Q1 2025 Universal Corp Earnings Call
Operator: Please stand by; your conference is about to begin.
Operator: Good day, everyone, and welcome to today's Universal Corporation First Quarter Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode, but later, you will have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. Please note that this session is being recorded. I'll be standing by should you need any assistance, and it is now my pleasure to turn the floor over to Jennifer Rowe. Please go ahead.
Good day, everyone and welcome to today's Universal Corporation first quarter fiscal year 2025 earnings call. At this time all participants are in a listen only mode. But later you will have the opportunity to ask questions. During the question and answer session. You May Register to ask a question at any time by pressing the star one on your telephone keep.
Jennifer Rowe: Thank you, Jim. Thank you for joining us.
Jennifer row: Please note. This session is being recorded I'll be standing by should you need any assistance and it is now my pleasure to turn the floor over to Jennifer row. Please go ahead.
Jennifer Rowe: George Freeman, our Chairman, President, and CEO, Ayrton Hentschke, 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. It will remain on our website through November 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.
Jennifer: Thank you Jim Thank you for joining us George Freeman, our chairman President and CEO Ericsson 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.
Operator: This call is being webcast live and will be available on our website and on telephone taped replay. It will remain on our website through November 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 copyrighted and may not be used without our permission.
Jennifer row: This call is being webcast live and will be available on our website and on telephone taped replay will remain on our website through November seven 2024.
Jennifer row: 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, 2024. Such risks and uncertainties include, but are not limited to, customer-mandated timing of shipments.
Jennifer Rowe: Weather Conditions, Political and Economic Environment, Government Regulation and Taxation, Changes in Exchange Rate and Interest Rate, Industry Consolidation and Evolution, and Changes in Market Structure or Sources. Finally, some of the information that I have for you today may be based on unaudited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may also 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.
Speaker Change: Before I begin to discuss our results I caution you that.
Jennifer row: Forward looking statements that are based on our current knowledge and some assumptions about the future and are representative as of today only.
Jennifer row: Actual results could differ materially from projected or estimated results and we assume no obligation to update any forward looking statements.
Speaker Change: 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, 2020 for such.
Jennifer row: Such risks and uncertainties include but are not limited to customer mandated timing of shipments.
Speaker: Weather Conditions, Political and Economic Environment, Government Regulation and Taxation, Changes in Exchange Rate and Interest Rate, Industry Consolidation and Evolution, and Changes in Market Structure or Source. For details on these measures, including reconciliations to the most comparable gap measures, please refer to our current earnings press release. Universal Corporation is off to a strong start for fiscal year 2025. Our strategic decisions to accelerate tobacco crop purchasing allowed us to secure our contracted tobacco in certain dynamic markets, which has positioned us well to meet customer demand.
Jennifer row: Weather conditions, political and economic environment government regulation, and taxation changes in exchange rate and interest rates industry consolidation and evolution and changes in market structure or sources.
Jennifer row: So the information that I have for you today, maybe based on unaudited allocations and is subject to reclassification.
Jennifer row: In an effort to provide useful information to investors. Our comments today May also 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.
Jennifer Rowe: Universal Corporation is off to a strong start for fiscal year 2025. For the quarter ended June 30, 2024, revenue was $597.1 million, up approximately 15% for both our tobacco and ingredient operation segments, while operating income was $17.2 million, up $6.2 million or 56% compared to the same quarter last fiscal year. Our revenue increase in the tobacco operations segment was driven by higher sales volumes and prices. Coming out of an exceptional fiscal year 2024, we benefited from continued strong demand from our tobacco customers.
Speaker Change: Universal Corporation is off to a strong start for our fiscal year 2025.
Jennifer row: For the quarter ended June 32024 revenue was $597 1 million up approximately 15% for both our tobacco and ingredient operations segments. While operating income was $17 2 million up $6 2 million or 56% compared to the same quarter last.
Jennifer row: <unk> fiscal year.
