Pyxus International (PYYX) 6 Jun 232023 Q4 Earnings call transcript

Hello, and welcome to the Pyxus International Inc. Fiscal Year 2023 First Quarter Earnings Call. [Operator Instructions] I will now turn the conference over to Tomas Grigera. Please go ahead.

Thank you. are our our CFO. morning and and this Landsberg, Flavia me Pieter President Sikkel, CEO; With

Before I cover would begin like we discussing to a our few financial results, points.

from that during well financial may that this an reproduction other to and should not and appendix referred this financial call, International, and as those are as the uncertainties accurate to the forward-looking content. accounting any aware of actual described States forward-looking that or these fact. cause measurements, Any well in of of of hear and and or be historical amortization, as authorized not the events regarding not not Business U.S. that to statements detail of that may belief, as EBITDA expectation in may and statements this You a differ interest, replay, risks non-GAAP commonly and reproduction before be these presentation. principles call risks call uncertainties provided These as adjusted of any its uncertainties statements of been an our statements express prohibited. including are in discussion and in is involve a of most the non-GAAP forward-looking reflection today intention included under is measures including number unauthorized alternative not materially reconciliation course statements. These results are are any or a and generally EBIT are these risks our assumptions results Investors conference management's including United We the may call to be SEC, undertake operations conference with made our on measures. A with has circumstances replay expectations by Form do accepted changes depreciation XX-K. on in considered in which reflect to GAAP be not transferred should change other based. Included filings measures this taxes, earnings table, any other the or of our conference strictly than update in recent to call along as rebroadcast, disclosures

provide provide During our our efforts. then surrounding with and an Pieter financial overview Pieter call ESG share the close Flavia results. call into guidance. insights results details will our XXXX the today, operating will of will

Now I'll hand call the over Pieter. to

you being Thank for all today. here

are fourth quarter year-end and XXXX. We performance results Pyxus more the call in-depth than our operations. about about sharing Today's both will to looking forward calls, past and for our detail sharing provide information global our and

year achieved full XXXX, we strong had teams as and quarter fiscal of fourth our the results anticipated. For

we leverage million year, highly working capital guidance and full inflationary costs. the generated EBITDA, $XXX.X and levels For sufficient exceeded ratios improved adjusted positive liquidity our cash our flow recent managed lease our ensure aggressively most despite and to in almost

were impressive challenges results Our overcame. even we significant considering the more

'XX short year. global line turned was third by countries lingering strong sourcing XX.X% increased they year increased of tobacco La The rates to farmers operations, continue sustainably challenges, interest a than and markets as weather When and that increasing consecutive full logistics from XXX,XXX key to our fourth network in drove by combined fiscal XX% patterns challenging and as and grown our a in $X.X complicate those Nina by costs the in shipments with more in quarter markets. geopolitical product year strong for production in crop results. for supplies grew revenues We limited XX-plus of of reduced customers' some compliantly generated to year year. Despite We full issues, we very top billion, tobacco tobacco offset much meet our demand margin.

production yields would estimates, and XXXX products particularly be year, of of reflects expected at would on-the-ground high that a demand sizable At where a America of meaning significantly the were which team short inventory amount year-end, notice crop our South advance we environment. lows, tobacco. modeling levels supply, short agronomy in uncommitted and farmer's Africa, Our short us saw gave be all-time

momentum this we forward, year fiscal the continue year to expect XXXX. through created Looking

Our recovery pricing. current tobacco we on XXXX to projections in and strength and guidance. financial and insights partial management our performance, operating our of indicate improved year the demand share call, a this supply compared continued and last Based will our during

XXX,XXX kilo our fiscal year Total by year shipments XX% increased X.X% compared XX.X% results tons. results. to to about the $XXX.X XXXX and per Turning by grew for million. EBITDA by to to Margins adjusted

has management on working positive cash consecutive achieving capital quarters. two last free in basis Our for focus proven the successful, flow resulting on LTM an

February Regarding our restricted covenants, adds successful and exchange to explain resulted transaction momentarily, from million the in will of balance company's This the relief secured sheet, exchange February in of maturities XXXX. provides financial debt. several near-term to greater detail the and completed December $XXX us extend which flexibility in Flavia our

