Q2 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to you the Universal Corporation second quarter fiscal year 2020 earnings call.
This time, all participants or listen to LIBOR.
After the speakers presentation, there will be a question answer session.
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Be advised that today's conference is being recorded.
Oh, no lighting I think all over to your speaker today can be Formacek, Vice President Treasurer Ma'am. Please go ahead.
Thanks to your again and thank you for joining us George Freeman, our chairman President and CEO Ayrton Henske, our Chief operating officer here with me today, and Johan Kramer, our Chief Financial Officer participating by telephone will join me in answering questions. After these brief remarks. This call is being webcast live and won't be a ban.
Well on our website and on telephone taped replay it will remain on our website through February 12, 2020 other than the replay we have not authorized and disclaim responsibility for any recording replay or distribution of any transcription of this call. This call is copyrighted I may not be used without our permission before I begin to discuss.
Our results I caution you that we will be making forward looking statements are based on our current knowledge and some assumptions about the future and a representative as of today only actual results could differ materially from projected or estimated results and we assume no obligation to update any forward looking statements for information on some of the factors that can affect.
Our estimates I urge you to read our 10-K for the year ended March 31, 2019, and the Form 10-Q for the most recently ended fiscal quarter such risks and uncertainties include but are not limited to customer mandated timing of shipments weather conditions, political and economic environment government regulation and taxation changes.
An exchange rates and interest rate industry consolidation in evolution and changes in market structure or sources.
Finally, some of the information I have for you today is based on unaudited allocations and is subject to reclassification.
In an effort to provide useful information to investors. Our comments today may include non-GAAP financial measures for details on these measures, including reconciliations to them as comparable GAAP measures. Please refer to our current earnings press release.
Net income for the six months ended Septemberthirty 2019 was $30.1 million or $1.19 cents per diluted share compared with $44.6 million or $1.76 cents per diluted share for the same period at the prior fiscal year included in the results for both periods or.
Certain nonrecurring income tax items detailed in todays earnings press release, which reduced earnings per share by 11 cents for the first half of the current fiscal year and increased earnings per share by 30 cents for the same period in the prior fiscal year, excluding those nonrecurring items net income declined by 3.9 million sick.
18 cents per share for the first half of fiscal year 2020, compared to the first half of fiscal year 2019.
But the second fiscal quarter ended September 32019, net income was $28.1 million or $1.11 cents per diluted share compared with net income of $31.4 million or $1.24 cents per diluted share for the prior years second fiscal quarter.
Segment operating income of $53.1 million for the first half of fiscal year, 2020, and 45.5 million for the second fiscal quarter of 2020 decreased by $9.6 million, an $8.2 million, respectively compared to the same periods last year.
Results in both periods reflected earnings declines in the North America and other regions segments, partially offset by earnings improvements and the other tobacco operations segment.
Consolidated revenues decreased by 146.5 million to 772.8 million for the first half of fiscal year 2020, and by 63.7 million to 475.9 million for the second fiscal quarter compared to the same periods in fiscal year 2019.
Mainly on lower sales volumes and prices.
Turning to the regions.
Operating income for the other regions segment decreased by $14.8 million to $28.7 million for the six months and by $13 million to $32.5 million for the quarter ended September 32019, compared with the same periods for fiscal year 2019.
Both periods reflected volume declines in Africa, mainly from lower carryover crop sales and delayed shipments in Brazil sales volumes were up and the six month ended September 32019 on higher carry over sales and up in both the six and six months and second fiscal quarter of 2020 on early.
Our current crop shipments compared to the same periods in the prior fiscal year in both periods the product mix in Brazil was less favorable compared to the prior year results for Asia also improved for the quarter and six months ended September 32019 on higher trading volumes largely from China.
Operating income for the North America segment of 6.4 million for the six month and 5.5 million for the quarter ended September 32019 was down by 10.9 million and 2.8 million respectively compared to the same periods for the prior fiscal year, mainly on significantly lower carryover crop sales.
Volumes in the first half of fiscal year 2019, carryover crop sales volumes were higher on shipments that had been delayed due to reduced transportation availability in the United States.
In addition in the first half and second quarter of fiscal year 2020, carryover crop sales volumes were down on fewer sales of U.S. Burley tobaccos and current crop sales volumes were down in Mexico, due to shipment timing and smaller crop sizes compared to the same periods in fiscal year 2019.
The other tobacco operations segment operating income of 18 million for the first half of fiscal year 2020 reflected an increase of 16.1 million compared with operating income of 1.9 million for this segment in the same period last fiscal year.
For the second fiscal quarter of 2020, the segment's operating income of 7.5 million compared to an operating loss of 0.1 million for the same period from the prior fiscal year.
In both periods results for our dark tobacco operations were higher on improved performance from our wrapper tobacco operations in Indonesia on higher volumes and margins results for our Oriental joint venture were up for the six month and quarter ended September 32019, compared to the same periods in the prior fiscal year on them.
More favorable sales mix and foreign currency comparisons.
Selling general and administrative costs for the first half of fiscal year 2020 decreased by 5 million to 104 million, mainly driven by positive foreign currency Remeasurement and exchange variances, primarily in Indonesia, and the Philippines, and lower customer claim costs, partially offset by lower net recoveries on advances to supply.
