Pyxus International (PYYX) 10 Aug 232024 Q1 Earnings call transcript

Good morning, and welcome to the Pyxus International, Inc. Fiscal Year 2024 First Quarter Earnings Call. Please note that this call is being recorded. [Operator Instruction]

I would now like to turn today's call over to Tomas Grigera, Treasurer.

begin. may You

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

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

the You may a expectation are intention or of that call well those historical that belief, as course as not hear express this during statements fact.

risks results in risks Form and risks forward-looking may cause that statements forward-looking are uncertainties those in described and These are with most and from events uncertainties involve SEC to and detail, and statements. other recent materially a our including These our number of with the differ actual XX-K. along filings uncertainties

changes any statements any to do or this circumstances in change undertake in We assumptions any which made based. management's forward-looking are not these statements or expectations conference update on on reflect call to

reference today, principles. calculated generally accordance call with we our During financial will not are measures in accounting that accepted certain

including taxes, GAAP of in results EBITDA States under earnings flow not United measures and not These adjusted as should non-GAAP accepted alternative considered finincial are an generally before be free or and amortization, financial depreciation commonly of U.S. to EBITDA interest, the measurements cash as referred to principles and operations measurements.

in authorized than strictly reproduction Pyxus replay by non-GAAP including press included is and in GAAP these this earnings as table, today. company's disclosures A a earlier the other non-GAAP reconciliation the financial been measures replay, prohibited. the and financial comparable regarding presentation has or release to issued the measures is not the of measures to these and International other of appendix transcript Any conference call, rebroadcast, other provided

unauthorized reproduction be conference aware be reflection of may of not this its should content. Investors that an accurate call any

provide reference. Pyxus' will of provide share into and insights will today, operating overview Flavio of financial our During the results. ESG our results Pieter then an call details

to call Pieter. the hand over I'll Now

solid today. call increase driving off XX% EBITDA for start year-over-year. first adjusted joining demand, a Good strong increased Thank Fiscal during XXX% our with increase and to and is quarter, year morning. a in you margins prices the XXXX revenue tobacco in a higher

sales increased tobacco from prices the increased year. in shipped of A the customers. customer and quarter acceleration significant customer high into tobacco driven demand, shipments to Our boosted later during quarter mix favorable by on margins were X fiscal the customer

tobacco the the During the quarters first our we from third growing second purchase during farmers fiscal X the hemisphere, hemisphere. Northern typically shipped in year. and we of Also the quarter into the we in in year, later customers of tobacco typically which the southern majority farmers to from purchase quarter,

We customer purchasing level year. billion. bring the ahead and of At we and geographic the the markets to acquire quarter the for end, peak multiple to most demand our well estimate during to America, in requirements Africa of buying that year inventory meet quarter. to significantly reach our footprint purchases our accelerated from fiscal We using first of our current inventory tobacco X higher we XXXX South USD typical completed supply crop our

all-time lows inventories during uncommitted near quarter. Pyxus' remain the

year. result, the a during compared current purchase fiscal will XXXX the of use the tobacco to As a higher customer percentage fiscal prior year shipments

stronger cycle During previous the sales the noteworthy the quarter, we which of and the working acceleration continued higher of results enabled and to capital in fueled than focus aggressive operating management on our our year.

to more discuss further and the purchase Flavia Pyxus, provided in tobacco a volumes larger this will compared XXXX. funding fiscal moment. expensive This significantly needed to liquidity but

undersupply year. persist are conditions anticipate throughout in Looking strong across the fiscal to the industry, demand we as ongoing expected pricing

as needed are diligently that affect we ready and could our our factors meet we Our risk our other monitored results, to teams strategies weather objectives. believe around world the the to and adjust

Before Recently, driving on business. goal in teams and greenhouse for joint an I over mitigating power the ESG India our venture outstanding turn operational I'd call our efficiencies, of win our the plant Flavio, our of with congratulate outages risk to to gas commissioned reducing like the emissions. a solar

