Q3 2024 Universal Corporation Earnings Call

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Operator: Good afternoon, ladies and gentlemen, and welcome to the Universal Corporation third quarter fiscal year 2024 earnings conference call. At this time, all lines are in a listen-only mode.

Good afternoon, ladies and gentlemen, and welcome to that again first of all Corporation third quarter fiscal year 2024 earnings Conference call.

At this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session. If at any time during the call you require immediate assistance. Please press star zero for operator.

Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, February 7, 2024. I would now like to turn the conference over to Jennifer Rowe, Assistant Treasurer at Universal Corporation. Please go ahead.

It's being recorded on Wednesday February seven 2024, I would now like to turn the conference over to Jennifer <unk> Assistant Treasurer at Universal Corporation. Please go ahead.

Thank you for joining us George Freeman, our chairman President and CEO Ireton 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.

Jennifer Rowe: Thank you for joining us. George Freeman, our Chairman, President, and CEO, Ayrton 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 the website through February 7th, 2024. Other than the replay, we have not authorized and disclaimed responsibility for any recording, replay, or distribution of any transcription of this call.

This call is being webcast live and will be available on our website and on telephone taped replay.

They remain on the web site through February seven 2020 for.

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.

Jennifer Rowe: 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 only as of today. 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, 2023. Such risks and uncertainties include, but are not limited to, impacts of pandemics, customer and 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.

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.

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, 2023, such risks and uncertainties include but are not limited to.

Impact of 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.

Jennifer Rowe: 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 the most comparable GAAP measures, please refer to our current earnings press release. Universal Corporation again delivered strong financial and operational performance in the third quarter of fiscal year 2024.

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 the most comparable GAAP measures. Please refer to our current earnings press release.

Yeah.

Universal Corporation again delivered strong financial and operational performance in the third quarter of fiscal year 2024.

Jennifer Rowe: Operating income and net income for the quarter were up 13% and 28%, respectively, relative to the third quarter of fiscal year 2023, which helped increase our operating income and net income for the nine months of fiscal year 2024 by 20% and 13%, respectively, compared to the same period last fiscal year. Our tobacco business continued to perform very well, driven by a favorable product mix and strong demand from our customers. Improved margins, larger crops in Africa, and strong tobacco shipments in line with our expectations benefited our results in the nine months and quarter ended December 31, 2023, compared to the same period last fiscal year. We continue to be encouraged by the solid progress the team is making to expand our ingredients business.

Operating income and net income for the quarter were up 13% and 28% respectively relative to the third quarter of fiscal year, 2023, which helped to increase our operating income and net income for the nine months of fiscal year, 2024 by 20% and 13% respectively compared to the same peer.

<unk> last fiscal year.

Our tobacco business continued to perform very well driven by a favorable product mix and strong demand from our customers.

Improved margins larger crops in Africa, and strong tobacco shipments in line with our expectations benefited our results in the non and quarter ended December 31, 2023 compared to the same periods last fiscal year.

We continue to be encouraged by the solid progress the team is making to expand our ingredients business. The investments we have made to build out the research and development and corporate sales teams are starting to gain momentum and has positioned us for future growth.

Jennifer Rowe: The investments we have made to build out the research and development and corporate sales teams are starting to gain momentum and have positioned us for future growth. Some financial highlights for the nine months and quarter ended December 31, 2023. Net income for the nine months was $79.3 million, or $3.17 per diluted share, and was $53.2 million, or $2.12 per diluted share, for the quarter ended December 31, 2023.

Some financial highlights for the nine months and quarter ended December 31 2023.

Net income for the nine months was $79 3 million or $3 17 per diluted share and was $53 $2 million or $2 12 per diluted share for the quarter ended December 31 2023.

Jennifer Rowe: Excluding certain non-recurring items detailed in today's press release, net income increased by $12.6 million and diluted earnings per share increased by 49 cents for the nine months, and Net Income and Diluted Earnings Per Share increased by $12.1 million or $0.49 per share, respectively, for the quarter ended December 31, 2023, compared to the same period last fiscal year. Operating income of $153.8 million for the nine months ended December 31, 2023, increased by $25.1 million. And operating income for the quarter of $87.5 million increased by $9.9 million. Selling general and administrative expenses were up $21 million in the 9 months on higher compensation costs and up $10.6 million in the quarter ended December 31, 2023, largely on higher compensation costs and unfavorable foreign currency comparisons compared to the same periods last fiscal year.