Jennifer row: Our revenue increase in the tobacco operations segment was driven by higher sales volumes and prices.
Jennifer row: Coming out of an exceptional fiscal year 2024, we benefited from continued strong demand from our tobacco customers.
Jennifer Rowe: We believe this demand will continue to support solid results for the segment for fiscal year 2025. Our strategic decisions to accelerate tobacco crop purchasing allowed us to secure our contracted tobacco in certain dynamic markets, which has positioned us well to meet customer demand. As in previous fiscal years, we expect that tobacco shipment timing and related revenue recognition will be more heavily weighted towards the second half of fiscal year 2025. However, our uncommitted tobacco inventory levels at June 30, 2024, remained low at about 13%. And we believe that global leaf tobacco remains in an under-supplied position.
Jennifer row: We believe this demand will continue to support solid results for this segment for fiscal year 2025.
Jennifer row: Our strategic decisions to accelerate tobacco crop purchasing allowed us to secure our contracted tobacco and certain dynamic market, which has positioned us well to meet customer demand.
Jennifer row: As in previous fiscal years, we expect the tobacco shipment timing and related revenue recognition will be more heavily weighted towards the second half of fiscal year 2025.
Jennifer row: Our uncommitted tobacco inventory levels at June 32024 remained low at about 13% and we believe that global leaf tobacco remains in an under supply position.
Jennifer Rowe: Looking ahead, we expect that recent elevated green tobacco prices will incentivize farmers to increase planting for the next season, potentially leading to more balanced markets in the coming years. We work closely with our contract farmers to provide guidance and support to promote increased production. During the quarter ended June 30, 2024, our ingredients operation segment also delivered improved performance, primarily based on increased sales volume. New product sales have increased across our ingredients platform, contributing to positive results.
Speaker: Looking ahead, we expect that recent elevated green tobacco prices will incentivize farmers to increase planting for the next season, potentially leading to more balanced markets in the coming years. New product sales have increased across our ingredients platform, contributing to positive results. Some financial highlights for the quarter ended June 30th, 2024: operating income of $17.2 million for the quarter increased by $6.2 million.
Jennifer row: Looking ahead, we expect the recent elevated green tobacco prices will incentivize farmers to increased planting for the next season potentially leading to more balanced markets in the coming years.
Jennifer row: We work closely with our contract farmers to provide guidance and support to promote increased production.
Jennifer row: During the quarter ended June 32024, our ingredients operations segment also delivered improved performance primarily based on increased sales volumes.
Jennifer row: New product sales have increased across our ingredients platform contributing to positive results.
Jennifer Rowe: These increased sales, combined with general improvement in certain markets and recovery of demand for our core products, drove the 15% increase in sales revenue for the segment as compared to the same quarter last fiscal year. However, as expected, our debt level remained elevated at June 30th, 2024.
Jennifer row: These increased sales combined with general improvement in certain markets and recovery of demand for our core products drove the 15% increase in sales revenue for the segment as compared to the same quarter last fiscal year.
Jennifer row: As expected our debt level remained elevated at June 32024.
Jennifer Rowe: As our committed tobacco inventories, which represented 87% of total tobacco inventories at June 30, 2024, are processed and delivered to customers, we anticipate working capital to unwind during fiscal year 2025. Some financial highlights for the quarter ended June 30th, 2024. Net income for the quarter was $0.1 million, or $0.01 per diluted share. Net income increased by $2.2 million, and diluted earnings per share increased by $0.09 for the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023. Operating income of $17.2 million for the quarter increased by $6.2 million. Selling general and administrative expenses were up $3.2 million in the quarter ended June 30, 2024, largely due to unfavorable foreign currency comparisons.
Jennifer row: As our committed tobacco inventory, which represented 87% of total tobacco inventories at June 32024 are processed and delivered to customers.
Jennifer row: Anticipate working capital to unwind during fiscal year 2025.
