last compared the Tobacco significantly foreign year. six quarter the currency strong periods in current and margin some included in ended

ended the six respectively Results inclusion for administrative Shank’s quarter XXXX. Ingredients million, compared XXXX. America, the September months primarily XX, income months North respectively compared shipments some segment as Mozambique mix quarter to million, XX, part up quarter September XXXX was the Tobacco compared the unfavorable the the for $X.X million for XXXX, September Africa, logistical in Operations to months from September business While October delays. $X.X $X.X LLC. tobacco Extracts, fiscal and the improved Malawi on sales to of sixth of year months XXXX, and purchase ingredients six XXXX, ended due half were down Asia ended fiscal the sales lower of ended ended general in Selling, current XX, million in XX, Operations six due fiscal the for months the segment and to some were XXXX six shipment were and and XXXX. timing, crop and to same carryover in lower In in XXXX the same was sizes, Operating segment ended XX, and and half first comparisons. $X.X fiscal quarter compared currency higher year the to XX, included for to well fiscal to compared margin prior smaller the September six in and of periods the in in September compared crop year quarter the in and periods quarter year XXXX as months Trading foreign period due volumes first in and same year expenses and to the XXXX, the the

For marketing, quarter Ingredients volumes the both Despite for the of and costs the the higher to for to periods segment to fiscal the Operations demand the ended both six months September and food materials, general year to expenses margins XX, first year, months and raw travel September prior addition those and Shank’s. segment in and first compared pet quarter Operations primarily of administrative compared continued half six categories. fiscal strong see hold XXXX in ended Ingredients the well, the human labor, XXXX, and segment of continued on Selling, the year in up fiscal XXXX. same XXXX increased for half in XX, in the

sustainability of Moving integrating remains forward, focused business. Universal our into aspects on all

of and to developing footprint, questions. for we our engaged future part zero in with plan net targets. for support have key a At guidance to time, carbon low develop this emissions global reducing your are to is to take our Our sustainability third-parties long-term prepare our available transition we updated efforts global strategy us meeting emissions’ on reducing

Our question please ahead Gurkin [Operator Thank question. your of Davenport. Ann you, Instructions] Candace. go comes Ann, first with from telephone

Good evening to everyone.

Hey.

evening, Ann. Good

Hi. results. nice on congratulations And

you. Thank

Thank you.

the What look return a I want operating on is start and would three-year question back for? number, which then start Can progression should number? What you’re income to we you are number. that it income your operating revenues, at think drivers key I you that just picture Presentation average take welcome. get with to $XXX to wanted around million? to I Investor picture three-year with big average XX, of outlined looking to – a just Slide big

Ann, again, call press supply. the supply But current we a we that are out margins in of you holding environment, really and are I nicely. certainly demand, release, shortage in as this know in believe up

the it’s know to about these positive So but we everything the can for at the moves reach all really year. volume moment get you numbers,

Okay.

back like you help if that looks if sizes three-year crop drive you to increase? average it So volume, number increase will tobacco that

based yeah, those. but sizes this where what crop able on Africa were the a down, to Well, in Yes. be achieve should we’re year seeing, bit we

Okay, still in great. the for And of the it then single-digits possible to terms year? high is operating margin, ingredient full hit

thing the it know, some know now was that’s of fairly we inventory told is, sitting as large especially Ann you out pointed inventory their high right brought And a operating we that with with silver, have in model. on previously, you they have you they costs. previous of inventory, shipping calls in that know fairly that Well, in amount we are you

you held up we better So those than margins have know had nicely, anticipated.

or whether really but know talking you’re yet, they numbers about, those that don’t not the for positive just year. exactly we So looks it hit

you and opportunities highlighted you utilization your to fill M&A And the opportunities. folks or Okay, is spaces? do you to that adding organically? will investing you’re ingredient in Or then of existing something will And what offerings? need development – salespeople in Is do capacity white that great. current and

you hires. We outside filled know some a positions by of those few

Yeah.