The came facility fiscal tobacco run first of days energy daylight online his X/X XXXX. during we few And solar during plant closing required months during to the operation, the approximately generated hours. our of of processing

the generated grid saving expected you to reduce could annual [ energy ] by and members of emissions use compared is the electricity purchased solar cost produce an XX% annual to executed the and XX%. more to team So facility's when to who see Thank its even initiative. than from this

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

remind To volume in our Peter. results. like to a and during benefit margin you, from Pyxus strength quarter, and everyone of see business. you start, I And both is would the that can this we a Thank

million We EBITDA same compared to grew the increase $XX.X the year. $XX.X prior the quarter quarter adjusted an in in of million, first to

higher generated is significantly Our the first This other several that quarter. have income first in of we million. strong $X.X than and have net years achieved income net sales time the margins the during

this a moment. further in discuss will I

per sales first year. an XX.X% [ a kilo in YoY as in XX.X% by the compared improvement quarter benefit average Our increased prior XX.X% increase well We to from ]. price as

first to accelerate from added to ] into America Africa growth. [ sales South the our is basically shipments customer quarter Our and ability

per in year. in on favorable compared the year $X.XX XX% margin quarter average per XXXX fiscal Margin in price per an Looking of at kilo on kilo kilo. of per to gross increased our margins, kilo price per $X.XX a in $X.XX prior was $X.XX average the the prior the of kilo. improvement customer the average a contributed first to Margins mix to shift

not from The net income important significant may conditions increase increase note agriculture quarters to margin. the repeated same the that during that due near-term and we in in be It primarily the quarter, the QX was in next the accelerated quarters. achieved sales volume industry, market in to a is

sufficient our ensure our goals. to managing meet purchasing we As liquidity capital working excel to Pieter mentioned, in

the the quarter, year. prior tobacco we the at of quarter During compared same more financed prices in to higher purchase the

purchase tobacco Our of operations warrant are of Crest credit, from our generated sources lines liquidity the primary other ABL securitized lines, seasonal of in receivables. facility, short-term cash to

throughout inventory sell we year, warrants As and to we credit fiscal plan ship repay to the customers ABL short-term facility. the

In several addition, programs our provide utilize to collections our by receivables up securitization teams from speeding customers. liquidity

quarter fiscal higher increased seasonal Looking million, P&L to at interest the lines. variable expenses $X.X on more to prior in compared year, closely our the primarily first the of due rates the by interest XXXX,

headwinds, lower margins seasonal of at and through focused variable mitigate operating remain interest duration continued of we reducing lines To rate renewing of borrowings our on acceleration seasonal credit cycle.

the quarter, During the prior operating increased to $X.X our year. first to significantly compared income million million, in $XX.X

This our shipments higher was accelerating margins of outcome another profit to due and gross the mix. positive customer

prior $XX.X flow to increase a usage the Our first cash cash quarter in million free compared year. represented

Our of the the first on purchasing free the cash Southern the Hemisphere flow peaks the in half is due crop. typically year to half in lower inventory second than

million first Cash focus prior compared on supported year the first ABL capital liquidity quarter year. our to of the outstanding Continuing to million XXXX. accelerated $XXX the from in $XX primarily from $XXX on in prior in quarter to working million the of decreased balance year management and when purchases cash the And $XX equivalents and year. in used million fiscal it the over prior reduce to was improved the $XXX million

foreign In foreign lines of year incremental use $XXX inventories in of fiscal build we lines of typically of as seasonal year. the resulting credit an seasonal of million end and as our XXXX, compared sold. seasonal the have decreases increase by credit outstanding increased lines to $XX inventory prior Since million,

the of result place our normalize of in of XXXX, And during will the exchange, interest of payments X.X% our $X.X million payments third the a occurred the timing cash the quarter. debt quarter. would quarter. second CNOs in the fourth quarter. [ fiscal interest second our Prior semi-annual remain first ] bulk the payments exchange the on impact and comparable change As forward, the took semiannual going notes in quarter to successful first in of This