Jennifer row: Some financial highlights for the quarter ended June 32024.
Jennifer row: Net income for the quarter was <unk> $1 million or <unk> <unk> per diluted share net income increased by $2 2 million and diluted earnings per share increased by <unk> <unk> for the quarter ended June 32024, compared to the quarter ended June 32023.
Jennifer row: Operating income of $17 2 million for the quarter increased by $6 2 million.
Jennifer row: Selling general and administrative <unk> expenses were up $3 2 million in the quarter ended June 32024, largely an unfavorable foreign currency comparison.
Jennifer row: Yeah.
Jennifer Rowe: Some highlights for our operating thing. Operating income for the tobacco operations segment increased by $5.6 million to $14.5 million for the quarter ended June 30, 2024 compared to the quarter ended June 30, 2023. Tobacco Operations Segment Operating Income was up in the quarter ended June 30, 2024, largely due to higher carryover crop shipments, as well as higher earnings from our Oriental tobacco joint venture. Operating income for the Ingredients Operations segment was up $4.9 million for the quarter ended June 30, 2024.
Jennifer row: Some highlights for our operating segments.
Jennifer row: Operating income for the tobacco operations segment increased by $5 6 million to $14 5 million for the quarter ended June 32024, compared to the quarter ended June 32023.
Jennifer row: Tobacco operations segment operating income was up in the quarter ended June 32024, largely on higher carryover crop shipments as well as higher earnings from our Oriental tobacco joint venture.
Jennifer row: Operating income for the ingredients operations segment was up $4 9 million for the quarter ended June 32024 results.
Jennifer Rowe: Results for the ingredients operation segment for the quarter were up primarily due to increased sales volumes, which included higher sales of new products as well as some increases in sales of core products, notably fruit juices. Accelerated purchasing by certain customers and lower inventory write-downs also increased results for the segment in the first quarter of fiscal year 2025 compared to the same period last fiscal year.
Speaker: Results for the ingredients operation segment for the quarter were primarily, Test runs and certifications of the processing lines for our Lancaster, Pennsylvania, expansion project are progressing well, and the facility remains on track to become fully operational in the second half of this fiscal year. Along with the expansion project, we continue to focus on our commercial and research and development teams. To enhance the capabilities and specialized products we are able to offer Universal Ingredients' customers.
Jennifer row: Our results for the ingredients operations segment for the quarter were primarily.
Jennifer row: Were up primarily due to increased sales volumes, which included higher sales of new products as well as some increases in sales of core products, notably fruit juices.
Jennifer row: Accelerated purchasing by certain customers and lower inventory write downs also increased results for the segment in the first quarter of fiscal year 2025, compared to the same period last fiscal year.
Jennifer Rowe: Test runs and certifications of the processing lines for our Lancaster, Pennsylvania, expansion project are progressing well, and the facility remains on track to become fully operational in the second half of this fiscal year. Along with the expansion project, we continue to focus on our commercial and research and development teams to enhance the capabilities and specialized products we are able to offer Universal Ingredients' customers. We continue to expect the project to meaningfully contribute to our ingredients operation segment results in fiscal year 2026.
Jennifer row: Test runs and certifications of the processing lines for our Lancaster, Pennsylvania expansion project are progressing well and the facility remains on track to become fully operational in the second half of this fiscal year.
Jennifer row: Along with the expansion project, we continue to focus on our commercial and research and development teams to enhance the capabilities and specialized products, we are able to offer universal ingredients as customers.
Speaker: We continue to expect the project to meaningfully contribute to our ingredients operation segment results in fiscal year 2026. Setting Scope 1, 2, and 3 greenhouse gas emission targets with the Science-Based Target Initiative in 2021 and committing to publicly disclosing our progress towards meeting those targets by 2030 are some of the ways we demonstrate our commitment to sustainability. The credibility of our disclosures is contingent on the accuracy of our admissions data and the methods we use to calculate them.