certainly intention forward. both through well the is, organically going we grow but So will acquisitions as that Ann, as

it’s made are well, clearly know working existing we’re platform in as synergies to they how pleased the developing, You be with we three expands. had have are acquisitions, it these really there extremely

the for both that we set ourselves. will we order you hiring we some know and So to are goals go achieve ways have just folks in

maybe you will have opportunities terms And platforms additional well in leverage as have of add make product development, or as some some you to tuck-in acquisitions you then – lines? the

certain have acquisitions all can things grow, to tuck-in can The just in add, not have this capacity, we certainly can we the we we have those. where a looking time do levels you we depth know pause were we at at we are on where yet. organically that that that we those point there put But with but certainly capabilities

So we’re types at going of forward. looking those things

Okay, additional your great. capacity And Do volumes? at current room plants. then you utilization processing and to sales have add

others and certainly our are that are them of some capacity those fill of certain might It are all we’re on platform, we We looking capacity what with on the looking efforts. close and for. across some are successful trying differs to we’re depends be It products products, and to XX%? in at where all

ready Okay, business? again, great. into for And prices, then are calendar to you ‘XX getting the going raise ingredients

all depends products talking which on That you’re about.

You that they at know looking that some probably are we are back down, coming in a have slightly apples. products we’re of the some level crops reached lower seeing

seem all of know it prices these other the remains those it other prices that those So some all seen. that of out things you to in be down. the some and is all But stuff depends energy origins, that coming of all depends come to

time this time. this and that point point in at that talking at contracting in We’re about we’re customers to

tobacco non-combustible Okay. offerings. And talking switching customers into moving to tobacco, then tobacco about

of movement focus on offerings? you customer do tobacco to or So Universal how non-combustible participate in the position

a of Iraq, services and non-combustible to shift generation vaping have products and these products have continue the the we Amerinics we also industries. for combustible services Ann, we do And that the that developing operations in we today, the have portfolio for and new on we Yeah, supply participate where products.

areas the material positioned we for services and today for generation are combustible are products. that the new raw and non-combustible those with So

rising Okay. XX Or the are think world then interest interest your or months for what XX fixed? And how over next about I is of expense you? in fixed do of of lines percentage your credit to debt this rates,

some swapped K. that actually which the We is of in

work. are that debt significantly of because than portion like that number large that to keep like, better the the levels for So way K our – we what course of we then you we can higher a fairly but it up look variable, works in the

this expense we So it in are carry we quarter higher? or something move the interest should forward see that

that Keep balances in you fairly the know high. mind are

considerable expect latter decreases balances of this certainly part year. we those So the in fiscal

of call, about that touched little last rate using bit quarter. you I saw we which a on a expense expecting. ahead was SG&A what more Okay. was of the was I run

So should given this latest rate a we run currency I of saw think of numbers? more it what of and those quarter

again, has Well, an The last FX, saw negative to for the of and that. types versus certainly negative comparison. were we currency, know as some this in Shank’s driver inflationary Strong certainly increases was things Yeah. year well travel big those there sure. the the on currency increases variance for as you the certainly regard quarter with dollar impact

Okay.

the then nice y’all share stock? see to ever but And Board buy repurchase program, going are approved Okay. the back to

it. When we have excess cash, Ann, we will certainly be thinking about

Okay. to And number. like worldwide uncommitted Candace, the inventory then, that. I’d get lease

as Yes, the million which kilos, down I from But previously. million – clear X that’s be of just it’s XX $XX to is X/XX/XX, think same reported you as know X/XX/XX.

quarter. same that as new the gave before. we So be this you in about Nothing should

for Okay, taking great and Thank congrats you all questions. again. these

Sure, thanks.

Ann. Thanks,

Ann. Thanks,

Thank seems you no for [Operator your It question, current questions. Instructions]. Ann. we have

the turn you. final any like Thank call team back to I’d Formacek Candace So for and remarks. the to

all you to be quarter. next talking Have evening. you again joining a thank us and Louisa you, good for We’ll Thank today.

night. Good

for call. today’s all joining you Thank

have now a and day. may You good disconnect