XXX% in stronger transaction, term of which of the of of execute exchange, result long-term a our XX% notes, are a and secured we to secured tranches and the As this accepted position loan our X strategy.

over to the take remind Before role this to Pyxus' Flavia, listening everyone I I'd industry. turn opportunity in like tobacco the of to call

for X high-quality, responsible We industry tobacco retail global held today, largest manufacturers the leader. But legacy. merchants much with than ]. we the have X compliant of a are and XXX-year supplying [ And much are product in more sustainable tobacco we publicly

small than helps to agricultural on conducting land, mitigate provide while of We farm million meet have growing agricultural while to annually. demand. customer us acres less global enabling holders considered X footprint our We nearly contracted visits of risk many X farmers, and that training are us support a diverse whom

our sell also of we improve an most in for only communities countries lives communities, product farmers and ESG is business our is our the their undertake operate, Pyxus complying while collect that discerning is of manufacturers data strategy leader. tens as working pride Pyxus day-to-day well the not During support regulatory regional in which contracted initiatives true of with improved ability farmers inform risks our we Pyxus XX business and business small decision both simply, We for operate. ESG the we a where ESG farmer between the the in these world's which points, millions as also contracted customers, more worldwide. Described and while diligently we differentiator evolving take and visits, global create rapidly the have efficiencies livelihoods ingrained environment companies The mitigate our base. but approximately and landscape. of largest, and operations. also our is operational to connection our and our tobacco improving tobacco into the to with

deliver source to savings work actions, shelled are our overall exported. Since many increase share help prior identified contract. I'd their innovative ESG alternative example crop achieve domestically our Once shelling Pyxus a and ESG we by being they processing brief farmers teams whom to to businesses, Malawi, adjacent groundnuts to factory like produce sustainable as bring as position efforts tobacco to process for for them The boilers facility. life. complementary value cost them generates to groundnut, trusted the farmers have and the partner which the tobacco own purpose partner us or customers purchased, tobacco, their our costly disposal, livelihood. a and sold to our can the groundnut to ESG in income with we local our programs. generated potential In with Our the with an fund to and waste, this our to sustainable customers help a cleaned and to contract helping reverting into shell, be and fuel a targets

plan operation to power groundnut contributed During fiscal year XXXX XXXX. used that fuel to XXXX, from goal which XXX% calendar this shell XX% our XX% zero We target. from reaching coal fuel season. savings the convert was with cost boilers approximately to produced an additional of generated for Malawi in XX% during net of year a of to waste, groundnut the and our shell our boiler

the I'll results. Now to turn to give Flavia? Flavia over on details call our

Pieter, everyone. morning, and good Thanks,

of achieving of and are EBITDA and core our exceptional volume. significantly were million, and an work working our guidance by proud our team's $XXX.X the capital adjusted outstanding EBITDA recent exceed of in and aggressively an sales adjusted managing in this higher operational We our against quarter success most financial XXXX, sales year. We liquidity. At executing very growth delivering an strategy

margin by our crop, market of at kilo There the our to the a During Pyxus in increased year, this This by billion. tobacco high or per a also means At as Pieter efficiently per short return. Pyxus year Growing a almost shipments customers. Africa where reach immediately we pass of achievement. million through cost we about XX.X% pricing in footprint that fit source [ is able meet are same those very $XXX margins, highly mix, in strong product of marketing the product and in coverage increase higher our noteworthy high-demand kilo margins mentioned. It's to are $X.X green our this total to solid improved the the by to purchases time, XX%. demand return our several geographic customer grew of enable contribution we returns increased diverse integration crop optimizing and Asia, spot us from or kilos All million driven have globally prices match in key revenues namely customer review profitable drivers roughly and year business, to by our at year-over-year by that full Asia. X.X to in rates demand presence short from were ]. value-added important increase strategies global and or tobacco pace X.X% we footprint

which EBITDA we to coverage profile resisting compared X.X% X.X% The the where capital our our a time, company's focused XXXX our of reduced improved working year significant performance improved adjusted in X.Xx interest strong profile, our efficient we to strengthening ratio. and XXXX, EBITDA balance the coverage a ratio compared debt net of management and leverage to our X.Xx our ratio were and We improving company's the and EBITDA in also driven team's improvement net result of leverage in XXXX. At adjusted third to have in ratio same sheet to improvement XXXX. on consecutive interest the credit liquidity. debt is by company's and the to adjusted

