Q1 2022 Universal Corp Earnings Call
[music].
Good day and thank you for standing by welcome to day Universal Corporation first quarter fiscal year 2022 earnings call. At this time all participants lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question.
During the session you will need to press star 1 on your telephone please be advised that today's conference is being recorded.
Require any further assistance you May press Star Zero, I would now like the hydrocarbon price of weird or you're.
For today Ms. Candace <unk>. Please go ahead.
Thank you Erica and thank you all for joining US today, George Freeman, our chairman President and CEO Ireson, Henske, our Chief operating officer, and Johan Kroner, Our Chief Financial Officer are here with me today and will join me in answering questions. After these brief remarks. This call is being webcast live and will be.
Available on our website and on telephone taped replay that will remain on our website through November 4.2021 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 and 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 that are based on our current knowledge and some assumptions about the future under 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.
This is of particular note during the current ongoing COVID-19, pandemic and the length and severity of the crisis and resultant economic and business impact also difficult to predict.
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, 2021, and form 10-Q for the most recently ended fiscal quarter such risks and uncertainties include but are not limited to the ongoing COVID-19 pandemic customer mandated timing.
Shipments weather conditions, political and economic environment government regulation, and taxation changes in exchange rates and interest rates industry consolidation and 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.
<unk>.
Our comments today may include non-GAAP financial measures for details on these measures, including reconciliations to the most comparable GAAP measures. Please refer to our current earnings press release.
We are off to a good start for fiscal year 2022 results for our tobacco operating operations segment improved on higher African carryover tobacco shipments and a favorable tobacco product mix in the 3 months ended June 32021, compared to the 3 months ended June 30.
2020, our ingredients operations segment, which includes our October 2020 acquisition of Sylva International delivered very strong performance in the 3 months ended June 32021.
It is exciting to begin to see the positive outcome from our capital allocation strategy, which we put in place in May 2018, with the goal of ensuring that we are well positioned for the future investments in our tobacco business have enabled us to expand the supply chain services, we provide our customers and to create footprint rationalization efficiency.
And we're seeing the returns from those investments in our result, our plant based ingredients platform is coming together nicely. We continue to believe we are on track for our ingredients businesses to meet our previously announced goal of representing 10% to 20% of our results in fiscal year 2022, we're excited.
At about the performance of our investments, thus far and will continue to seek prudent strategic opportunities to enhance our businesses and return value to our shareholders.
Turning to our results.
Net income for the quarter ended June 32021 was $6.4 million or 26 per diluted share compared with $7.3 million or 29 per diluted share for the quarter ended June 32020, excluding restructuring and impairment costs and certain other nonrecurring items detailed.
And other items in today's earnings release, net income and diluted earnings per share increased by $6.8 million and 28, respectively for the quarter ended June 32021, compared to the quarter ended June 32020.
Adjusted operating income also detailed in today's earnings release of $12.6 million increased by $8.3 million for the first quarter of fiscal year 2022, compared to adjusted operating income of $4.4 million for the first quarter of fiscal year 2021.
Consolidated revenues of $350 million for the first quarter of fiscal 2022 increased by $34.2 million compared to the same period in fiscal year 2021.
The increase was mainly due to the addition of the business acquired in October 2020, and the ingredients operations segment, partly offset by modestly lower comparative leaf tobacco sales volume.
Turning to the segments.
Tobacco operations in the first fiscal quarter is historically, a slow quarter for our tobacco businesses operating income for the tobacco operation segment increased by $3.8 million to $8.9 million for the quarter ended June 32021, compared with the quarter ended June 32020, although tobacco sales.
Volumes were down modestly segment results improved on carryover shipments product mix and increased supply chain services to customers in the quarter compared to the same quarter in the prior fiscal year.
Carryover crop shipments were higher in Africa, and the quarter ended June 32021, compared to the same quarter in the prior fiscal year in part due to some shipments that were delayed from fiscal year 2021.
Brazil experienced an improved product mix on lower volumes in the quarter ended June 32021, compared to the same period in the prior fiscal year when high volume of lower margin carryover crop shift.