Turning and levels. to debt our credit profile

quarter billion decreased end primarily higher XX of over compared the our based ratio XXXX, Total million year. due compared first seasonal of credit at EBITDA prior Our compared $X.X was months, This the EBITDA prior debt prior cash less year. to adjusted foreign for by to for working our last and prior profile on in strengthen to was price. year. debt to compared Similarly, last net $X.X the and the on line fiscal incremental X.Xx the Based management XXXX $XX first X.Xx million June in quarter coverage million XX quarter at adjusted of our year. $XX decrease enable was of borrowing X.Xx to us months, the ratio the the capital interest to X.Xx our XX, to

the back the of I results. would I Before to back a the first look in turn remaining to I call strong who call I with to and our will Pieter. business generate commend to forward accelerate this quarters margins volumes, solid XXXX. quarter increase turn our expand now continue execution teams momentum X like fiscal Peter, cycle, to year

you, Flavia. Thank

believe achieved results during and as the our clearly do. the adjusted position continue $X.X positive our to and intended We our please the fiscal first With our us our XXXX many first between stated for for plan open billion against its guidance between quarter objectives. progress we quarter few to $X.X in $XXX first EBITDA $XXX what questionsAnd made And million. building announced upon We operation. previously billion We fiscal our execute operator, and of that, achieve highlighted, year. lines and phone the sales of teams to Flavia million

with question BTIG. Oren Instructions] comes from [Operator first Shaked Your

So And be maintained Peter, QX through guidance XQ obviously, in the the last into this shipments the and year QX. was suggesting forward you recent down pull XQ versus best year-over-year would the that reference of performance year. for memory did yet some

help of the demand just there, us as in you can unpack forward? bit maybe the much little how much performance it just bit was understand pull referenced. little you quarter is marketplace have So first the a of How a dynamics stronger

us help understand that bit Just a better.

on [Technical Difficulty] year. considered improved is last guidance Year-on-year

you Sorry, hear can me.

I can hear you now.

is year-on-year considerably on last A guidance improved year.

XX quarter, obviously pleased through forward. quarter, continuing we think progress to with and first I that. don't the we of might is Our are the is very, X considerable X you guidance. in was And [indiscernible]. in And of year example, And XX year the which first that quarter we costs start happens X% reduce [ as ours of for think in [indiscernible] quarter the last are what rolling we what or very I the we that this rolling have for target that increase A what anticipate months when variable you X% quarter interest the and doing full we shipment highlighting shifted, achieved year. versus key year, of have under of you year the [indiscernible] guidance. ] focus shipping therefore as us go months, accelerating first in

anticipating and certainly positive. are process [indiscernible] to continue one On ship first we're this that very when we build basically us terms at have to we is But the in year. And purchasing the at accelerated crop that year, we in few years. earlier So that pack quarter the guidance. the the have gives last X and of of looking significant opportunities within guidance midpoint

that -- to days. presentation cash we conversion And XX in just very compliment what and you see what focus important on [indiscernible] over reached to cycle, to the add Pieter just

So us the environment manage market. and in the to that better interest it cost high a a from way cost manage to compensate of much in headwinds the gives ability continue some interest

Sisson comes question next from Your with Odeon Group. Rosemary Capital

you some gotten. you've a Do that bit. with shipments to Just other accelerated market business that from on that the before to in other there? players. going able something I there higher on Is wouldn't smaller because question profitability. taken attract believe mix you contributing Because follow have you some also words, mean, you've you customer little that been share to mentioned have away

in your if curious just to there's any relative acceleration. dynamics So there

this growth low very with the year, we the at this year fact is it, despite came into Look and anticipating are we that inventory.

