管理層發言
Ladies and gentlemen, thank you for being here. My name is Desiree, and I will be your conference operator today. I would like to welcome everyone to the Universal Corporation First Quarter Fiscal Year 2026 Earnings Call. I will now turn the conference over to Wushuang Ma, Vice President and Treasurer. You may begin.
Good morning, and thank you for joining us. With me today are Preston Wigner, our Chairman, President and CEO; and Johan Kroner, our Chief Financial Officer. During the course of this call, we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future. They are representative as of today only. Actual results, performance or achievements could differ materially from the anticipated results, prospects, performance or achievements expressed or implied by such forward-looking statements, and we assume no obligation to update any forward-looking statements, except as required by law. For information on some of the risks and uncertainties related to these forward-looking statements, please refer to our reports we filed with the SEC and under cautionary statements regarding forward-looking statements in our current earnings press release.
Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification. Our comments may also include certain non-GAAP financial measures. For details regarding these measures, including a reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials. This call is being webcast live and will be available for replay on our website through November 7, 2025, and via telephone through August 21, 2025. This call is copyrighted and may not be used without our permission. Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay or distribution of any transcription of this call. I would like to now turn the call over to Preston.
Thank you, Wush. Good morning, everyone. Thank you for joining us today. We are off to a good start to our fiscal year. On a consolidated basis, operating income increased $17 million to $34 million for the first fiscal quarter, while revenue was down slightly to $594 million for the quarter. Our Tobacco Operations segment delivered improved results driven primarily by favorable product mix, which offset lower tobacco sales volumes. Seasonally, our first fiscal quarter tends to be our smaller quarter. Tobacco sales volumes in the first quarter are generally driven by shipments of carryover tobacco from the prior fiscal year. Given strong customer demand last fiscal year, we shipped significant volumes of tobacco earlier in the prior year. As a result, carryover tobacco shipments and tobacco sales volumes were lower in the first quarter of the current fiscal year compared to the same quarter last year.
Flue-cured and burley crop sizes are significantly larger this fiscal year, and green tobacco purchases are largely completed in Brazil and Africa. Although it is still early, we expect the flue-cured and burley tobacco will move to more balanced supply positions during the fiscal year. Given the current expected crop sizes, we believe it is likely that flue-cured and burley tobacco will be in oversupply positions by the end of the fiscal year. Customer demand has remained firm despite larger crops, and we believe this is a result of several years of short tobacco supply. At the end of June, our uncommitted tobacco inventories were low at about 11% of total tobacco inventory. Turning to our Ingredients Operations segment. We maintained positive momentum in the first quarter of fiscal year 2026, with revenues and sales volumes both up in the quarter. Operating income was lower in the quarter.
Segment results were impacted by a less favorable product mix, tariff uncertainty impacts on demand and higher fixed costs associated with our recently expanded production facility. As we work to fill our new facility, we continue to see interest in our new value-added products. Supported by a foundational customer for our expanded facility, we are focused on converting additional interest from both new and existing customers into increased volumes and margins. I will now hand it over to Johan to provide details of our financial and operational performance. After which, I will offer additional thoughts and open the call for questions.
Thank you, Preston. Good morning, everyone. As Preston mentioned, we are off to a good start to our fiscal year 2026 with improved results from our Tobacco Operations segment and higher revenue and sales volumes in our Ingredients Operations segment. For the first quarter of fiscal year 2026, sales and other operating revenues were $593.8 million as compared to $597.1 million for the same quarter last fiscal year. This was a slight decline of $3.3 million, mainly due to lower sales of carryover crop tobaccos. Operating income for the quarter was $33.8 million as compared to $17.2 million for the same quarter in the fiscal year 2025. The increase of $16.6 million was due to a favorable product mix in the Tobacco Operations segment. SG&A expenses were $79.2 million during the quarter compared to $78.7 million for the same quarter last year, an increase of $500,000 primarily due to higher compensation and legal and professional fees, which were largely offset by favorable foreign currency comparisons and lower tobacco sales commissions.
Net income attributable to Universal Corporation was $8.5 million for the first quarter or $0.34 per share on a fully diluted basis as compared to $100,000 or $0.01 per share for the same quarter in fiscal year 2025. Adjusted net income, which excludes certain nonrecurring items, was $9.6 million or $0.38 per share on a fully diluted basis for the quarter as compared to $100,000 or $0.01 per share for the same quarter last year. Segment operating income for the Tobacco Operations segment was $35.7 million in the quarter as compared to $14.5 million for the same quarter last year. The increase of $21.2 million was mainly due to a favorable product mix in Asia. Segment operating income for the Ingredients Operations segment was $1.7 million for the quarter as compared to $2.9 million for the same quarter last year. The decrease of $1.2 million was due to less favorable product mix, some curtailed demand due to tariff uncertainty and higher fixed costs including depreciation from our recently expanded Universal Ingredients production facility.