Carryover tobacco crop shipments were lower and product mix was less favorable in Asia in the first quarter of fiscal year 2022, compared to the same quarter in fiscal year 2021.
And in the first quarter of fiscal year 2022, we also provided increased supply chain services to customers for wrapper tobacco compared to the same quarter in the prior fiscal year.
Selling general and administrative expenses for the tobacco operations segment were lower in the quarter ended June 32021, compared to June 32020, primarily on higher recoveries of value added taxes and advances to suppliers.
Yeah.
Operating income for the ingredients operations segment was $4.3 million for the quarter ended June 32021, compared to an operating loss of <unk> 7 million for the comparable quarter in the prior fiscal year results for the segment improved year over year on the inclusion of the October 2000.
<unk> 20th fill the acquisition for.
For the first quarter of fiscal 2022, our ingredients operations saw strong volumes in both human and pet food categories as well as some rebounds and demand from sectors that have been suffering during the ongoing COVID-19 pandemic selling.
Selling general and administrative expenses increased in the quarter ended June 32021, compared to the same quarter in the prior fiscal year on the addition of the acquired business.
Our tobacco plant based ingredients businesses are both currently performing according to our plans.
Like other industry, we are seeing some logistical constraints around the world with regard to vessel and container availability stemming from the ongoing COVID-19 pandemic. However at this time, we do not know what significant such constraints may have on shipment timing or our results. We are continuing to monitor these and other.
Pandemic related conditions, which affect our operations.
And lastly, as part of our ongoing efforts to set high standards of social and environmental performance to support a sustainable supply chain, we have developed targets to reduce greenhouse gas emissions, which are consistent with the levels required to meet the goals of the Paris agreement limiting global warming to well below 2 degrees.
Great above preindustrial levels are.
Our targets were recently approved by the science based targets initiative and reflect our commitment to reduce our global greenhouse gas emissions by 30% by 2030.
At this time, we are available to take your questions.
The floor is now open for questions.
If you have any question. Please press star 1 on your telephone keypad again Thats star 1 on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Okay.
Your first question comes from the line of Ann Gurkin from beef and pork and co. Your line is open. Please go ahead.
Good evening everybody.
Hey.
I have a couple of questions. Congrats on a terrific start to your fiscal year. Thank you very much.
Beginning with tobacco you talked about some carryover in Africa can you quantify what that contributed to the first quarter.
And we don't know when we go into the details because we always have some carryover here and there but.
Total you into in the fourth quarter that there were some shipments that got hung up.
Due to Covid, primarily some of the vessels just bypass some of the Africa ports and we saw that coming through the first quarter. This year.
And should we.
Should we think about any kind of timing of shipment changes for the balance of the year is there anything to call out at this point or is it too early.
It's too early and it really.
Pointed out really the constraints are there is certainly we would hope that we could see the light at the end of the tunnel, we can't see that yet depending on what shipping lanes you are looking at.
It is roughly in Asia, the shipping laying out of Asia as compared to some of the others, but still.
There are certainly some headwinds with regard to logistics.
Yes.
And then in terms of the leaf update it looks like barley numbers went up can you can you comment on how both flue cured and barley looks in terms of supply and demand.
Yes, we do see on the volume side. So we do we do see that the last 3 years the crops have declines around the world and we do see the bottleneck in the supply situation and we and when we look forward. We see that there is going to be an increasing production and day.
On the flue cured overall it is in balance, but we also have seen some pressure in some specific styles and qualities and also blend position Oriental overall, we see borrowings for the dark.
To wrap up we see increased the net.
Okay.
Candace do you have a worldwide uncommitted leaf inventory number.
Yes.
Okay.
We have 73 million kilos for the unsold flue cured and Burley as of 630, 21, which is down $21 million from 331 'twenty..1 the last number we gave you.
Okay, and then I asked a question I think every time, but Philip Morris or 1 of your large customers without talking about discontinuing.