Excluding certain nonrecurring items detailed in todays press release net income increased by $12 6 million and diluted earnings per share increased by 49 for the nine months.

And net income and diluted earnings per share increased by $12 1 million or <unk> 49 per share respectively for the quarter ended December 31, 2023 compared to the same periods last fiscal year.

Operating income of $153 $8 million for the nine months ended December 31, 2023 increased by $25 1 million and operating income for the quarter of $87 $5 million increased by $9 9 million.

Selling general and administrative expenses were up $21 million in the nine months on higher compensation costs and up $10 $6 million in the quarter ended December 31, 2023, largely on higher compensation costs and unfavorable foreign currency comparison compared to the same period last fiscal year.

Year.

Jennifer Rowe: Some highlights for our segment. Operating income for the tobacco operations segment increased by $29.9 million to $148.9 million for the nine months and by $10.5 million to $87.6 million for the quarter ended December 31, 2023, compared to the nine months and quarter ended December 31, 2022. Tobacco Operation Segment Operating Income was up largely on higher prices in a more favorable product mix, partially offset by lower tobacco sales volume. For the nine months and quarter ended December 31, 2023, African crops were larger, and carryover crop shipments from South America were significantly lower compared to the same period in fiscal year 2023.

Some highlights for our segments.

Operating income for the tobacco operations segment increased by $29 9 million to $148 $9 million for the nine months and by $10 5 million to $87 6 million for the quarter ended December 31, 2023, compared to the nine months and quarter ended.

December 31 2022.

Tobacco operations segment operating income was up largely on higher prices and a more favorable product mix, partially offset by lower tobacco sales volume.

In the nine months and quarter ended December 31, 2023 African crops were larger and carryover crop shipments from South America were significantly lower compared to the same periods in fiscal year 2023.

Operating income for the ingredients operations segment was $5 million and $2 $2 million, respectively for the nine months and quarter ended December 31 2023.

Jennifer Rowe: Operating income for the ingredients operation segment was $5 million and $2.2 million, respectively, for the nine months and quarter ended December 31, 2023. In the quarter ended December 31, 2023, operating income for our ingredients operation segment was in line with results for the same quarter in the prior fiscal year, as incremental revenue and margins from the sale of new products offset the effects of market challenges for our core products and higher expenses resulting from the investments that we were making to position the segment for future growth. Operating income for the segment for the nine months ended December 31, 2023, was lower as compared to the same period in the prior year, mainly as a result of lower operating income in the first quarter of the current fiscal year.

In the quarter ended December 31, 2023 operating income for ingredients operation segment was in line with results for the same quarter in the prior fiscal year as incremental revenue and margin from the sale of new products offset the effects of market challenges for our core products and higher expenses, resulting from the investments.

Is that where you are making to position the segment for future growth.

Operating income for the segment for the nine months ended December 31, 2023 was lower as compared to the same period in the prior year, mainly as a result of lower operating income in the first quarter of the current fiscal year.

Jennifer Rowe: Results for the first quarter of fiscal year 2024 were negatively impacted by customer inventory recalibration. As we enter our last quarter of fiscal year 2024, global leaf supply for all types of leaf tobacco continues to be, and as of December 31, 2023, our uncommitted tobacco inventory was at a low level of 8%. While we expect the global leaf tobacco supply to remain tight in fiscal year 2025, in part due to El Nino weather conditions, we believe the strength of our diverse global footprint will help us satisfy our customers' leaf tobacco needs. In our ingredients business, we are pleased with the progress. We are making an expansion of our processing capabilities at our ingredients facility in Lancaster, Pennsylvania. We expect those resources to be fully operational in the third quarter of fiscal year 2025 and positively contributing to our earnings as soon as fiscal year 2026. Another important achievement in fiscal year 2024 has been the progress we made to advance Universal's global sustainability agenda.

For the first quarter of fiscal year 2024 were negatively impacted by customer inventory recalibration.