The corporate overhead allocation to the segment was also higher in the quarter. As of June 30, 2025, our net debt, which is defined as the sum of notes payable, overdrafts and long-term obligations, including current portion plus customer advances and deposits less cash and cash equivalents was $1.1 billion, $47 million lower than as of June 30 of last year. We are focused on continuing to maintain a strong balance sheet and conservative debt levels. I would like to now turn it back over to Preston.
Thank you, Johan. It is still early in our fiscal year. Uncertainties remain for the rest of the fiscal year, including our customers' procurement strategies and tariff impacts. We believe those challenges can present us with opportunities. Our global diversification, long-term customer relationships and local expertise will position us well to capitalize on those opportunities. Our leaf tobacco team is experienced in managing changes in market conditions. We will continue pursuing opportunities to maximize and optimize our tobacco business, including offering and providing additional services to our customers. At the same time, we are dedicated to continuing our Ingredients segment's momentum. We are focused on driving organic growth, capitalizing on our investments in Universal Ingredients and converting customer interest into product sales. Our expanded facility added an industry-leading combination of extraction, blending, aseptic packaging and other capabilities to our segment.
With our investment in sales, marketing and product development teams, we are creating value across the entire Universal Ingredients business and delivering unique customized products to our customers. I also want to take a moment to acknowledge a recent leadership announcement. Johan will be retiring from his role as Senior Vice President and Chief Financial Officer after more than 30 years with Universal. He will remain with the company through July 1, 2026, to support a seamless transition. We thank Johan for his dedicated service and we value the financial discipline he has instilled across the organization. I look forward to working closely with Johan for the next year. Finally, I'd like to highlight our ongoing commitment to sustainability. At Universal, we believe sustainability is good for business and it gives us a competitive advantage. It also represents good stewardship in the communities in which we operate.
We recently completed our annual third-party assessment and verification of Scope 1, 2 and relevant Scope 3 emissions. This assessment is part of our broader emissions reduction efforts. It ensures alignment with established standards and provides transparency into our emission reduction efforts. It also helps us calculate the impact of projects, like our newly commissioned biomass boiler in Zimbabwe. Once operational, this new boiler will hope to reduce coal use over time and contribute to our goal of net zero greenhouse gas emissions in our value chain by the year 2050. Universal will continue integrating sustainability into our operational decision-making. Operator, please open the floor for questions.
分析師問答
And our first question comes from the line of Ann Gurkin with Davenport.
Congratulations on a very solid start to your fiscal year. Nice to see. I was wondering if we could start with a conversation surrounding tariffs, both on tobacco and ingredients business. I guess, starting with tobacco, leaf imported into the U.S. from Brazil, I think, would represent maybe 5% to 10% of tobacco sales for you all. Is that in the ballpark? And how should I think about navigating the tariff situation, uncertainty, ability to pass along tariff costs to customers? Any kind of insight you can share on the tobacco tariff situation?
Sure. With respect to Brazil imports, I think those imports over the years, let's say, they're around 35,000, 40,000 tons per year, which is a small portion of the total Brazil crop. And our portion of that is relatively small. On the tobacco side, a large majority of our business is obviously outside the United States. So it's not a significant impact for imports in and out of the United States for us. Our diversified footprint and our broad customer base, they provide opportunities for us and solutions for our customers with tariff impacts. For our U.S. customers, we can provide them with options if they need to shift purchases from high tariff origins like Brazil, including selling them U.S. tobacco. And where we have tobacco in high tariff origins, we have a very broad global customer base and we move that tobacco to them. Tariffs are still fluid. They continue to be monitored, and we remain in very close contact with our customers, both on the tobacco side and on the ingredient side.
On the ingredients side, our ingredients business also has flexibility. We evaluate and alter our buying strategies to account for tariffs. And we import raw materials, for example, from China for one of our operations, and we did buy forward to mitigate the tariff impacts for those volumes that we bought. We also work with our customers on their buying strategies to mitigate tariffs. We've seen some tariff impacts on customers demand that are arising from challenges in their own supply chains. And we've worked with those customers to understand the impacts of those supply chains and the timing of when they can increase their purchases from us. And we work very closely with both our tobacco and our ingredients customers in those tariffs. And if tariff costs are included in the pricing, then they're included in the pricing, but we certainly try everything we can to work with our customers to mitigate those impacts of tariffs to avoid those situations.