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Large carryover crop sales, particularly in North America, and Africa benefited our results in fiscal year 2019, why when fiscal year 2020 reduced sales prices softer demand and larger flue cured crop to put pressure on margins.
All of these factors have created difficult comparisons for the first half of the current fiscal year to the same period last year.
Looking forward and this year like in prior fiscal years, our volumes and results will be heavily weighted to the second half of the fiscal year.
During this fiscal year, we have also been actively positioning our company for future success with investment projects, and our tobacco business and engaging with targets and our investment pipeline in adjacent industries.
As a leading global leaf tobacco supplier and inline with our capital allocation strategy. We continue to make disciplined investments in our leaf tobacco business, where we see opportunities to grow and strengthen that business. We have recently agreed in principle with one of our major customers should provide additional sustainable tobacco supply and value added services.
In the Philippines. This arrangement will provide further supply chain efficiencies helped sustain and expand our former base and support our customers long term supply needs.
We also continue in a disciplined and deliberate manner to actively engaged with potential targets in our pipeline for growth opportunities outside of leaf tobacco and adjacent industries and markets that we believe will utilize our assets and capabilities and deliver value to our shareholders.
We consider adjacent seems to be industries in markets, where we can leverage our strength such as country knowledge agricultural expertise and complex grower management and logistics network management.
As we look to adjacent industries and explore growth opportunities within tobacco, we are dedicated to remaining the leading global leaf tobacco supplier and building on our strong history.
At the same time that we had been making investments in our leaf tobacco business and progress on our investment pipeline and adjacent industries. We have also returned value to our shareholders through dividends and share repurchases in the first half of fiscal year 2020, we returned over 50 million to our shareholders through dividends and stock.
Yes.
As we enter the second half of our fiscal year, we're excited about our opportunities for new growth investments and remain focused on delivering long term value to our shareholders.
At this time, we are available to take your question I'll turn it back to you year.
As a reminder to ask a question you will need to press star one on your telephone and to enjoy your question for standard hash key.
Please standby, while we go because any roster.
Your first question comes from the line of Ann Gurkin from Devon Sports.
Your line is open.
Good morning, and good morning, good morning. Thanks.
Hi, I Wonder if I could talk began with the updated outlook for fleet card production. It's come down and then following comments last quarter, where maybe there was an excess supply a flue cured versus demand I wonder if you could just comment on kind of the outlook.
For global supply and demand for best flue cured and barely at this point.
As we stated in the last quarter, we do see the flow of your slide oversupply and.
We are we are actively working with our sales team internationally tool to move some of this over this two buckets that received that we are that we are carrying us as uncommitted as off now on the food on the Burley sides reduce C.
It was issue more in balance because mainly the Africa crops. They came in below deal region, though volumes that were projected.
Okay.
And then looks like.
Fair enough in the quarter improved with shipments, but took in Asia with shipments to China is that.
So when you got more as a positive versus the comments, we saw last quarter, well well given tariffs that were.
Likelihood of delayed shipments can we just can't update kind of on the business trends and outlook for Asia and export volume.
I would just add to and that the business that we have with China and our Asia segment is primarily trading business.
We're still seeing and a exports. There. So you know that is something that does have different timing factors you know from various quarters.
There are still issues in the U.S. of course with the Chinese tariffs that we look forward to clearing up as well.
Okay, great congratulations on picking up some additional business and the Philippines as that business is gonna be included and fiscal 20 or fiscal 21 can you give us any kind of numbers on that.
No there isn't as it will be included in fiscal 2020 , we're going to see the results of debt over that investment already hitting our 2020 fiscal year and continual floors in 20 to 21, it's one.
Okay any other parameters you can give us on that.
No no. Thanks, [laughter], but also asked this every quarter any.
You put additional commentary regarding exploring growth opportunities, but any kind of update on on timing, we might get some more concrete details anything else you can share on on that that.
Investment research whatever you want call you.
No, we but we do have a definitive pipeline and we are actively engaged.
So all that.
I'll, just keep asking okay, great okay. Okay.
[laughter].
It was up in the yes, exactly that's you know it's up in the quarter. It looked like higher legal and professional fees, what does that relate to tell.
[noise], mostly those and our administrative and legal factors across a number of of places.
Nothing okay.
Got it anything I should be concerned [laughter] right and then canister worldwide uncommitted numbers do you have that.
And I don't think we have an update yet the number is still the one that I have for you in June which is 125.
Okay, and then capex for the or any change I think it was 60 to 65 million if I remember right.
Yes, and again, we all that little bit the <unk> from <unk> million open next 12 months.
Yep, So it's strictly capex spending this year as more onerous additional supply chain in Serbia. So can you use and I'll leave that will business, which we were extremely yeah.
I did about and we can go go can you do not tobacco were.
Hi, good investment trips.
I'm sorry, what was arranged for fiscal 2000.
50 to 60 doing.
50 to 60, okay, Okay, that's quite yet.
And ended the quarter.
Over the next 12 months.
Jack we did those spend these will occur.
That's not what should be coming back down.
When you want.
Okay, great great. Thank you very much.
Thank you Andrew.
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There are no further questions over to so these continue.
Thank you your again, thank you all for joining us on our call today.
Last quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating.
Disconnect.
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