As we enter our last quarter of fiscal year 2024, global leaf supplier for all types of leaf tobacco continues to be.

And as of December 31, 2023 are uncommitted tobacco inventory was at a low level of 8%.

While we expect global leaf tobacco supply to remain tight in fiscal year 2025, and part due to El Nino weather conditions, we believe the strength of our diverse global footprint will help us satisfy our customers' leaf tobacco needs.

With our ingredients business, we are pleased with the progress.

We are making on an expansion of our processing capabilities at our ingredients facility in Lancaster, Pennsylvania.

We expect those resources to be fully operational in the third quarter of fiscal year 2025, and positively contributing to our earnings as soon as fiscal year 2026.

Another important achievement in fiscal year 2024.

Has been the progress we made to advance Universal's global sustainability agenda.

Jennifer Rowe: These include the December publication of our 2023 Sustainability Report and our recently announced participation in a solar project that we believe will help us meet our target to reduce operational greenhouse gas emissions by 30% by 2030. We are pleased with our sustainability advances, and we continue to seek opportunities to further promote sustainability in our business. We are proud of our performance thus far in fiscal year 2024. We believe our strategy of maximizing opportunities in our tobacco businesses by capitalizing on our industry-leading market position in the primary exporting regions and our robust sustainability practice, while at the same time investing for growth in our ingredients business, continues to serve us well. Demand for leaf tobacco and our relationships with our long-standing and diverse customer base remain strong.

These include the December publication of our 2023 sustainability report and our recently announced participation in our solar projects that we believe will help us meet our target to reduce operational greenhouse gas emissions by 30% by 2030.

We are pleased with our sustainability advances and we continue to seek opportunities to further promote sustainability in our business.

We are proud of our performance thus far in fiscal year 2024, we believe our strategy of maximizing opportunities in our tobacco businesses by capitalizing on our industry, leading market position and the primary exporting regions and our robust sustainability practices.

While at the same time investing for growth in our ingredients business continues to serve us well.

Demand for leaf tobacco, and our relationships with our longstanding and diverse customer base remains strong and our position in the tobacco business can offer us opportunities in the future.

Operator: And our position in the tobacco business can offer us opportunities in the future. We continue to make measured and thoughtful progress on our ingredients platform, and we are excited about the opportunities for our business. We believe that we are on the right path for a successful future. At this time, we are available to take your questions. Thank you. And, ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your telephone keypad. You will hear a three-tone prompt acknowledging your request, and your questions will be answered in the order they are received. Should you wish to decline from the polling process, please press the star followed by the number two.

We continue to make measured and thoughtful progress on our ingredients platform and we're excited about the opportunities for our business. We believe that we are on the right path for a successful future.

At this time, we are available to take your questions.

Thank you and ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your telephone keypad, you will hear at deep on from acknowledging your request and Youre questions will be pulled into order. They are received.

If you wish to decline trend appalling process. Please press the star followed by the number two and if in case, you're using a speaker phone. Please see 10 said before pressing any keys one moment. Please for your first question.

Operator: And if, in case, you're using a speakerphone, please keep the handset before pressing any keys. One moment, please, for your first question. And your first question comes from the lineup: Ann Gurkin from Diebenport. Your line is open. Good evening, everybody.

And your first question comes from the lineup Ann Gurkin from deep import your line is open.

Good evening, everybody and congratulations on good numbers.

Ann Holden Gurkin: Congratulations on the good numbers. Thank you. Thank you, Ann. And also, a big congratulations on your progress versus your sustainability goals. That is well done.

Thank you, Rob and also a big congratulations on your progress versus your sustainability goals.

Ann Holden Gurkin: A lot of kudos to you for achieving those goals and maybe even achieving them ahead of time. I wanted to start, if I may, with the ingredients segment. I have a number of questions.

Well, Don a lot of kudos to you all for achieving those goals and maybe even achieving them ahead of time.

Thank you.

I wanted to start if I may with the.

The ingredient segment to have a number of questions.