we year, carried fiscal on just much this So really last because had current crop low year. inventory to of we very from focus tobaccos the

drive improving is think performance X And quarter in the throughout in will shipments, our those mix volumes. to growth of continue all year. of I X acceleration results of margins, our a

the continuing from improved So pleased, regions it's we of very slides, the We're results saw combination. as quarter. a move out X in you obviously our we through progress year. and as forward do X the saw anticipate

year. purchasing start happens foundation the well to shortly. perform got very the what that a crops out see Hemisphere quarter We to for have Northern with But we'll of certainly, good X we've

Next, we with Monrad have Northeast Investors. Bruce

me hear okay? you Can

Bruce. Yes,

Great. Okay.

if I up me follow on Let that, would.

sounds sounds have that more of So just -- on it's I'm wording you're bit I'll issue -- hearing crop comments maybe on accelerated you that that it on supply like and conservative pivot little and your and a just ask. a so

had you've mean, where of down customers inventories. I a So ran years your couple

So not more your like customers or take I the like really right? satiated -- you accelerate, mean it using anything but had if had probably, you're that. they you a crop, bigger could it's word . if are

being is occurring still very to demand and Africa is also And some volume despite in that We've extent, for that crop -- being seen crop crop What strong to strong. and significantly We satisfy demand. is year. increased and is in -- Bruce, used increased increased that this sizes, very we've the India. demand Brazil is the seen sizes, particularly

correct. are anticipate able been we be got that. for we have year. of pleased a in with what fulfill certain are in certainly with to where that purchased to have shipments order could to have the little are the pleased But we If we would with we more date rest volume You bit we quite markets, very the

Okay.

there's again, a inventories, inventories are fine. But issue customer secular So customer a here. seasonal on basis,

difficult able requirements. But don't for to to comment I those customer demand there customer I bit in inventories. strong out there's numbers. think still a We tobaccos us satisfy for exactly think be it's order to little on have

a at point level this of different a duration customer Each time. in little bit has

closer are durations, up. be normal the still topping Some maybe may to Others

And last X Okay. question.

term So the as the the of of are result tobaccos Can at level, not little bit a -- Pyxus loan, confirm the but seems turn Pyxus there you in be pari-passu to confusion Pyxus here. exchange? and up that notes a the

Can question? you the repeat

this priority seems [ and between to they from Are -- the And the the same are that -- at share debt, ]. Intivex confirm they a collateral at loan the is be exchange Pyxus Pyxus. So the there equally. again, bonds confusion rank and about pari-passu term new you can that distinct they that

Yes.

so a think have collateral is the to that detail waterfall will that the way you. we best you you just It's send including have kind of of in do send I in lot can I what to there, it. there.

all have the are So that necessary. you can details

I there me got be just from I've Okay. offer document parallel hoping sort I'm you. of what actually reading comment Okay. any get was it. of would it the exchange in that Thank -- front it but -- confusion, we if on of was could be But there'd a broader so

comes Your Arthur Court. question Kavalis with from next Three

land where about can to far to sort wanted buying guidance. that lead how and of you're going you've ask to -- I guidance first done so think about purchasing on us your the

this We've and in larger said particular some or, our Well, Asian at has most in point -- generally had based I markets. those this in South year. we America purchasing as in and That we cases, a we've met stated, have believe expectations, purchasing are certainly on crops. program throughout strong Africa, accelerated time

fiscal better those opportunity obviously, that process, an is Our order now, get program, early be need and tobaccos shipping -- volumes a gives volumes to to customers, the having opportunity to to by able processing year. us instructions with those program those obviously, to in out we those within purchasing ship get earlier the in commit

for going where them I been think quarter year rest. the we'll see to July, where been visibility far as we through we've at so certainly be, pretty the good shipments, we X, our we expect looking progress got for and they've in we've

finish we I when into than the and crops we happens a X pretty feeling good in because we'll in. quarter just get less bit coming the but X are year probably we're quarter X, proportionately, last X we of quarter about X as think quarter and way did we see So what little and need the

this at we about where positive we're feeling in So the year. are point

to we million balance that. we last fulfill a $XXX was the stated, quarter bit year, as more. $XXX same purchased to million, over compared And the sheet strong Already, comparison you