Cigarette sales now they're outside and then 1 just continue cigarette sales within a decade in the U K. So how do you how do you plan your business. How do you address that that scenario and I don't think its just going to be the U K market I think that's going to move around globally.
Well, we believe that that is not going to be 1 solution that's going to that's good.
B for every day for every market and when we see what happens.
Recently with the reports from our major customers.
Compared to the past few years, whereas there was a decline between 2% to 3% right now we see the overall international market flipped.
Or almost fletch I think what is important also to consider here is the growth in the non combustible section that segment of the market that are referred to us some time ago, because we participate there we see some.
Portal.
In the heat not burn in the vaping and this a smokeless and we are participating in all of these different categories and we are also expanding our services into the supply chain. So.
That's the way we looked at it.
Okay. So that segways into 1 of my question is from your Investor presentation Thats on your website could you need to be part of the supply chain for next generation tobacco products. So is that.
What's you're referencing in that latest comment.
Yes, that's correct.
Okay great.
And then ingredients, it's nice to see that the business recover versus last year.
In terms of customer orders was was there any were there any accelerated orders or any kind of unusual order patterns in the quarter.
Or is this kind of a run rate we should think about.
Good day ingredients.
No.
And just again keep in mind force. This is the first quarter that we have swapped through operating there because that's important and then on top of that those logistical constraints.
It will have an impact I think later on this year on margins.
When you look at freight rates out of Asia at 5 times, what they were pre COVID-19.
And our guys are trying very hard to pass along those costs, but that will be next to impossible. So you will see a bit of pressure on the on the margins going forward were certainly talking to our customers about it and some of them certainly will share from those costs, but there will there will be again, some some headwinds there.
Do you contract with customers on an annual basis or do you have a pass through.
For higher freight cost or input cost per customers, how does that work.
It depends on the customer certainly a large group does have annual contracts.
But again, you have outs with regard to free and things like that unusual circumstances.
But again when the freight rates are as they are today.
There is just a difficult and we're bringing products out of Asia. Our way. So we are actually paying for those costs, so as compared to the tobacco, where most of the tobacco we settlement fob basis of those costs are.
For the accounts of the customers. So thats, where there is a bit of a difference but on the <unk> side when we bring those products over those costs are ours.
So it looks to me like there's a margin of 7.7% in the first quarter I don't know how to think about the margin for the segment long term.
How should I think about that.
Don't exactly know how you got back to dose those numbers, but.
<unk>.
I think you need to wait a couple of quarters. So you have some comparisons there and because again, we will slowly.
Go through it and you will see the full year come out and it will be a whole lot easier to take a look at it that way.
Keep in mind that you have.
Amortization in there and some other things.
Give us a couple of quarters and you will see.
Very good.
Happy with the results at the moment and it's really developing into a platform that we were looking for.
In terms of acquisitions I thought you all were kind of at your target for the near term in terms of investments are you are you still actively out there looking for businesses to acquire or add to the platform.
Yes.
Pipeline certainly is active.
And we will continue to look at any targeted accounts across the board that will help us to fill.
This platform into what we are looking at.
Sure.
Alright, and then going back to your Investor presentation on Slide 20, you put out average operating margin can you get back to that to that average operating margin.
In that presentation, you have been running below it since like 2013.2014.
Can you get back to that number of 200 million operating.
Income number.
We are certainly trying to get there and again with regard to due to the region in 2018, we.
Mark on the capital allocation strategy is to offset some of the.
The decline that we see in the future in tobacco, we have done a very good job on gaining market share.
And trying to keep it up.
<unk> seen in the quarter, but with regard to services and everything.
We're making gains there. So we're certainly striving to do to achieve those numbers, but again there are some headwinds and we just need to take it 1 step at a time.
Okay, and then sorry, 1 more thing on slide 23 in that presentation Capex has ramped up.
Going into 'twenty, 1 or so how should I think about capex for fiscal 'twenty 2.
From 'twenty 2 the numbers between 35 to 45.
That's what we have put in the filings.
Last year it was off a bit.
We bought from some warehousing related to the businesses.
