Q4 2020 Earnings Call
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Candace Formacek. Please go ahead.
Thank you Sandy and thank you all for joining us.
George Freeman, our chairman, President and CEO higher than Henske, our chief operating officer, and Johan corner, Our Chief Financial Officer are here with me today I am will join me in answering questions. After these brief remarks.
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Before I begin to discuss our results I caution you that we will be making forward looking statements that are based on current knowledge and some assumptions about the future and a representative as of today only.
Actual results could differ materially from projected or estimate of results and we assume no obligation to update any forward looking statements.
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, as well as our form 10-K for the year ended March 31, 2020, which we expect to fall with the FCC later this week.
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 in exchange rates, an interest rate industry consolidation and evolution and changes in market structure or sources.
Finally, some of the information they happy today is based on all cat one older should allocations and 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 the Mets comparable GAAP measures. Please refer to our current earnings press release.
We could not have predicted that we would be closing our fiscal year and the throws of a global pandemic. Our thoughts are with all those who have been and continue to be affected by this unprecedented event and our thanks go out to all who are providing essential services to our communities.
We are especially grateful to our many employees worldwide, who make it possible for us to continue to operate under challenging conditions and within the guidelines of authorities to meet the needs of our valued customers.
Our first priority is the health and safety of our employees and we appreciate their willingness to adopt new protocols that we believe will help protect the safety and health of our employees their families and communities in which we operate.
Foreign governmental organizations and governmental organizations in the United States have taken various actions to combat the spread of covered 19th including imposing stay at home orders and closing non of central businesses and their operations. We're closely monitoring developments related to the ongoing cobot 19 pandemic and have taken.
I continue to take steps intended to mitigate the potential risk to us.
It is paramount that our employees to operate our businesses are safe an important we have assessed and updated our existing business continuity plan for our business in the context of this pandemic. For example, we have taken precautions with regard to employee and facility hygiene imposed travel limitations on our employees directed.
Certain employee groups to work remotely whenever possible and we continue to assess protocols designed to protect our employees customers and the public.
We're also working with our suppliers to understand the potential impact to our supply chain.
At this time, we have not experienced a material impact to our supply chain. However, uncertain market conditions, mainly driven by the ongoing covered 19 pandemic led to extreme weakening of the Indonesian repeat Brazilian real and Mexican peso relative to the U.S. dollar all of which experienced double digit appreciate.
Mission during the month of March these currency weakness says were the primary drivers for unfavorable currency comparisons mainly attributable to remeasurement of $21 million and $13 million to for the quarter and year ended March 31 2020, respectively.
Towards the end of our fiscal year. We also saw some shipment delays in certain regions due to the cabin 19, pandemic and slower customer orders, which increased our uncommitted inventory levels.
In addition to these Kevin 19 related impacts as we have discussed throughout the fiscal year. Our results for fiscal year 2020 have been negatively impacted by lower carry over volume compared to fiscal year 2019, mainly in North America and Africa, our gross margins for fiscal year 2020. However.
Remained relatively flat compared to fiscal year 2019.
Returning to the detailed results.
Net income for the fiscal year ended March 31, 2020 of $71.7 million or $2.86 per diluted share compared with $104.1 million for $4.11 per diluted share for the prior fiscal year.
Excluding restructuring and impairment costs and certain nonrecurring items detailed in other items in today's earnings release net income and diluted earnings per share declined by $25.3 million.96 per spus, respectively for fiscal year 2020 compared to fiscal year 2019.
For the fourth fiscal quarter ended March 31, 2020, net income was $15.6 million for 63 cents per diluted share compared with net income of $31.4 million or $1.24 cents per diluted share for the prior years fourth fiscal quarter.
Excluding restructuring and impairment costs and certain nonrecurring items detailed in other items in today's earnings release net income and diluted earnings per share declined by $5.2 million.18.
For share respectively for the quarter ended March 31, 2020, compared to the same quarter of the prior year.
Segment operating income was $138.1 million for the fiscal year ended March 31, 2020, a decrease of $48.7 million and for the quarter ended March 31, 2020 was $41 million a decrease of 20.5 million.
Both compared to the same periods last fiscal year.
Results reflected earnings declines in the North America, and other regions segments, partially offset by earnings improvements and the other tobacco operations segment for fiscal year 2020.
Compared to fiscal year 2019.
For the quarter ended March 31, 2020 results declined for all segments compared to the quarter ended March 31 2019.
Consolidated revenues decreased by 317.2 million to 1.9 billion for the year ended March 31, 2020, and by 39.6 million to 632.1 million for the three months ended March 31, 2020 compared to the same periods in fiscal year 2019.
I mean on lower sales volumes and prices.
Looking at the region.
Operating income for the other regions segment decreased by 40.8 million to 110.8 million for the fiscal year ended March 31, 2020, compared with fiscal year 2019 on lower sales and processing volumes.
In fiscal year 2020 volumes decreased in Africa on smaller Burley tobacco crop and lower carryover crop sales and results for Brazil were down on lower volumes under less favorable product mix compared to fiscal year 2019.
Results for Europe, also reflected lower processing and sales volumes for fiscal year 2020, while Asia for higher sales and trading volumes.