Unnamed Speaker: Operating profit of $2.2 million. You just talked about the highlights. Sales of new products but also sales of core products or existing products at a lower margin and also some additional costs for investing for future growth. Can you break out those additional cost components kind of what's an underlying operating profit number without the investment costs in it for the ingredient segment? And, as you all know, we don't break out individual pieces. However, what we can tell you is that, you know, you're now seeing a fairly complete R&D and commercial group cost structure. So we've only seen a glimmer of the benefits of these investments, and we expect it will take until 2026, as Jennifer said, until we see positive earnings from them. As we told you previously, we're making some significant investments in the R&D area as well as in the commercial group. But those investments will take a little bit of time for those to really show earnings. On top of that, as Jennifer pointed out, the facility in Lancaster won't come online until later this year.

So operating profit of $2 2 million.

You just talked about highlights.

Sales of new products, but also sales of core products or existing products at lower margin and also some additional costs for investing for future growth can you break out those additional that cost component kind of what's an underlying.

Operating profit number without the investment cost in it for the ingredient segment.

Yeah.

And as you well know we don't break out individual pieces. However, what we can tell you is that you know youre now seeing a fairly complete R and D and commercial cost structure.

And so we only have seen a glimmer of the benefits of these investments and we expect it will take until 2026 as Jennifer said do we see positive earnings from these.

Sure.

As we told you previously you were making some significant investments in the R&D area as well as in the commercial group.

So.

Those investments it will take a little bit of time for those to really show.

Earnings on.

On top of that of course, as Jennifer pointed out the facility in Lancaster won't come online until later this year.

Unnamed Speaker: And at that point in time, we'll be able to actually produce that product. So again, it will take a little bit of time for us to get there. We had a couple of weak quarters early on.

Yes.

And at that point in time, we will be able to actually produce that product. So again, it will take a little bit of time for us to get there. So we had a couple of weak quarters early on Andrew.

Unnamed Speaker: There is still some weakness in the core products, but we are seeing some of those benefits from these commercial folks that we have hired and, especially, the R&D that we pointed out where, you know, there are some new products that we have put out there, which will be more sticky, which add value, which you margin up. So all that looks positive, but it's going to take a little bit of time for us to truly see the benefits of all these investors. Okay, so the sequential slowdown from Q2 to Q3, maybe it's partially seasonal, but partially reflecting a step up in these investments. Is that kind of fair to think about it? Yeah, that is fair.

Still some weakness in the core products, but we are seeing some of those benefits from these commercial folks that we've hired and especially with your R&D.

We pointed out where.

There are some new products that we have put out there, which will be more sticky, which add value, which you margin up so all of that looks positive but it's.

It's going to take a little bit of time for <unk>.

But to truly see the benefit of all of these investments.

Okay. So the sequential slowdown from Q2 to Q3, maybe it's partially seasonal but partially reflecting a step up in these investments is that kind of fair to think about it.

That is fair.

And that level of investment.

Ann Holden Gurkin: And that level of investment should continue in Q4 or fiscal 2025. So we'll think about the margin kind of in the low single-digit range going forward because of the level of investments in the mix of business. Or how do I think about margin progression? I expected it to continue to strengthen through fiscal 24 and then into 25, but should that change that thought process?

Investments should continue Q4, 'twenty fiscal 2025, so we'll think about the margin kind of in the low single digit range going forward because of the level of investments in the mix of business or how do I think about margin progression I had expected it to continue to strengthen.

Through fiscal 'twenty, four and then into 'twenty five, but if that thought process should that change that thought process well as I pointed out again.

Unnamed Speaker: Well, as I pointed out, again, the platform, the commercial group, the R&D group is pretty much built out. So those costs are now baked in. And, you know, you might have a person here, a person there, but at the end of the day, those costs are in, and they're going to be around for a while. So the question there becomes... How much more can you sell? At the moment, the capacity is limited

The platform.

Commercial group the R&D group is pretty much full out so those costs are now baked in and you might have the person you reverse in there, but it does cost story and theyre going to be around for a while.

So the question there becomes.

How much more can you sell at the moment the capacity is limited yes, we still have capacity on core products, but in order to sell these new products that we were going out selling with your R&D group with the help of the R&D group.

Unnamed Speaker: Yes, we still have capacity for core products, but in order to sell these new products that we're going out selling with the R&D group, with the help of the R&D group, you know, you need to get that factory online, and that's not going to happen for a little bit. That's why we're saying it's going to take a little bit of time. You know, again, we had a very weak first quarter where we took some inventory write-downs because raw material prices were coming down faster than anticipated.