And we certainly made some very good investments on the tobacco side to perform services.
Seeing the fruit sales right now.
Okay. That's great. Thank you all for taking all those questions I appreciate it.
I would like to even answer.
Okay.
Your next question comes from the line of Steve <unk> from Capitol Securities. Your line is open. Please go ahead. Thank you good afternoon everybody.
Good afternoon.
And it's true.
Couple of question I was going to ask but I do have a couple of follow up.
What do you just adding some flavor to the whole high cost of shipping currently out of Asia.
What scenario would it take to drive down the cost.
In your view and theoretically if that were to occur.
When would it start to impact your results did you say it would be 4 quarters out from now or would it be sooner.
It's certainly this I expect it to hit this fiscal year.
Probably the latter part of this fiscal year, depending on when the product is coming in and everything but again.
Containers were available pre COVID-19, certainly less than $5000 now you're at $15000 loss in it.
And along those costs.
We will be difficult, so that's where we see some of those headwinds.
Do if any of your.
Shipping folks given you any idea of what type of timeline, we might see in terms of decline in the race potentially.
Now we were hoping that comparable.
It would normalize.
At the beginning of Covid, we saw that some of the shipping lines, we're taking vessels out of rotation.
Most of those vessels have come back in however.
They are putting them on their most profitable line sure. Okay, and then their most profitable lanes. So.
Some of some of the areas, they're still as I pointed out to him. They were skipping force early on what we saw in March and we're now seeing net debt still is occurring in certain area. So again, it's going to take a little bit of time for this thing to work itself out hopefully by the end of the year at least we can see.
Your line at the end of the tunnel.
Okay.
Thank you very much and congrats on a good quarter.
Thank you from wonderful evening.
Again, if you would like to ask any question. Please go ahead and price star 1 on your telephone keypad.
As there are no further questions presenters. Please go ahead.
Thank you so much and thank you all for joining us on our call today to speak with you again next quarter.
Okay.
This concludes today's conference call. Thank you all for joining you may now disconnect.
Yeah.
Yeah.
Okay.
[music].
Yes.
Good day.
[music].
[music].
[music].
[music].
Good day and thank you for standing by welcome to day Universal Corporation first quarter fiscal year 'twenty 'twenty 2 earnings call. At this time, all participants lines are in a listen only mode.
Third the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded.
You require any further assistance you May press Star Zero, I would now like to hand, the corn price or weird.
Your speaker for today Ms. Candace <unk>. Please go ahead.
Thank you Erica and thank you all for joining US today, George Freeman, our chairman President and CEO Ireson Husky, our Chief operating officer, and Johan Kroner, Our Chief Financial Officer are here with me today and will join me in answering questions. After these brief remarks. This call is being webcast live and will be avail.
On our website and on telephone taped replay it will remain on our website through November 4.2021 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 and 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 that are based on our current knowledge and some assumptions about the future and are 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. This is.
A particular note during the current ongoing COVID-19, pandemic and the length and severity of the crisis and resultant economic and business impact also difficult to predict.
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, 2021, and form 10-Q for the most recently ended fiscal quarter such risks and uncertainties include but are not limited to the ongoing COVID-19 pandemic customer mandated timing.
Of shipments weather conditions, political and economic environment government regulation and taxation changes in exchange rates and interest rates industry consolidation and 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.
Sure.
Our comments today may include non-GAAP financial measures for details on these measures, including reconciliation to the most comparable GAAP measures. Please refer to our current earnings press release.
We are off to a good start for fiscal year 2022 results for our tobacco operating operations segment improved on higher African carryover tobacco shipments and a favorable tobacco product mix in the 3 months ended June 32021, compared to the 3 months ended June <unk>.
32020, our ingredients operations segment, which includes our October 2020 acquisition of Sylva International delivered very strong performance in the 3 months ended June 32021.
It is exciting to begin to see the positive outcome from our capital allocation strategy, which we put in place in May 2018, with the goal of ensuring that we are well positioned for the future investments in our tobacco business have enabled us to expand the supply chain services, we provide our customers and to create footprint rationalization efficiency.