In the quarter ended March 31, 2020 operating income for the other regions segment decreased by 12.1 million to 42.6 million compared with the quarter ended March 31, 2019 on lower sales volumes offset impart by timing of receipts of distributions from unconsolidated.
Affiliates.
Higher sales volumes from Africa, and Asia, where more than offset by lower sales volumes in Brazil, and Europe in the quarter ended March 31, 2020 compared to the quarter ended March 31 2019.
Sales volumes in the quarter ended March 31, 2020 were reduced in part by shipment delays in certain regions due to the covered 19 pandemic.
Operating income for the North America segment of 8.4 million for the fiscal year ended March 31, 2020 was down by 14.7 million compared to the fiscal year ended March 31, 2019, primarily 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 in fiscal year 2018, due to reduced transportation availability in the United States.
In addition in the fiscal year ended March 31, 2020, carryover crop sales volumes were down on reduced sales of U.S. early tobaccos and current crop sales volumes were down in Mexico, and Guatemala compared to fiscal year 2019.
Operating income for the North America segment of 1.6 million for the quarter ended March 31, 2020 was down by 1 million compared to the same period for the prior fiscal year, mainly on lower sales volumes, partly offset by a better product mix.
The other tobacco operations segment operating income of 19.0 million increased by 6.8 million for fiscal year 2020, compared with the prior fiscal year.
For the quarter ended March 31, 2020, the segment incurred and operating loss of 3.3 million compared to operating income of 4.1 million in the same period last year.
In both periods for adult results for our dark tobacco operations reflected higher wrapper sales volumes and unfavorable foreign currency remeasurement comparisons due to the significant weakening of the Indonesian rupiah in the fourth fiscal quarter compared to the same periods in the previous fiscal year.
Results for our Oriental joint venture were down for fiscal year 2020, compared to the prior fiscal year, primarily from lower sales volumes and margins, partially offset by lower operating expenses as well as favorable currency Remeasurement and exchange variances.
For the quarter ended March 31, 2020 results for our Oriental joint venture improved on higher sales volumes unfavorable currency comparisons.
Results for our special services group were also lower in the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019 in part due to purchase accounting adjustment for the fruit Smart acquisition.
Selling general and administrative costs for the fiscal year ended March 31, 2020 decreased by 2.2 million to 222.9 million as lower compensation costs value added tax charges and customer claims costs as well as gains on sales of fixed assets were largely offset.
By unfavorable currency variances of approximately 13 million, primarily in Indonesia, Brazil and Mexico.
In the fourth quarter of fiscal 2020, selling general and administrative cost increased by 12.2 million compared to the quarter ended March 31, 2019 as unfavorable foreign currency comparisons of approximately 21 million, primarily in Indonesia, Brazil, Mozambique, and Mexico more.
As an offset lower compensation costs and a gain on sale of fixed assets.
As we move into fiscal year 2021, we're forecasting that global flue cured and Burley tobacco production will decline by about 7% and 10%, respectively, which we believe we'll keep flue cured tobacco in a slight oversupply position on Burley will remain in a balance supply physician.
Business activity during the first fiscal quarter is usually lower than in other quarters as crop purchases are continuing in Brazil, and just beginning in Africa.
As we continue to monitor the impacts of code 19, and all our global operations to date, we have not seen immaterial impact to our supply chain or seasonal planting or harvesting requirements.
In some regions, our processing facilities temporarily experienced partial or title closures.
Nearly all operations have resumed and we've instituted measures to protect our employees, including reduced staffing and social distancing.
We have experienced slower processing due to social distancing requirements, which may lead to later timing of shipments to our customers.
We've also taken steps at this time to conserve our liquidity position, including limiting most discretionary spending and non essential capital spending.
We currently have sufficient liquidity to meet our current obligations and business operations remain fundamentally unchanged other than shipping delays, which could impact quarterly comparisons.
We also expect the volatility in foreign currency exchange rates to continue during fiscal year 2021 that we cannot reasonably estimate the duration or extent about volatility.
Despite the ongoing challenges of the pandemic, we're continuing to position our company for success.
As part of our capital allocation strategy, we may disciplined investments and best tobacco and non tobacco businesses that we believe we'll be able to deliver shareholder value recognizing the strong demand for natural tobacco rappers we've taken steps to increase production in strategic regions to meet our customers ongoing and future demands.
Our acquisition of freight Smart Inc. In January 2020 represents a foundational staff in building out a broader plant based agro product services platform for which we maintain an active investment pipeline.
At the same time, we are focused on prudently managing our financial position I believed that we are well positioned to fund upcoming working capital needs, including any potential requirements due to the pandemics and take advantage of investment opportunities in our tobacco business.
We're also extremely proud that we are able to deliver value to shareholders through dividend increase as illustrated by our milestone Fiftyth annual dividend increase announced today.
At this time, we are available to take your question.
Okay.
Thank you at this time.
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No questions at this time presenters FIMI continue.
Thank you Sandy and thank all of you for joining us on our call today the safe.
Dave.
This concludes todays conference. Thank you everyone you may now disconnect.