You would need to get that factory online and that's not going to happen for a little bit. That's why we're saying you're just going to take a little bit of time again, we had a weak very weak first quarter, where we took some inventory write downs because raw material prices were coming down faster than anticipated we were sitting on a little bit of inventory there so but in total raw materials.

Unnamed Speaker: We're sitting on a little bit of inventory there, but in total, raw material prices are coming down. So from a revenue similar to tobacco, when green prices on tobacco come down, you just pass that on. So we'll see where we end up with the margins.

Prices are coming down so.

From a revenue similar to tobacco when green prices on tobacco come down you'd just pass that along.

So, we'll see where we end up with the margin the margin percentages are holding up really nicely at the moment and we only think thats going to.

Unnamed Speaker: The margin percentages are holding up really nicely at the moment, and we only think that's going to be better in the future, you know, again, because of the R&D, the stickiness of the new products that we're developing, and all those things that come with this new investment we're making. So what I think should be a high single-digit operating margin target for this ingredient segment business; I should be thinking more about hitting that target in fiscal 26. I'm not going to give you an exact number, but we should see improvement in the future because, again, otherwise we wouldn't make these investments. These are sizable investments, and we need to see good returns on those investments. And the pace of investments, is it taking a little bit longer for the investments in Lancaster? You brought CapEx down a little bit. Is that maybe a reflection of maybe the timeline for investing in the ingredients business, or is there anything else to read into that? No, there is not.

To be better in the future again because of the RMB the stickiness of the new products that we're developing and all those things that come with these new investments we're making.

So what I think should be high single digit operating margin target for the ingredients segment business actually thinking about hitting that target more in fiscal 'twenty six.

Okay.

I am not going to give you an exact number but we should see improvement in the future.

Again.

Otherwise we wouldn't make these investments these are sizable investments.

And we need to see.

Good returns on those investments and the pace of investments is it taking a little bit longer.

For the investments in Lancaster, I, you brought capex down a little bit.

Is that a reflection of maybe the timeline for investing in ingredients business or is there anything else to read into that.

Ann Holden Gurkin: It was a bit of a delay getting some of the approvals, and when the facility comes online, you know, we have to do trial runs, and we have to do some other things. So you know, it's taking a little bit longer than anticipated. We're working as fast as we can, you know, everybody's screaming for the product, and until we can make it, we can't sell it. So certainly, everybody is fully aware that we want to put it online as quickly as we can, but we have to be conscious of. You know, being able to make the product right and everything being in order in that facility.

It was a bit of a delay getting some of the approvals.

And when the facility comes online.

We have to do trial runs and we have to do some other things so it's.

It's taking a little bit longer than anticipated, we're working as fast as we can everybody screaming for product and then until we can make it we can't sell it. So certainly everybody is fully aware that we want to put it on as quickly as we can but we have to be conscious of.

Being able to make the product right and everything being an order in that facility.

Unnamed Speaker: And the increase in the sales force, I think some of the opportunity was to try to cross-sell products among customers. Are you achieving any of that ability with your new product sales? Yes, we are. As we pointed out previously, again, with the help of the R&D group, we are using, you know, people from the different companies that we bought to go to customers with cross products, you know, a little bit of a beverage, a little bit of a dry product in there that is, again, slightly different, but it adds value, and you can margin up on those things because, again, if they buy them Great. Okay, great.

The the.

The increase in sales force I think some of the opportunity was to try to cross sell <unk>.

Alex among customers are you achieving not any of that ability with your new product sales.

Yes, yes, we are as we pointed out previously again with the help of the R&D group we are using.

People from from the different companies that we bought to go to customers with.

Yes.

Products little bit of a beverage a little bit of a dry product in there that is again slightly different but it adds value.

You can marching up on those things because again, if you have a product that is unique.

That's great okay, great switching over to tobacco.