Our XXXX, by flat. debt by success from $XX.X total expense tobacco in while prices almost recent net significant maintaining more net XXXX reducing of interest and than higher at $X.X million million, purchase debt

SG&A. to now Turning

transaction, with expenses increases to items. compared significant impact have incurred despite the costs, totaled costs our X.X% accrued million. transaction transaction. Operating the lower a include during year, million taxes exchange totaled million This the fees we important totals increase XXXX I or debt expense care to In this taxes during higher costs XXXX the health XXXX, professional related address debt some was $XX.X of notable $XX.X payment cash in about income which totaling and paid prior $XX.X exchange the year-over-year primarily million of results SG&A with about Tax $XX.X compensation year of operating $XX.X that total and rising million revenue travel X.X% million taxes fiscal compared growth million $XX.X related to $XX.X and inflation. to to cash includes in offset the will conjunction of X.X%. is to year. It For debt or by XXXX XXXX. year XXXX, Pyxus benefit only due in

and mentioned, As at million despite growth only higher expenses increase interest interest rates. $X.X in net borrowing increased our

credit to capital like capital sheet in and capital testament flow in fund strength cash profile. managing credit would challenging company's improve and manage focus our efficiently rate levels lower GAAP year working liquidity discuss balance how is and and achieved management an leveraging levels that an effectively in the in our fiscal our even It higher year, Bio-Ag. this Now team increasing regional borrowing by to our lines a this 'XX markets emphasize help more purchasing finance I to costs, in threat. We it giving our flexible aggressively working debt interest

inventory. crop the We capital our shipments will advancing first green facility. Normally, by fund we by receivables securitization position half using used cash accelerating leaf and be tobacco planting up most year improved intensively build of also and to our customer the working payments during

half sell stands programs. The would convert which issue normal years and significantly customers. cash the cycle geopolitical During year, we receivables, This builds into of products the growing second cash business using season. events to to past the at the during subsequent quickly securitization X

facilities our by securitization program operating length up working turnover the speeding of have growth. with management capital Our receivables cycles and accelerated reduced

conversion by in of $XX.X days was million the days X million contributor our cycle million business cost achieve cash flow cash past days. cash over can years, XXXX XXXX XXX we're in cash flow should conversion grow our in in a $XX.X grow shortened This And continue we debt. allocate of XXXX. When free main ultimately able reach further and resulting cash flow which improving free free to cash normal So to paying negative flow, we XXXX, of by predictable from cash shorten in $XX.X of XXX to the we in free a in of a to down capital which compared to to cycle, cycle expense XXXX. XXX conversion our XXXX,

During $XX.X million, of amount. debt our total a down cash which our primarily cash by partial this reduced by ABL and quarter, our we facility, similar equivalents the reduced pay

improved our to to for of this. has effect want now debt adds financial While in well growth leave decent evidenced provided February and I the equity on EBITDA that free have our believe the strategy the of story, in to our our this on a adjusted by debt XXXX. With we in debt financial debt industry and we and profound The the capital and nil and fiscal impact as management as the performance. XXXX, operations position with in our flexibility mind, results debate fund exchange Take it maturities trading flow are closing, and are you the XXXX. In working transaction below company's had cash long-term to result, and extend generating our almost guidance in our new a profile our December future. substantial 'XX near-term year liquidity will

and the to back our performance guidance deliver to XXXX. continue for the to remedy leadership call improved across Pieter turn Our is will our situation business. I year fiscal share energized that to

Flavia. you, Thank

results $XXX We between we million. With we We expect $XXX sales levels achieve at to Southern a operator, fiscal XXXX. With between this and and lines questions. and delivered rapidly the be be ending to what year are low have believe build open fiscal crop, larger in for EBITDA needed XXXX entered for with during the to relatively adjusted XXXX is momentum to time, the be and purchasing target. fiscal mind, expect our XXXX Hemisphere to billion $X.X and our point billion, XX, in XXXX, inventory of XXXX March million progressing that, phone in this on $X.X please do which

