Universal (UVV) 7 Feb 242024 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to the Universal Corporation's Third Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, February 7, 2024. I would now like to turn the conference over to Jennifer Rowe, Assistant Treasurer at Universal Corporation. Please go ahead.

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

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

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

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

quarter press and XX% performance XXXX and months increase for which fiscal Operating quarter period fiscal refer respectively, fiscal year same measures, most and the delivered of up in the to the compared to year net operating third were strong to XXXX. financial reconciliations GAAP XX%, quarter our operational of income including respectively, the and measures, these again on the year and our the for earnings current relative helped X Corporation details by income please fiscal last third income of to XX%, income XX% release. Universal XXXX, year. For comparable net

Our well, crops tobacco strong Africa, driven quarter XX, product customers. very our from and Improved favorable X in line mix demand the to same to the last larger results with and shipments our our December and months tobacco business by fiscal margins, expectations, in continued perform year. a XXXX, compared ended in periods strong benefited

made business. encouraged to future team investments we progress and starting us by have out gain We momentum sales the growth. research development teams making and The solid continue to the to our are for have is positioned expand the corporate build Ingredients be to and

months quarter $X.XX $XX.X months financial $XX.X ended diluted and ended or and for was the for quarter Some share December highlights million the XXXX. the for XXXX. was per December X or income million $X.XX XX, Net X share XX, per diluted

earnings and higher million compensation currency the costs compensation ended unfavorable XXXX, to costs period same quarter fiscal XX, and largely up year. $XX.X the share per the diluted were nonrecurring Excluding the in by by the for And administrative in increased $X.X million press expenses income net by by and million. Selling, up release, certain XX, detailed $X.XX income million net quarter operating for million XX, $XX $XX.X months. per X the $X.XX for December to months higher on general income income increased and increased the million fiscal XXXX, by share respectively, quarter and of December $XX.X of XXXX, X million period for same ended or months comparisons, on share, diluted compared per earnings X in today's foreign items increased $XXX.X the compared year. Operating $XX.X last and million $XX.X increased December last ended

quarter challenges ended XX, impacted the the higher segment fiscal segment period expenses partially sales by December segment prior lower In Operations' year for products for margin investments inventory December $XX.X $XX.X segment for prior prices year, year. Results Tobacco Ingredients operating segment sale the the of were lower for South the from resulting operating the and quarter a $XXX.X to million XXXX. Operating XX, for X offset X results compared line XX, crop in quarter up XX, million to growth. on quarter ended mix, in $X.X XXXX. increased in Operating effects the segments. fiscal and same income we're for larger XX, market position income operating compared in current the our Ingredients by as months was was African million by same Operations largely ended X $X XX, for the million and the to XXXX, Operations X a core for products highlights December quarter for the product offset months compared by the Some December shipments million, year million months tobacco XXXX, fiscal for ended that December result the from recalibrations. negatively year December the same lower the XXXX, and carryover for income ended were were Operating making crops X to period and quarter XXXX. of more income the new to ended higher Operations was the America to of quarter our from volume. months the segment customer was months for in first In respectively, income the for the and incremental of favorable future and lower significantly XXXX mainly quarter the income as fiscal revenue and XXXX, first Tobacco $XX.X as of the with and

a fiscal continues level December types As at all And tobacco be was low uncommitted global XXXX, X%. leaf year our tobacco we inventory enter XX, of tight. supply as leaf our quarter of last to of for of XXXX,

are year leaf El to business, part with capabilities we due expansion in conditions, While will our Pennsylvania. tobacco Nina we remain tobacco in Lancaster, we us footprint XXXX, expect making our our satisfy diverse weather of at processing the progress global strength our in we an pleased customers' our help ingredients supply on of facility believe leaf fiscal Ingredients tight to the needs. With global are

expect as those resources positively to year the We and XXXX. year be in as quarter of fully fiscal earnings operational fiscal to XXXX our third contributing soon

Universal's us will our greenhouse XXXX meet XXXX in reduce XX% that emissions project agenda. announced been a in achievement of progress sustainability participation sustainability we to gas our global important XXXX. to include year made the recently These operational advance December Another solar target our publication has and fiscal report help by we believe the by

promote advances We our sustainability pleased seek are sustainability in with we our opportunities business. to continue further to and

growth our opportunities business business time relationships leaf in with We our continues serve fiscal Demand at the position same our and tobacco industry-leading on our businesses investing customer by in performance primary the to our can practices, of capitalizing regions We thus and are XXXX. remains believe in our market in for well. us tobacco year strong in our offer tobacco proud diverse base position Ingredients opportunities us for strategy in our maximizing and while exporting the far the long-standing future. sustainability and of robust our

the for We we to excited are successful to platform, path believe for we continue thoughtful progress are time, business. future. At on we questions. measured about We take on our the that right this and are make your our and available a opportunities Ingredients