So overall, our global footprint and our customer base, broad customer base and really solid customer relationships, they're going to help us pursue these opportunities that tariffs are going to create, and we're really well placed to take advantage of that.
That's very helpful, thank you. Regarding tobacco, there was a nice margin in the first quarter, and I understand there was a positive contribution from the mix in Asia. Can you help me understand how to project margins for the second half of the fiscal year, considering customer orders, pricing, and mix? Additionally, what should I consider for the full year margin outlook for the Tobacco segment?
Yes. Of course, as we mentioned earlier in the call, the first quarter is our seasonally low quarter. And so we certainly enjoyed an improved product mix for carryover sales for the quarter, but it's a small quarter for us. Looking ahead, we have been very happy with how things have progressed. We have largely completed purchasing in Brazil and Africa and those crops are very large, and we expect very large crops all around the world. And with that, we would expect pricing to come down despite that firm demand to date. So that could create margin pressure that we would monitor and work with our customers. Additionally, if we're handling larger volumes through our factories with those larger crops, that also helps reduce our per unit costs in our factory. So we're very happy with where we are today with our uncommitted inventory levels and with the more traditional buying patterns that we've seen especially in Brazil versus what we've seen in the prior season with the accelerated buying everything all at one grade.
That gives us options to satisfy our customers' needs while also protecting the margins that we recognize for the value that we bring to our customers. There's a value doing business with Universal. So it's still really early in the season. There's still a lot of tobacco to buy. There are markets that still are opening. And we're going to continue to monitor those dynamics in those markets and work hard with our customers to maintain good communication with them and to protect the value that we bring to them.
Super. And have you been able to increase services or market share with customers?
Yes, that's certainly a goal of ours. That's part of our corporate strategy of maximizing and optimizing tobacco is to increase volumes, increase market share and take advantage of opportunities to increase the services we provide for them. I'm not going to talk about any customer in particular, but we're very happy with where things are going so far early in the year. And we see benefits. We still have a long way to go for the year. But we're on the right track, and we're optimistic.
Super. And then maybe an update on the progress of the U.S. tobacco leaf crop?
Yes. U.S. tobacco crop is large. It's more of a traditional crop. Buying is really just beginning. So it's really sort of early in the process for that. They've had very good weather conditions. So it should be a really large crop in pretty good quality.
Super. Switching to Ingredients. So the margin was lower than we would have thought in the first quarter and you've outlined the challenges faced by that segment in the first quarter. I guess also the same question. If you look out to the back half, we had operating margins for the full year for Ingredients in the mid-single-digit range, and that seems aggressive given what we've seen in the first quarter, some customer challenges, specific customer challenges, maybe reduced purchases and forward purchases that shifted into Q4 last year. I guess, can you help me think about that margin progression, where it could end, land at the end of fiscal '26, please?
Yes, there are certainly a lot of moving pieces with that. We're very happy with the momentum from increased revenue and volume, and we continue to make progress with our ingredient strategy. We're focused on continuing to increase volume of the value-added products, especially through the new Universal Ingredients, Shank's expanded facility to increase sales and achieve returns on those investments. We did have those additional costs that impacted the first quarter, performance in margin, and our goal is to keep increasing volume through the facility as well as across the entire platform to reduce those per unit costs and provide us more opportunities to increase margins. It's a similar story on the tobacco side with increasing volumes going through our factories. We continue to see interest in the value-added products and capabilities, and we're absolutely dedicated to converting them with existing and new customers from existing business, new business, pipeline business to additional volumes and improved margins.
You've made a significant investment in the new facility, as you mentioned, along with the new capacity at the Shank's facility and the additional sales force. This sets a strong foundation for driving higher revenues, which is very exciting. Are you seeing customer wins? Are you noticing an increase in business that will allow you to capitalize on those investments?
We consider those investments essential to our strategy. In the first quarter, we encountered certain challenges, including tariff impacts, which we believe we can navigate with our customers. Some of these issues may relate to timing, particularly if our customers experience tariff impacts in their supply chain compared to those we face with our facility that sources raw material from China. However, we have established a solid platform, and we have made significant investments in R&D, commercial marketing resources, and expanding capabilities, not only at the Shank's facility but also in other locations. This positions us well to offer platform products that provide customized value-added solutions for our customers. The focus now is on effectively executing our plans and commercial strategies to boost volumes and advance pipeline projects from development to production. We are optimistic about our strategy and momentum, and we will continue to work diligently for the remainder of the year and beyond to further increase volume.