Jennifer row: We continue to expect the project to meaningfully meaningfully contribute to our ingredients operations segment results in fiscal year 2026.
Jennifer Rowe: Reducing our environmental impacts remains a key business goal for Universal. Setting scope 1, 2, and 3 greenhouse gas emission targets with the Science-Based Target Initiative in 2021 and committing to publicly disclosing our progress towards meeting those targets by 2030 are some of the ways we demonstrate our commitment to sustainability. The credibility of our disclosures is contingent on the accuracy of our admissions data and the methods we use to calculate them. We are pleased to announce that we have received independent, third-party verification of our scope 1 and 2 admissions data, as well as our scope 3 admissions data associated with tobacco purchased through our supply chain, and the methods we use to calculate our emissions.
Jennifer row: Reducing our environmental impact remains a key business goals for universal.
Jennifer row: Setting scope, one two and three greenhouse gas emission targets with the science based target initiative in 2021 and committing to publicly disclosing our progress towards meeting those targets by 2030 are some of the ways, we demonstrate our commitment to sustainability.
Jennifer row: The credibility of our disclosures is contingent on the accuracy of our emissions data and the methods. We used to calculate them. We are pleased to announce that we received independent third party verification of our scope, one and two emissions data as well as our scope three emissions data associated with tobacco purchase through our supply chain.
Speaker: We are pleased to announce that we received independent third-party verification of our scope 1 and 2 admissions data as well as our scope 3 admissions data associated with tobacco purchased through our supply chain. Our proactive approach to understanding and responding to the changing world in which we operate and our deep understanding of our customers' needs will serve us well as we continue our endeavor to deliver consistent results year over year.
Jennifer row: And the methods, we used to calculate our emissions.
Jennifer Rowe: These important milestones reinforce our dedication to the public and transparent disclosure of our progress towards our goals and the importance of sustainability to Universal. For over 100 years, Universal has successfully managed its business and generated strong cash flows over time under a wide range of market conditions. We continue to leverage our global footprint to alleviate the impact of localized disruptions such as adverse weather. Our proactive approach to understanding and responding to the changing world in which we operate and our deep understanding of our customers' needs will serve us well as we continue our endeavor to deliver consistent results year over year. At this time, we are available to take your questions.
Jennifer row: These important milestones reinforce our dedication to the public and transparent disclosure of our progress towards our goals and the importance of sustainability to universal.
Speaker Change: For over 100 years Universal has successfully managed our business and generated strong cash flows over time under a wide range of market conditions.
Jennifer row: We continue to leverage our global footprint to alleviate the impact of localized disruptions such as adverse weather.
Jennifer row: Our proactive approach to understanding and responding to the changing world in which we operate and our deep understanding of our customers' needs will serve us well as we continue our endeavor to deliver consistent results year over year.
Speaker Change: At this time, we are available to take your questions.
Operator: And to our phone audience joining us today, if you would like to ask a question at this time, simply press star and one on your telephone keypad. Pressing star and one will place your line into a queue, and I will open your lines one at a time. A friendly reminder that if you're joining today on a speakerphone, please return to your handset prior to pressing star and one to ensure that your signal does reach our equipment. Once again, ladies and gentlemen, that is Star N1. We'll hear first from Ann Gurkin of Davenport & Co.
Speaker Change: And to our phone audience joining today, if you would like to ask a question at this time simply press star and one on your telephone keypad pressing star and one more place your line into a queue and I will open your lines one at a time.
Speaker Change: A friendly reminder, that if youre joining today on a speaker phone. Please return to your handset prior to pressing star and want to ensure that your signal does reach our equipment.
Speaker Change: Once again, ladies and gentlemen that is star one we'll hear first from Ann Gurkin with Davenport <unk> co.
Speaker: Good evening, everyone. Congratulations on a terrific start to your fiscal year. Thank you very much. You're welcome. I wanted to start with tobacco and move towards more of a balanced supply environment. So that outlook.