[Operator Instructions] And your of the first from Davenport. line from comes question Ann Gurkin

you your may, progress a And Congratulations even of them congratulations on numbers. A ingredients versus have wanted I for all goals done. well achieving -- your I kudos those time. I big segment. the also to and sustainability ahead of a on if with questions. number of achieving start, That is good goals. to maybe lot

So operating profit million. $X.X of

products of profit Ingredient cost sales You the or for for products, that just you -- additional at those but component what's break products growth. sales some operating investing also the it segment? also kind cost talked lower in of costs an without about investment and out for new highlights, underlying core Can additional number future margin existing of

Ann, as we out know, all you pieces. break individual don't

fairly However, what group structure. you that complete seeing and can tell you're a now R&D cost we commercial is

of positive and expect said, as will have benefits we we it take XXXX, seen only glimmer earnings Jennifer from investments the see these. we So of till these until a

the So as we area as making group. in as some R&D well told in the commercial you investments significant previously, we're

out, time won't the to of that So facility those this earnings. On of pointed product. be Lancaster for investments, course, year. it take will we little for a at bit show in those really until actually Jennifer in as that And point time, able that, later produce online come of will to top

of bit get will So to time for again, little there. us it take a

of R&D out especially have you that the hired There that value, on. products, pointed early products up. these be are some of we the So benefits which those which but we put we some seeing are quarters margin more will there, out a had and sticky, which weakness have new couple where we still folks commercial some in that add there we core weak from is

to positive. that the all But a for all truly So little these going of looks benefit see investments. it's to of time bit us take

Okay.

maybe that a the reflecting So fair to seasonal, kind in QX Is sequential it's from of these QX partially it? investments. about to slowdown proportionally step-up but think

fair. is that Yes,

investment XXXX. of level that And fiscal should QX continue

because forward kind the the expected think process low margin of margin of change strengthen the -- So of I progression? investments we'll thought of to into then think that and about mix level how the fiscal 'XX. continue to business? through should thought range that going I 'XX process? Is about in single-digit do I Or in it

R&D as pointed commercial out. I in much again, platform the is group built out, pretty Well, group

the costs for person going while. end in day, to and in be of a person a the at the are might are around now you costs those those So have or there, and but baked they're

the time. happen and capacity the how are to that sell. the saying out bit the it's for a capacity order So new selling group, factory we it, is little R&D to on going of take At the you products -- sell can question that online, why not moment, becomes R&D Yes, with limited. we're to that's have with you bit. products. the to need these much help in still we of a But going more That's core get little there going

weak a very took -- there. Again, weak inventory write-downs little quarter, than anticipated. we material inventory We're sitting first bit coming were down a prices faster where raw some because had of we on

prices So are material in raw -- but coming total, down.

that from So similar when pass tobacco on down, come to just you on. tobacco, revenue a prices green

that products where up in all better be R&D, the the come developing The margin holding we So see the that we end we're really and Again, going we're with with future. the percentages the are moment, nicely this of new to that's at only stickiness of we'll things up new and those March. making. investment think because

this that what be think target should I think business. that I more in a should single-digit fiscal target high margin 'XX? Ingredient So segment about for hitting operating

I'm we wouldn't in otherwise, not because, on but give need number, investments. we to we make investments, these see are you an those exact the sizable again, good and should future see These to -- returns improvement that's going investments.

for in of And longer is investments a Ingredients maybe that? anything bit. line bit into time pace that is a investments, CapEx the little for to down brought Lancaster? there of read investing Or else reflection Is in it You a little business? taking the the

do comes a to a online, the facility No, some of things. runs delay of and trial some it getting we to have other do the bit and approvals we have was when

a longer make can it. we we bit We're can. than for is fast as can't working And as product. So anticipated. little sell it, screaming it's we until taking Everybody

put in that conscious in product But that to fully want everything is facility. we to being as and can. of aware being to everybody as right have make certainly, it be So able we quickly online we the order

product that And the the I with products -- customers. sales new think Are in increase any cross-sell some try force, opportunity sales? your the ability you of of among to to that was -- achieving

are. Yes. we Yes,

companies using people As a the different out they again, we things beverage, of that are with you the help dry different group, but with bit is a that little slightly to a in is, of cross again, a go on from if customers previously, unique. product margin value up it you and it's we R&D bit bought to of those the pointed product little -- there we adds have bite, because, again, a can that products,

Great.