[Operator Investors. Your comes Instructions] question Northeast line the of Bruce Monrad first from with

A couple questions. of

the loaded, you characterize Let's see, the guidance Or XQ? loaded? for visibility how is on back-end XXXX, front-end the Or potential improvement, would is that that?

in purchasing is than Brazil I it was crops, and actually more larger think, year particularly Africa. in Bruce, rapidly last proceeding

facilities So in are generally into ships. point those it's a globe. packing see around matter this of customers converting that to the products or at we see pack products ship in our time, our And willing

of acceleration So initial go actually the are we year. some as the we through quarters anticipating

early So relatively we should be able in the that to year. see

previous have that's cadence strategy And expediting our aligned and the with than earlier year. of

So we base. decreased the operating cycle

of sort stare going that. sort the of need gone ultimately And your get carrying should get for your going capital if to this, is in I like that Great. guess part goes a a of Okay. are at to that paid my sort as to of of through interest EBITDA-based, think cost if I for One And of question up, look bank of the up, kind stuff you have rates something million up, way one at has million customers another $XXX of inventories is you EBITDA. $XXX for you when bank. paid

margin services inventory way with sure interest answer but when pricing question determines you making million there is my get increases put on that up? you a on I rates going what guess quick holding maybe How go is your write do for providing, of $XXX book could to ability forth customers. me you're discussions? those you any So your could how worth including are give the a you paid about it,

Yes, can. I

part X okay? to cost. faster. So we'll the interest So yes, rates first that, is calculate parts ship there's our thing that internally actually the of is, one But includes main price, of here

fast the as and is for for customer. less cost that's customer as So the So the and we -- us ship tobacco, gets

Okay.

shape? And in And freight a thank anymore Okay. then being that's good okay, that's you. problem -- not is

back to Yes, markets, to and vessels of containers most generally, in similar levels. pre-COVID availability the we're

occasional the markets, nothing that's issue get in we certain but So abnormal.

operating question. include? question, and Okay. all sales Last -- And do typically my or those revenues last what

the That nontobacco includes businesses. basically

you've some you've there, in agri So got got value-added e-liquids, ...

of question Reddy comes line Your from with the Chris next Cowen. TD

Pieter, strong Flavia, Thomas. That's really a year-end. quarter and

Just had for you tobacco We quick is question on X. down. a Slide obviously, supply

to would expect Can that pricing. the speak volume up, then able pricing So nicely you year? offset what and is regional increases you that for what's to you're decreases your driving next and and with

this joining slide, the year's you Yes, reflects call. volume. for Yes, this on Chris, thank last

what So Africa, America and supply Malawi, in in saw been out those particular. the of crop. And we crops, short would obviously, XXXX have in particularly South in

seeing to increase Malawi size So about level around Malawi in was Burley ] XX,XXX tonne. about in XX,XXX. [ Burley this What that crop from around XX% the XXX,XXX down tonne to crop returned year we're a Brazil. We're seeing the

in Zimbabwe, little Tanzania. Some and increases bit in a

So that's global Obviously, crop particularly customers' fulfill inventory. and we a do we to have regions demand. these also, continue we're normal low order strong crops. And need us We'll global We year. having the footprint that did of do last as other in relatively diverse to very reflecting We continue this utilized out focused a the this that to very benefit with certain year. And Asia really, increased well. for more of participation our a much footprint, size year. be year enter in

in there just the Is far specific it overlay was of as travel and like? X.X%. of an also to the demand? is as Asia then And that Or Great. cited opening economies up the -- increased you

footprint part all that Asia the Indonesia, includes on focused We -- was demand. we were it. Thailand, offset to the reason of India, talked of think in sourcing. Asia don't our we about Asian able And I China,

Your question comes with next line the from Shaked Oren of BTIG.

more? touch to maybe do opportunity you working drive see you can on improvement much Flavia, a little bit more capital How there?