only the lines million shortening we $XX rest cycle. to see added and the is related the on You seasonal

the that to some have as accelerate of securitization receivables. now As of programs we some

be leads to structure interest interest have will a gone impacting up costs -- basis how costs that and interest you're helpful. second is foresee you year. of the on this how It's And actually the question, And course, a but higher my obviously, capital forward with me which foresee environment, do quarter-over-quarter. do you it's what doing rate what

we cycle. managing basically And As that. do on is operating how accelerated us shortening we help interest we focused on interest. number into extremely guidance don't that this to but one. expense, will and shipments provide are That's do the

profile our one second The is is credit improving.

good terms working in result rates, and to continues order we the So very the debt, debt of decreasing to bit great even in of base exchange though have hard, for past net interest And happened to few in actually are we the that interest the of is a grow. in spread the compensated some spread, base on of costs a the the also increase lower lower months. the example long-term kind that the

the is this alliance is thing. And same

increasing spread manage interest on continue order our cost. to We in better to work the

that consideration? Is that And cost -- you and talk mind is debt see. one that's interest was on about a my didn't under at I buying reducing thing your the your discount.

So opportunities. looking we're for always

to we verged We cash performance. flow, strong have why that's have on a and

but order We company. have opportunities to for the we're shipments unveil to capital, to in working some deleverage the looking accelerate always

from comes Intermarket. Your next von question with Meister John

Jo It's von Meister. actually

year. Is fiscal So cycle guidance that the on correct? is your is, based the shipment XXXX in question X

Yes, that's correct.

report in the a there double dip first just was quarter in shipments provided? And

Partially, yes.

or double in the part get the dip you the of occur that third fourth quarter quarter? the gap a would that second gap if or double second So

I parts market-dependent. very on markets think to continue Obviously, different various around to that's is that much very shipments of to the work we dependent much And year. globe. accelerate the

of But usually, ship product typically your in fourth most the right? third you quarter, and

yes. Historically,

We've come in the bit a bit a a we've acceleration was I cycle in little year. think got of third quarter fourth was Last Obviously, that this strong little got quarter. the different less. coming. year very

if changing bit very to years. last So pre-COVID, But went substantial back been few a that's over the little you quarter.

current kind What have EBITDA dip versus impact would double of a guidance? your

to we intentional. able mean is shipment be the is to what idea is we this the to going that us here managing costs. shorten is sheet interest not again I cycle accelerating We're about -- disclose tell the is, -- but that, you helps strength I the -- can it specifically as balance

only -- -- is a is year. the that's of from But the overall first second accelerating right, year the movement the talking overall impact X of the guidance was cycle in within impact half of about the be the So basically on is from the year, and within you're the continued to half year. guidance

Your comes Capital Rosemary next from Odeon question Group. Sisson with

just a the of I as continuation incorporate curious margin gross similar guidance on a to kilo. per your profit was whether

the Our across depending the gross is go origin what shipping. mix that a as changes vary quarters and region quarters lot it within on on. will margin, of always There's

shipping year. America in and So more the come It year, Africa later in we'll Asia. earlier will the be South

but and the across shipment So levels at a margin our guidance has obviously potential year. range within levels it throughout the various and quarters, is will that looking vary

on can to per we as you just kilo. I that see the much So focused very margin -- our add, said,

versus that this can You per year. quarter last increase in tremendous there's kilo a margin same see quarter the on

okay? that with and a consequence customer So of do And acceleration. is a to lot mix has the this mix, geographic a

comes kilo include half first in the of customer said, second extension we our bond. do higher being margin margins mix. half related and That increases geographic that volumes per But per That's with on be the and margin it kilo. to than expect is guidance,

them That's you that this declined Hello? Philip expect from interesting X.X% expect shipment looking and to year. -- are International has Philip volume said they Morris great. decline It's they there? at volume because results, to X.X% I also cigarette International's for shipment was Morris

from in an cigarette that feel don't international experiencing all you the you're -- actually that from of from you've customers your demand your perspective? demand -- So

we interruption, are difficulties. the technical Pardon [Technical having Difficulty]

the able hear here you or us? Can to hear dropped had can Jeff technical us. problem through call. We a