How tightened should think do or South fiscal over I in the Great. more, the tobacco? Okay. sales volumes that about 'XX or top in America? particularly it 'XX, volumes, crop the for that Switching has to fiscal tobacco. I global line looks given think outlook How for industry pricing those like about

we we about effect a of stated, continue America there We of South and reduction in tobacco weeks, demand completed. produce. country. of And plant. varieties rain. XX% for seeing there the all size Africa, Brazil. some crop is As that Nino that And a seeing in is we course, strong we're tobacco is El the we estimate going And right But right a hopefully, dry had some spell very are transplanting rains next coming of now, Tobacco the in resilient we there. see to as and

the we also also quarter still fiscal last see so of but just year in And XXXX, now, shipments not 'XX. the

$X sheet, look we over at tobacco have balance you our of If billion inventory.

ship some substantially of we that estimating have. we tobacco that projecting So and out are to

of X%, there the of And year. next of part course, tobacco, low. we As into part March. that which might it's the have is fall fiscal stated, inventory of that time as And cutting uncommitted we tobacco

then or for And expect number? uncommitted you still guess Okay. Maybe I'm the I leaf worldwide, a tobacco, do sorry, regarding Jennifer. -- looking

Yes, kilos it was XX the at of December. end million

And read customers, out sheet of Is the new direction presentation prior Okay. under into guess, other presentation. customers? I liquid nicotine, to and offering opportunities took Is in in about terms service did you that then anything talked a that? the services businesses, tobacco, talk investor about but your, to change investor under there in presentation, tobacco you lab services Great.

targets that that discontinued that on was we have. especially In we we that continue specifically the we in according other the the labs, about areas, underperforming But Yes. to case, service seeing sheet opportunities, providing, we products were the that have.

We And that ongoing as we not speak yes, see but the just services have as projects here. we side continue in well. opportunity,

products Operations, a the We stated quarters servicing also also the step master taking further guard mobilizing on and and our the cigar into some sorting in industry for before we that wrapper Tobacco of industry.

to we continue So see good too. we opportunities there see --

gaining terms tobacco you of sales? are And market leaf share in

According to database, yes, share. we our Yes. gaining are market

a if the think also cash? which freed Great. needs in and that page the there's talking fiscal potential increase then And 'XX. Congrats. on do use for how 'XX? fiscal And presentation, down, what in think number I I capital is about up And 'XX investor this in that it working would, about that comes

those crops, crops, depends the as size you of know, on crops. all all Ann, Well, the of it the pricing currency of

capital side So frees of and shareholder coming to we add funds certainly use where we the investments bit on can going you're those well When side right, that a down working and hopefully, forward. value. see little value tobacco as the up, that as create ingredient plenty certainly have we both

'XX? me fiscal then can And with expenses help all you for at Okay. SG&A

foreign higher was As have that again, currency comparisons out slightly just low. year, do I last But pointed to was this quite year we I again, one elevated. think compared to now, -- say was slightly we XX last thought. than

thing that propped that comp performance up some a now have We little bit.

certainly R&D be costs those years we that are and higher than we forward, going incurring. commercial just because again, prior of So that will

for Ingredients platform? Okay. And is the your M&A appetite what on

We looking. will certainly be

moment to at The our continue We up. pipeline but look. leverage is active, is the

until we down more, remain sidelines unless So bit comes spectacular little that on along. we a bring will something the

And entail? management his -- and And then terms sorry, Universal change I've what for of tell me track. what is of structure, Treasurer you I'm of then role Okay. in position is a kind lost who you President's just now? announced can

is he X, very on goes Our Wush. joined January has new joined and we're by treasurer Ma. happy Shen name Wu that He He us us.

to transitioning of role. now a is And more management

remarks. Rowe at it back no I closing this like are time. would turn further to questions Jennifer to there And

Thank joining you our us on all call. today for

And and presenters. gentlemen, concludes call. this conference you Thank you, for participating. today's ladies Thank

now may You disconnect.