So we and 'XX Day, it cycle XXX shipments. and dramatically here have -- of mentioned, cadence we still piece opportunities XXX. here and 'XX XXX down the in to as our went from major We is

relate is possibility interest that And there shipping cost. to our further faster. decrease exactly And even lower strategy. also by this So that's a to

business more be and interest able have debt. to costs, flow increase off our in grow continue that We be and pay cash more to the efficient to

it. Got

And Okay. then well? credit down continue the to pricing of do seasonal as on see drive you lines an opportunity to

That's credit better, correct. lower. this I decrease cost we'll continue next with past the see on mean, already the saw in getting getting significant that profile leverage year. year, We and some to

doing nice We we're also competition that to always a how we us. profile. -- credit with in actually just And to banks have better our it's more portfolio this, add lend create

next line the Your von Meister Group. Joe comes Intermarket from of question with

I the guys. hosting have questions. quick for Thanks call

expect you The the cash carry do one in is current what issues fiscal how of do supply in much you levels. are chain first a your the assuming SOFR as inventory LIBOR cost experienced And question XXXX, second interest be is, still result XXXX rates to and at 'XX? -- hold 'XX

Joe, we a this don't being can But year. what said, give you on are is guidance massive as Okay. tell can the you that interest cost. we I see

on and of leads, able to much a see cost was big height average flat. we current cost. almost pretty can find We year, actually cost and was higher interest of went green flat you a that lines our very As with were through interest this borrowing the

opinion with we also creating by into need play that and So faster. competition banks work on that would to by of other

-- of And later have there equipments. have it the we [indiscernible] at what some inventory, still opportunity into an the shipping may And be But to have we with accelerate an from regards the -- would to point it may that would at opportunity time, there's end whether we're moment, -- are than [indiscernible] done we next in this this not year. year be the at sure.

comes Credit Independent question Manoukian the line from next Stan with your And of Research. Instructions] [Operator

extent faster their your I the What just to this it for something are you mostly high so them customers depleted wait replenishing the that willingness fact been inventories in think that to an have of Is prices? these in at kind do inventories. with or question. they their guys inventories Pieter, point? just more advance to do to replenish their have the one industry the anticipating can't quick on inflation of related it's is going that piling quicker,

got of environment their that highlighted fulfill you've we're of you the Stan, factors all weren't requirements high customers operating think, combination those to there, inventory have aware that at last able of the certain I need is that moment. in certainly everyone and year. Obviously, that replenish purchasing a you interest to we

logistics the So the so reduce weather accelerating last global you and shipments And when potentially or look years, chain on. over disruptions whether supply the cost. COVID does at interest few it's or

I on you them think ensure manufacture within supply that the factories and there can inventory continuity you is focus various have shelves. and on to ensuring the ensuring to customers' of consumer on a products renewed hand put still continue

acceleration So customers. seeing last all solid that of discussions We're think very that, year. I have we with

continue matter moving product, And We the us manufacture it's factories around in be shipment that getting our for this to see out. tobacco and able operate it a really, clock it to acquiring the the to order ready then having of year.

focused accelerate. So continuing we're on to certainly

is with extent be point, will the what manage not the indefinite? will their quickly where do inventory on they this to their how replenish of they At feel inventory situation And stuck is kind process? visibility comfortable. your the And replenish about they to the how level you And and cycle some uncertainties will future. because then you

see stuck. don't us I being as

as as certain we under requirements regulatory I in increasingly producing efficiently inventory produce required and ship of are traceable sustainable, the the crop the think demand are future get that positions, we pack understand customer to markets. correct possible. And a for those for crops and stringent that we need tobacco

they a key are if we those of markets. particularly So to into ship customers, various component want tobaccos

the share potentially footprint have. grow continuing supply significant customers see do market and those with that for So our opportunities actually we we to

turn the Sikkel. to Pieter session. call I the over will concludes question-and-answer This

Thank you, operator.

and moment we the of team, contracted achieve our to to a I'd Pyxus quarter teams, Board our better take We like together us joining as world. thank we helping work and reaching grow in sign global and And to the trust thank on for your us to you, today. Before year-end. the for call impressive appreciate forward our world Directors new off, look heights this a management everyone, farmers around

concludes This call. conference today's

may lines. You disconnect your now