Ann Holden Gurkin: Switching over to tobacco. What should I think about sales volumes and fiscal 25, given that it looks like the industry or the outlook for the global crop has tightened more, particularly in South America? How do I think about that top line or those volumes pricing fiscal 25 for tobacco? As we stated, we continue seeing strong demand for all varieties of tobacco that we produce. And, of course, the El Nino effect is also present in South America and Brazil.

How should I think about sales volumes in fiscal 'twenty five given that it looks like the industry or the outlook for the global crop has tightened more particularly in South America, how do I think about that top line or are those volumes pricing fiscal 'twenty five for tobacco as we as we stated we continue seeing strong demand for.

Or all varieties of tobacco that we produce.

Of course.

Minimum effect is there in South America, and Brazil, we estimate about 20% reduction of that crop sizes, there as a country.

Unnamed Speaker: We estimate about a 20% reduction in that crop size there as a country. And in Africa, we had some rains, and the transplanting of tobacco is completed. And right now, we are seeing a dry spell right there, but hopefully, in the next coming weeks, we're gonna see some rain. Tobacco is a very resilient plant.

In Africa, we have some rains in the transplanting after a buck was completed.

And right now we are seeing a dry spell right there, but hopefully in the next coming weeks youre going to see some rain tobacco is a very resilient plant.

Unnamed Speaker: And so we see shipments now, not just for the fiscal year 2025 but also still in the last quarter of 24. If you look at our balance sheet, we have over $1 billion of tobacco inventory. So we are estimating and projecting to just substantially ship out some of that tobacco that we have. As we stated, we have an uncommitted inventory of 8%, which is 0%. And part of that tobacco, of course, always the cutting time that it's March.

So we see all saw shipments now not just for the fiscal year 'twenty 'twenty 'twenty five but also still in the last quarter of 24. If you look at our balance sheet, we have over $1 billion of tobacco inventory. So we are estimating projecting to substantially.

They ship out some of that tobacco that we have as we stated we have uncommitted inventory of 8%, which is an oak.

Part of that toolbox before as always.

Cutting timed out its march and part of that tobacco might fall into the next fiscal year.

Ann Holden Gurkin: And part of that tobacco might fall into the next fiscal year. OK, and then. Regarding the tobacco, do you still expect it? I guess I'm looking for a worldwide, sorry, uncommitted leaf number.

Okay and then.

Regarding the <unk>.

Tobacco do you.

Okay.

I guess I'm looking for a worldwide uncommitted leaf number.

Jennifer Yes, it was 14 million kilos at the end of December.

Ann Holden Gurkin: Yes, it was 14 million kilos at the end of December. Great. And then in your, I guess, investor presentation, you did talk about in the prior presentation about other tobacco businesses, talked about opportunities to service customers, sheet tobacco, liquid nicotine, but you took out lab services and the new investor presentation. Is there anything to read into that?

Okay great.

Great and then in your Investor presentation, you did talk about.

The prior presentation under other tobacco businesses talked about.

Opportunities to to service customers sheet tobacco.

Liquid nicotine, but you took out lab services and the new Investor presentation is there anything to read into that is that a.

Unnamed Speaker: Is that a change in direction in terms of services offered to customers? In that case, specifically regarding the labs, we discontinued that service that we were providing because it was underperforming according to, you know, the targets that we have.

A change in direction in terms of services offering customers.

Yes in that case, specifically about the labs will discontinue that service in fact, we were providing was underperforming quarter tool.

The targets that we have but on the other areas, we continue seeing opportunities, especially in the sheet products that we have we have projects ongoing as we speak here.

Unnamed Speaker: But in other areas, we continue seeing opportunities, especially in the sheet products that we have. We have projects ongoing as we speak here. And, yeah, we continue seeing opportunities, not just that, but in the services side as well. We also stated in previous quarters that in our dark tobacco operations, we are also taking a step further into servicing, you know, the RAPA sorting and bobinizing some of the products for the cigar industry and mass cigar industry. So we see, and we continue to see good opportunities there? And are you gaining market share in terms of tobacco leaf sales?

Yes.

Do you see opportunities not just there but in the services side as well. We also stated in quarters before that's on our dark tobacco operations were also taking a step further into servicing the rubber sorting and organizing so almost.

For the.

Cigar Hugo boss regarding industry. So we see we continue to see good opportunities there.