Yes.

the Sorry, much what per margins Rosemary, heard I related from know kilo? said in to I how you

you're Yes, X.X statement their I asked that know Phillip I not, this are they where I seeing you don't one X.X or demand heard margin and if but it's your question your seeing did and year to is International's customers you that they Where they're answer. -- a this increase? strong hear another just the down -- seeing is demand points it's of is decline. -- question biggest because on demand interesting expect. Morris

sales the I the demand the same. between difference cigarette not customer any think Well, statistics X necessarily for is and

the as I So have on we portfolio of Morris. comment multitude from geographies particularly won't a a customers of said wide globe. Phillip I earlier, around But

to We very strong see continue demand customer across portfolio. that

for move basis. and on and growth. opportunities we will with potentially see annual That individual with an take to customer up But continue an down opportunities overall,

our So seeing to that opportunities those that in we across cases, more but strong versus business, in past or various the demand of integration, taken others, we've have reversal other maybe are with totality. we the are are the we in certain that -- that geography demand that crops vertical programs the related in in

Fitzgerald comes Patrick Your from Baird. with next question

that price as mix very in would if I you know quarter, have on sold that general issues you per be the any kilo there's year this that helpful. shift progresses, some pricing but the commentary

but I that still the the think year, pricing global year's in not very increases increase pharma to saw, last is generally crop, in seeing what that seeing geographies in significant we're we particularly marketplace this with are general, most markets across up and into continue inflationary those increases improve markets our And some pricing to extent, with in export year-on-year. performance on our converting increased on and catching obviously, America. margins South there is to that are and still certain focus we

long assumption term, as on changes volumes But a is the Or there's long some different issues. pandemic based asking But decline the to the know is long make? of the person way term? I I and Okay. same in -- wrong this question shipment And just of term, that guess tobacco isn't won't volumes before. kind that

think we're you've the of at midpoint to at billion in take way. revenue year, look tobacco year, We think of $X in any and about our we total of combustible I let's cigarette in amount over let's [indiscernible] X the Well, kind this leaf got $XX probably it -- consumed say, this billion. production

very of of a producer for requirement. there that do we we Now us. lot tobacco market for is a well, there domestic and supply. that substantial same is But we have to domestic continue get value-added continue focus out we see businesses. for our there the those can also share increased basic product are to other At and other how perform opportunities We time, production businesses on

small excited opportunities to relatively we growth. are. large We're and very very as piece of market, we're a for So where a a we see continued

point a here. more out me things Let couple it

global very -- a market. is First is this the

world, in going the consumption but be States it's United not. especially in may the in in So Asia, down, areas some

So -- it's that's stable number market. is one. a very Number X

comes If consumption. pretty at the very COVID And you some very, maybe economic crisis it crisis, years some all consumption and solid comes -- look from -- that. solid past through

very, the very, years. look even if it's you past very, So XX, stable very XX at

like proof. inflation So and -- crisis and it's like almost almost

important another the ], [ of that's And so other strong. parts the growth super world in stable and by price

thinking terms of in for cash there taxes could the Is provide Okay. year? about help you any

related see other the we for cash that's taxes exchange pay The to that some cash to will in will -- the have includes that quarter taxes you higher, why X. see payment taxes you year so

You're planning we more do be on be much but cash would -- going to in taxes X. overall that -- [indiscernible] -- the exchange. tax to the taxes have cash July. taxes the see efficient in payment more But onetime or quarter paid

million compared But you I to think last will be higher was Do Okay. $XX it year, it that. than last year. think like

give it's but on that, on guidance besides taxes. it's don't unusual the pretty that part, exchange We nothing --

today's This conference you us Thank this no joining questions at call. conclude time. for are further There today. will

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