And we are seeing the returns from those investments in our results.
Our plant based ingredients platform is coming together nicely. We continue to believe we are on track for our ingredients businesses to meet our previously announced goal of representing 10% to 20% of our results in fiscal year 2022. We are excited about the performance of our investments thus far and we will continue to seek proof.
Strategic opportunities to enhance our businesses and return value to our shareholders.
Turning to our results.
Net income for the quarter ended June 32021 was $6.4 million or 26 cents per diluted share compared with $7.3 million or 29 per diluted share for the quarter ended June 32020, excluding restructuring and impairment costs and certain other nonrecurring items detailed.
And other items in today's earnings release, net income and diluted earnings per share increased by $6.8 million in 2008, respectively for the quarter ended June 32021, compared to the quarter ended June 32020.
Adjusted operating income also detailed in today's earnings release of $12.6 million increased by $8.3 million for the first quarter of fiscal year 2022, compared to adjusted operating income of $4.4 million for the first quarter of fiscal year 2021.
Consolidated revenues of $350 million for the first quarter of fiscal 2022 increased by $34.2 million compared to the same period in fiscal year 2021 the.
The increase was mainly due to the addition of the business acquired in October 2020, and the ingredients operations segment, partly offset by modestly lower comparative leaf tobacco sales volume.
Turning to the segments.
Tobacco operations for the first fiscal quarter is historically, a slow quarter for our tobacco businesses operating income for the tobacco operations segment increased by $3.8 million to $8.9 million for the quarter ended June 32021, compared with the quarter ended June 32020, although tobacco.
Oil volumes were down modestly segment results improved on carryover shipments product mix and increased supply chain services to customers in the quarter compared to the same quarter in the prior fiscal year.
Carryover crop shipments were higher in Africa, and the quarter ended June 32021, compared to the same quarter in the prior fiscal year in part due to some shipments that were delayed from fiscal year 2021.
Brazil experienced an improved product mix on lower volumes in the quarter ended June 32021, compared to the same period in the prior fiscal year when high volume of lower margin carryover crop shift.
Carryover tobacco crop shipments were lower and product mix was less favorable in Asia in the first quarter of fiscal year 2022, compared to the same quarter in fiscal year 2021.
And in the first quarter of fiscal year 2022, we also provided increased supply chain services to customers for wrapper tobacco compared to the same quarter in the prior fiscal year.
Selling general and administrative expenses for the tobacco operations segment were lower in the quarter ended June 32021, compared to June 32020, primarily on higher recoveries of value added taxes and advances to suppliers.
Operating income for the ingredients operations segment was $4.3 million for the quarter ended June 32021, compared to an operating loss of zero point $7 million for the comparable quarter in the prior fiscal year results for the segment improved year over year on the inclusion of the October.
2020, so the acquisition from.
The first quarter of fiscal 2022, our ingredients operations saw strong volumes in both human and pet food categories as well as some rebound in demand from sectors that have been suffering during the ongoing COVID-19 pandemic.
Selling general and administrative expenses increased in the quarter ended June 32021, compared to the same quarter in the prior fiscal year on the addition of the acquired business.
Our tobacco plant based ingredients businesses are both currently performing according to our plans like other industry. We are seeing some logistical constraints around the world with regard to vessel and container availability stemming from the ongoing COVID-19 pandemic. However at this time, we do not know what significant such.
Constraints may have on shipment timing or our results. We are continuing to monitor these and other pandemic related conditions, which affect our operations.
And lastly, as part of our ongoing efforts to set high standards of social and environmental performance to support a sustainable supply chain, we have developed targets to reduce greenhouse gas emissions, which are consistent with the levels required to meet the goals of the Paris agreement limiting global warming to well below 2 degrees.
Great above preindustrial levels are.
Our targets were recently approved by the science based targets initiative and reflect our commitment to reduce our global greenhouse gas emissions by 30% by 2030.
At this time, we are available to take your questions.
The floor is now open for questions.