And are you gaining market share in terms of tobacco leaf sales.

Ann Holden Gurkin: Yes, according to our database, yes, we are gaining market share. Great, congrats. And then also, in this investor presentation, there's a page talking about the increase in working capital needs for fiscal 23, and how do I think about that in fiscal 24 and 25? And if that number comes down, which I think it would, what is the potential use for that freed up cash?

Yes, according to our database just gaining market share.

Great Congrats.

Also on this investor presentation, there is a.

Page talking about the increase in working capital needs.

<unk> 23, and how do I think about that in fiscal 'twenty, four and 'twenty five.

And as that number comes down which I think it would.

What is the potential use for that.

Freed up cash.

Okay.

Ann Holden Gurkin: Well, and as you all know, it all depends on the size of the crops, the pricing of the crops, and the currency of those crops, so hopefully you're right and we certainly see that working capital coming down a little bit going forward. When that frees up, we certainly have plenty of investments on both the tobacco side as well as the ingredient side where we can use those funds to add value and create shareholder value. Okay. And then, can you help me at all with SG&A expenses for fiscal 25? www.larryweaver.com, as pointed out. Just now, again, I think this one was slightly elevated. I do have to say that 78 was slightly higher than we thought. But again, you know, foreign currency comparisons compared to last year. Last year it was quite low.

Well and as you all know it all depends on the size of the crops pricing of the crops currency of those crops. So hopefully you are right and we certainly see that working capital coming down a little bit going forward.

When that freeze up we certainly have plenty of investments on both the tobacco side as well as the ingredient side, where we can use those funds to add value.

And create shareholder value.

Okay.

Okay.

And then can you help me at all with SG&A expenses for fiscal 'twenty five.

As pointed out.

Just now again I think we this one was slightly elevated I do have to say.

78 <unk>.

Slightly higher than we thought but again.

And.

Foreign currency comparisons compared to last year last year was quite low.

Unnamed Speaker: We now have some performance comps that prop that thing up a little bit. So, again, going forward, we certainly will be higher than prior years just because of that R&D and those commercial faults that we are incurring. Okay, and what is your appetite for M&A on the ingredients platform? We will certainly be looking, we continue to look, the pipeline is active, but our leverage at the moment is high, so until we bring that down a little bit more, we will remain on the sidelines.

We have now some performance comp.

That being up a little bit though.

Again going forward, we certainly will be higher than <unk>.

Prior years, just because of that R&D in those commercial policy that we are incurring.

Okay.

What is your appetite for M&A on the ingredients platform.

We will certainly be looking we continue to look at the pipeline is active.

Our leverage at the moment.

This is up so until we bring that down a little bit more.

We will remain on the sidelines.

Ann Holden Gurkin: Spectacular comes along. Okay, and then, Just in terms of management structure, you announced a change to Preston's position and kind of what his role entails, and then can you tell me who is treasurer of Universal now? Uh, our new trasher's name is Wuxian Ma. He goes by Woosh. He joined us on January 1st, and we're very happy that he has joined us. Right, and Preston is now transitioning to more of a management role.

Spectacular comes along.

Okay and then.

Just in terms of management structure, you announced.

Changed for <unk> position and kind of what what is his role entail and then can you tell me who is treasurer of Universal now I'm, sorry, I've lost track.

Our new Treasurer his name is <unk> Ma.

He goes by Bush.

He joined US in January 1st and we're very happy that he has joined us.

Great.

And.

Now in <unk>.

Transitioning to more of a management role.

Unnamed Speaker: Okay, okay, that's great. That's all I have. I appreciate your time very much. Thank you. Thank you, and there are no further questions at this time. I would like to turn it back to Jennifer Rowe for closing remarks. Thank you all for joining us today on our call. Thank you, presenters, and ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Thank you for watching! And, ladies and gentlemen, this concludes today's conference.

Okay. Okay. That's great. That's all I have I appreciate your time very much. Thank you. Thank.

Thanks, Anthony Thanks, Matt.

Thank you and there are no further questions at this time I would like to turn it back to Jennifer Lowe for closing remarks.

Thank you all for joining us today on our call.

Okay.

Thank you presenters and ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

And ladies and gentlemen, this concludes today's conference.