Ann Gurkin: Good evening, everyone. Congratulations on a terrific start to your fiscal year. Thank you very much. You're welcome.
Ann Gurkin: Good evening everyone.
Ann Gurkin: Congratulations on a terrific start to your fiscal year.
Ann Gurkin: I wanted to start with tobacco. And the update about estimated lease production for 2025 and your comments suggest we might move towards more of a balanced supply environment. So that outlook, combined with some comments from some of your top customers, indicating prices, tobacco leaf prices have been up but expected to moderate going into 2025, I was wondering how I should think about the combination of those two factors as we look forward to fiscal 26 and potential margins for your tobacco segment. Yeah,
Speaker Change: Youre welcome.
Speaker Change: I wanted to talk start with tobacco.
Speaker Change: And the update about estimated leaf production for 2025 and your comments we might.
Speaker Change: Move towards more of a balanced supply environment, so that outlook.
Speaker Change: Bind with some comments from some of your top customers.
Speaker Change: Indicating pricing of tobacco leaf prices have been up but expect it to to moderate going into 2025 I was wondering how I should think about the combination of those two factors as we look forward to fiscal 'twenty six and potential margins for your tobacco segment.
Unknown Executive: Yeah, I know that's a very good point there, and we are coming out of two, three crocs of surprise. And that, of course, has generated an inflationary green price all around the globe. But what we are seeing now is, for 2025, a different weather pattern, a mild La Nina, which means, you know, a little bit dry in South America and Brazil and some more rain in Africa. So a mild La Nina should produce bigger crops, and we have positioned Universal Leaf to increase, as we are working with our farmers, to increase our own tobacco production in the key markets. And that should bring a more balanced situation to the tobacco industry.
Speaker Change: Yes.
Speaker Change: That's a very very good point there.
Speaker Change: We are coming out of two or three crops of under supply.
Speaker Change: Right.
Speaker Change: Therefore of course has generated very inflationary green price all around the globe, but.
Speaker Change: We are seeing now is for 2025.
Speaker Change: Different weather pattern.
Speaker Change: Mild landing gear, which mean.
Speaker Change: B dry in South America and Brazil.
Speaker Change: Some more rain in Africa, so a mild lending should reduce bigger crops and we have positioned universal leaf to increase as we are working with our farmers to make reasonable on tobacco production, indicating in the key markets and that should bring a more balanced situation into two button.
Speaker Change: Understood.
Unknown Executive: So the combination of that more balanced scenario, how does that support your ability to price LEAF and keep margins at attractive levels in fiscal 26?
Speaker Change: So the combination of that more balanced scenario, what how does that support your ability to price leaf and keep margins at attractive levels in fiscal 'twenty six.
Unknown Executive: We will definitely be looking at a reduction in this inflationary green price for green tobacco. And at the same time, you know, we would also have more volume to process in our facilities, reducing our overall fixed costs, and believe that we can definitely maintain our market in this scenario. Okay. Thank you.
Speaker Change: We will definitely be looking at.
Speaker Change: Reduction in this inflationary green Green price Green tobacco.
Speaker Change: At the same time, we would have also more volume two processing facilities, reducing overall fixed cost and believe that we can definitely in this scenario maintain our margins.
Speaker Change: Okay.
Ann Gurkin: Great. And then you talked in the release about consolidating sheet production in Europe. Can you tell me what the potential cost savings are from that effort?
<unk>.
Speaker Change: And then you talked about it in the release about consolidating sheet production in Europe.
Speaker Change: Can you can you tell me what the potential cost savings are from that effort.
Speaker: Okay.
Speaker Change: We can't go into exact numbers here.
Speaker Change: There will be some cost savings the number currently for restructuring is between 10 and $15 million most of that is noncash.
Speaker Change: We're still talking to these workers council and a number of all the things that we need to look at to determine what the.