If you have any question. Please press star 1 on your telephone keypad again, but star 1 on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Okay.
Your first question comes from the line of Ann Gurkin from David Bourg and co. Your line is open. Please go ahead.
Good evening everybody.
Hey.
I have a couple of questions. Congrats on a terrific start to our fiscal year. Thanks very much.
Beginning with tobacco you talked about some carryover in Africa can you quantify what that contributed to the first quarter.
And we don't normally go into the details because we always have some carryover here and there but.
Total U in the in the fourth quarter, there were some shipments that got hung up.
Due to Covid, primarily because some of the vessels just bypass some of the Africa force and we saw that coming through the first quarter issue.
And should we.
Should we think about any kind of timing of shipment changes for the balance of the year is there anything to call out at this point or is it too early.
It's too early and it really.
Pointed out really the constraints are there is certainly we would hope that we could see the light at the end of the tunnel, we can't see that could get depending on what shipping lanes you are looking at.
It is roughly in Asia to shipping laying out of Asia as compared to some of the others, but still.
There are certainly some headwinds with regard to logistics.
Okay.
And then.
In terms of the leaf update it looks like Burley numbers went up can you can you comment on how both flue cured burley looks in terms of supply and demand.
Yes, we do see on the wireless side. So we do we do see that the last 2 years the crops have declines around the world and we do see the bar on the supply situation and we and when we look forward, we see that there's going to be increasing production in the Barnett on the flow.
Look George overall it is in balance, but we also have seen some pressure on some specific styles and qualities and also planned position Oriental overall, we see borrowings for the dark.
And the rubber we see increased the net.
Okay Ken.
Candace do you have a worldwide uncommitted leaf inventory number.
Yes.
Yes.
Yeah.
We have 73 million kilos for the unsold flue cured and Burley as of 630, 21, which is down 21 million from $3.31 21 for the last number we gave you.
Okay, and then I ask a question I think every time, but Philip marshes, or 1 of your large customers without talking about discontinuing cigarettes.
Cigarette sales now they're outside of net 1 discontinue cigarette sales within a decade in the U K. So how do you how do you plan your business. How do you address that that scenario and I don't think it's just going to be the U K market I think it's going to move around globally.
Well, we believe that that is not going to be 1 solution that's going to that's good.
The update for every for every markets and when we see what's happened.
Simply with the reports from our major customers.
Compared to the past few years, whereas there was a decline between 2% to 3% right now we see the overall international market flipped.
Or almost flat I think what is important also to consider here is the growth in the non combustible section that.
Net of the market that are referred to some time ago, because we participate there.
See some.
Importantly in the heat not burn in the vaping and this smokeless and we are participating in all of these different categories and we are also expanding our services into the supply chain. So.
That's the way we look at it.
Okay. So that segways into 1 of my question is from your Investor presentation Thats on your website continuing to be part of the supply chain for next generation tobacco products. So is that.
Whats youre referencing in that latest comment.
Yes, that's correct.
Okay, Okay great.
And then ingredients, it's nice to see the the business recover versus last year.
In terms of customer orders was was there any were there any accelerated orders or any kind of unusual order patterns in the quarter.
Or is this kind of a run rate we should think about.
So the ingredients.
No.
And just again keep in mind force. This is the first quarter net we have swaps currently in there. So that's important and then on top of that dose logistical constraints.
It will have an impact I think later on this year on margins.
When you look at freight rates out of Asia at 5 times, what they were pre COVID-19.
And our guys are trying very hard to pass along those costs, but that will be next to impossible.
You will see EBIT of pressure on the on the margins going forward were certainly talking to our customers about it and some of them certainly will share in those costs, but there will there will be again, some some headwinds there.
Do you do your contract with customers on an annual basis or do you have a pass through.
For higher freight cost or input cost per customers, how does that work.
It depends on the customer certainly large group does have annual contracts.
Again, you have out with regard to freight and things like that unusual circumstances.
But again when the freight rates are as they are today.
There is just a difficult and we're bringing products out of Asia. Our way. So we are actually paying for those costs, so as compared to the tobacco, where most of the tobacco settlement applebee basis from those costs are.