So do you think that margin can increase in the back half of the year for the Ingredients segment versus Q1?
Yes. We have work to do to continue to execute on our strategy and to get things out of the pipeline. Some pipeline projects take months, some might take a year, and they're all in different phases. I'm optimistic for the rest of the year that we would continue to execute on our strategies and continue to drive volume growth and then have the margin opportunities as we continue to increase our volumes. It's a lot of work, but we feel like we've got the right investments and the right teams and the right relationships with the customers and the right strategies to make that happen.
Great. Well, we'll see how the year plays out. Best wishes to Johan and his retirement. That's fantastic. Any update on the announcement of a successor in terms of CFO?
No. We have initiated the process, but no announcements to date. We will keep everybody informed, of course.
Great. And then I always ask about the use of cash. Any updates there?
In what sense, Ann?
Are you still there?
Please hold on for a moment as we address a technical issue.
And we will proceed to our next question comes from the line of Daniel Harriman with Sidoti & Company.
Congrats on the quarter. I've got 2 questions this morning, and I understand you already hit on both of these in the prepared remarks and then the prior questions. But just for educational purposes, as someone newer to the story, at a high level, could you just walk us through how seasonality and crop carryover typically affect results as the year progresses? Obviously, we know the impact from the first quarter. And then with the oversupply expected in the market, I was just hoping you might be able to comment a little bit on how you're managing that risk of the oversupply while maintaining pricing and inventory discipline as the year goes on.
Sure, Daniel. The carryover for us is largely influenced by timing and product mix, which can vary from year to year. Since the first quarter tends to be our slowest season, we find ourselves buying more than selling. Even minor shifts in mix or volume can significantly impact our results for the quarter. In recent years, due to smaller crop yields, our carryover has been minimal. Similar to last year, high demand led us to ship products earlier, resulting in lower carryover for the first quarter. Additionally, with uncommitted inventories being quite low at year-end due to a supply shortfall, we had limited flexibility to make late-season sales or respond to customer demand. As we approach a more balanced supply, and potentially an oversupply by the end of the fiscal year, the main factor for us is having access to tobacco. If we can obtain tobacco, we believe we can effectively sell it using our strategies and competitive advantages.
Our diverse operations enable us to access various crops to meet customer needs, and our strong relationships and communication with customers allow us to navigate market changes together. This transition from smaller crops and supply shortages to larger and more balanced crops should lead to reduced costs, create appealing opportunities, and lessen our working capital needs. Additionally, increased production volumes at our factories help lower our per kilo cost. We generally prefer slightly oversupplied markets for these reasons. We consider ourselves a valuable partner for our customers, especially during these shifting market conditions, as it allows us to better meet their evolving demands. Importantly, we do not purchase tobacco speculatively; we base our purchases on our understanding of customer needs. This approach helps mitigate risks associated with ending up with excess uncommitted inventory as markets shift to oversupply.
Typically, in oversupply situations, we see prices paid to farmers decrease year-over-year until market balance is restored. We are careful about managing our inventory and ensuring we can move it effectively to avoid ending the year with a significant stock of high-cost tobacco heading into another oversupply season. Considering the current market changes, we are transitioning from historically high green prices, which we have never encountered before. However, our teams around the world are adept at handling these market dynamics. We have experience navigating transitions from supply shortages to oversupply to balance. With our global diversified presence, we possess the flexibility and expertise to capitalize on these changes and support our customers, maintaining the value of our partnerships.
Great. That's really helpful. And I appreciate your willingness to kind of take a step back there. But congrats on the quarter and best of luck moving forward.
And we would like to call out Ann Gurkin for any additional questions.
I just wanted to follow up on the use of cash. I know you have an outstanding share repurchase program. And I know you use it for investing in working capital needs and ingredients business, although it sounds like you're going to grow that organically more at this point. That was my question.
Yes. And the repurchase and the $100 million that we have out there, we just renewed that and we just have it out there just in case the opportunity arises in any of the situations that you just mentioned. So currently, there are no big plans there, but because we have lots of other things to look at. But yes, it is out there just in case we need it.
There are no further questions at this time. I would like to turn the call back over to Preston Wigner for closing remarks.
Thank you, Desiree. Thank you all for joining our call today, and we look forward to speaking to you for our next quarter. So have a very good day.
Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.