Speaker Change: The exact cost is going to be helpful.
Speaker Change: Restructuring, we do see some efficiencies there by bringing all of that under one roof.
Speaker Change: No.
Speaker Change: Facility wasn't exactly efficient so certainly there are going to be some benefit, but we need to see what that is going forward.
Ann Gurkin: And will those cost savings, potential cost savings, flow through in fiscal 26?
Speaker Change: And will those cost savings potential cost savings flow through in 'twenty fiscal 'twenty six.
Unknown Executive: That's what we would expect, yes, ma'am.
Speaker Change: Thats, what we would expect yes ma'am.
Ann Gurkin: Okay, great. And then, are you having any issues obtaining shipping containers to move the lease in the back half of fiscal 25?
Speaker Change: Okay great.
Speaker Change: And then are you having any issues obtaining shipping containers to move the leaf in the back half of fiscal 'twenty.
Unknown Executive: lately, and we have seen some of the disruptions. We have seen increased freight and overall logistics costs in some geographies. Of course, it's a lot related to the situation in the Red Sea and the Middle East conflict there, but also some availability of containers, yes. But I think, and over the COVID period, we managed much more, let's say, strength situation there. And we worked very, very optimistically and very diligently with our customers, and we are being as proactive as we can to avoid any constraints on the supply chain.
Speaker: lately, and we have seen some of the disruptions. We have seen increased freight and overall logistics costs in some geographies. Of course, it's a lot related to the situation in the Red Sea and the Middle East conflict there, but also some availability of containers, yes. But I think, and over the COVID period, we managed much more, let's say
Speaker Change: Lately, we have seen some of the disruptions.
Speaker: We have seen increased freight and overall logistic cost.
Speaker: In some geographies of quarter, you saw a lot related to the situation in the Red Sea and the middle East conflict there but.
Speaker: But and also some availability of containers, yes, but I think.
Speaker: Over the Covid period, we manage.
Speaker: Much more let's say.
Yes.
Speaker: Strength situation there.
Speaker: We work very very optimistic and very diligently with our customers.
Speaker: We are being as proactive as we can to avoid any constraint on the supply chain.
Ann Gurkin: Great, and it's nice to see the strong results for Oriental tobacco. How should I think about that for the balance of the year?
Speaker: Great.
Speaker Change: It's nice to see the strong results for the Oriental tobacco, how should I think about that for the balance of the year.
Unknown Executive: And a lot of that has to do with, of course, last year, you know, specifically with regard to the Turkish market, you know, that that currency there was whipping around, you know, they're paying some hefty interest rates on the local loans and everything. So, you know, it's a very good start for the Orientals. And we expect, you know, to see a nice pop up from last year because, certainly, last year, they didn't do so well. But, you know, it's going to be more in line with the
Speaker: And a lot of that has to do with of course last year.
Speaker: Specifically with regard to the Turkish market.
Speaker Change: That currency there was whipping around we're.
Speaker: We're paying some hefty interest rates on the local loans and everything so it's a very good start for the Oriental and we expect.
Speaker Change: To see a nice pop up from last year, because certainly last year, they didn't do so well but.
Speaker Change: It's going to be more in line with the past okay great.
Unknown Executive: I am waiting in Richmond for Hurricane Debbie. What should I think about that as it moves up the coast? Well, first of all, our thoughts and prayers are with all the communities that have been affected and potentially will be affected in the next couple of days. So far, what we know so far is that there was a negative impact on some of the production areas in Georgia and Florida, but those are very small production areas. The balance of the production areas where the majority of the volume is located is too early to project as the storm path and pattern continue to evolve.
Speaker Change: Waiting in Richmond for Hurricane Debbie how should I think about that as it moves up to the coast well first first of all our thoughts and prayers are with all the communities that have been affected and potentially will be affected in the next the next couple of days. So what we know so far.