440 accounts of the customers, so thats, where there is a bit of a difference but on the ingredient side when we bring those products over those costs are ours.
It looks to me like within a margin of 7.7% in the first quarter I don't know how to think about the margin for the segment long term.
Should I think about that.
Don't exactly know how you got back from those those numbers, but again.
Thank you need to wait a couple of quarters. So you have some comparisons there and because again, we will slowly.
Go through it and you will see the full year come out and it will be a whole lot easier to take a look at it that way.
Now keep in mind that you have.
Amortization in there and some other things.
Yes.
Give us a couple of quarters and you will see we are very very happy.
Happy with the results at the moment and it's really developing into a platform that we were looking for.
And in terms of acquisitions I thought you all were kind of at your target for the near term.
Terms of investments are you are you still actively out there looking for businesses to acquire or add to the platform yes.
The pipeline certainly is active.
And.
We will continue to look at any targeted accounts across the board that will help us develop this platform into what we are looking at to be.
Future.
Alright, and then going back to your Investor presentation on Slide 20, you put out average operating margin can you get back to that to that average operating margin.
In that presentation, you've been running below it since like 2013.2014.
Can you get back to that number of 200 million operating income.
Income number.
We are certainly trying to get there and again with regard to this region in 2018, we.
Mark on this capital allocation strategy is to offset some of the dike.
Declines that we see in the future as backup we have done a very good job on gaining market share.
And trying to keep it up.
<unk> seen in the quarter, but with regard to services and everything.
We're making gains there. So we're certainly striving to do to achieve those numbers, but again there are some headwinds and we just need to take it 1 step at a time.
Okay, and then sorry, 1 more thing on slide 23 in that presentation Capex has ramped up.
Wanted to 'twenty, 1 where should how should I think about capex for fiscal 'twenty 2.
From 'twenty 2 the number is between $35.45.
That's what we have put in the filings.
Last year it was off a bit.
We bought from some warehousing related to these businesses and we certainly made some very good investments and it's on the tobacco side to performance services that we're seeing the fruits of right now.
That's great. Thank you all for taking all those questions I appreciate it.
I would like to even Andrew.
Okay.
Your next question comes from the line of Steve Marotta from capital Securities. Your line is open. Please go ahead. Thank you and good afternoon everybody.
No no.
And answered and asked a couple of questions I was going to ask but I did have a couple of follow ups.
What do you just adding some flavor to the whole high cost of shipping currently out of Asia.
And what scenario would it take to drive down the cost in your view and theoretically if that were to occur.
When would it start to impact your results did you say it would be 4 quarters out from now or would it be sooner.
It's certainly this I expect it to hit this fiscal year.
Probably the latter part of this fiscal year, depending on when the product is coming in and everything but again.
Containers were available pre COVID-19, certainly less than $5000 now you're at $15000 loss and its just.
Passing along those cost.
It will be difficult, so that's where we see some of that those headwinds.
If any of your shipping.
Shipping folks, giving you any.
Idea of what type of timeline, we might see in terms of decline in the race potentially.
We were hoping that comparable.
Normalized.
At the beginning of Covid, we saw that some of the shipping line, we're taking vessels out of rotation I think most of those vessels have come back however.
They are putting them on their most profitable line sure and then their most profitable lanes. So.
Some of the some of the areas they're still.
As I pointed out the <unk>. They were skipping force early on what we saw in March and we're now seeing net debt still is occurring in certain areas. So again, it's going to take a little bit of time for this thing to work itself out hopefully by the end of the year at least we can see light at the end of the tunnel.
Okay.
Thank you very much and congrats on a good quarter.
I appreciate it keep expenses 1 of the reasons.
Again, if you would like to ask any question. Please go ahead and price SAR 1 on your telephone keypad.
As there are no further questions presenters. Please go ahead.
Thank you so much and thank you all for joining us on our call today to speak with you again next quarter.
Okay.
This concludes today's conference call. Thank you all for joining you may now disconnect.