Speaker: Well, first of all, our thoughts and prayers are with all the communities that have been affected and potentially will be affected in the next couple of days. And I just want to note that, again, the U.S. represents less than 10% of our tobacco segment results.
Speaker Change: There was a negative impact.
Speaker Change: And some of the production areas in Georgia, and Florida, but those are very small production areas. The balance of the April books in areas, where the majority of the volume is located is too early to project.
Speaker: The storm passed and pattern.
Speaker: <unk> continues to evolve. So we are closely monitoring the situation and we will have a clearer picture by the by this weekend.
Unknown Executive: So we are closely monitoring the situation, and we will have a clear picture by this weekend. And I just want to note that again, the U.S. represents less than 10% of our tobacco segment results. Okay, great. We will keep our fingers crossed. Okay. Jennifer, do you have uncommitted worldwide tobacco leaf numbers?
Speaker: And I just want to note that the again the U S represents less than 10% of our tobacco segment results.
Speaker Change: Okay great.
Speaker Change: We will keep our fingers crossed.
Speaker: Jennifer do you have uncommitted worldwide tobacco leaf numbers.
Jennifer Rowe: Sure, the worldwide Blue Carat and Burley uncommitted stocks stood at 21 million kilos at the end of June; that's down 7 million kilos from the end of March.
Speaker Change: Sure the worldwide.
Speaker Change: Flue cured Burley uncommitted stocks stood at 21 million kilos at the end of June that's down 7 million kilos from the end of March.
Speaker: Okay.
Ann Gurkin: And then turning to ingredients, nice improvement sequentially on your ingredients segment. Nice to see that pick up stronger than I was expecting. How should I think about the full year and potential margin for that segment? Q1 came in higher than I would have thought. So that's great to see.
Speaker Change: And then turning to your ingredients a nice improvement sequentially on your ingredients segment nice to see that pick up stronger than I was expecting.
Speaker Change: Thank you how should I think about the.
Speaker: The full year and potential margin for that segment.
Speaker Change: Q1 came out higher than I would've thought so that's great to see.
Unknown Executive: Yeah, and look, in the first quarter, they certainly improved from last year. That was primarily driven by a combination of, you know, sales of new products under the new contracts. You know, our investments in the platform commercial sales team and R&D functions are finally starting to pay off there. And also, stabilization in some of the markets we serve and the recovery in the sales of our core products. So we saw it from both sides.
Speaker Change: Okay look into in the first quarter.
Speaker Change: Improved certainly from last year.
Speaker Change: That was primarily driven by a combination of several new products under the new crop on the new contracts.
Speaker Change: Our investments in the platform commercial sales team and R&D functions are finally, starting to pay off there and also with the stabilization in some of the markets, we serve and the recovery in the sales of our core products are we saw it on both sides.
Unknown Executive: Volume was up nicely, but keep in mind that pricing was down in most of those areas because, you know, raw materials have come down quite a bit over the last year or so. For the year, we expect to see continued improvement as the new contracts come out. Customer Contracts, you know, ramp up throughout the year, and, you know, we expect to see some benefits from the expansion project in Lancaster, but we don't expect to see meaningful impact until fiscal year 26.
Speaker: <unk> was up nicely keep in mind that pricing was down in that most of those areas because of the raw materials have come down quite a bit over the last year or so.
Speaker: For the year.
Speaker: Expect to see continued improvement.
Speaker Change: It's new.
Speaker Change: Customer contracts ramp up throughout the year and we.
Speaker Change: We expect to see some benefits from the expansion projects in Lancaster.
Speaker Change: But we don't exceed expect to see meaningful impact until fiscal year 2006. So again last year, we started out.
Unknown Executive: So, again, last year, we started out down, there was some inventory right down, so we didn't repeat that this year. So that is a nice pick-up there. And again, we're seeing a nice, nice pick-up on volume, and it's going in the right direction. So we expect that, and we hope to continue that momentum.
Speaker Change: Down there were some inventory write down so that we didn't repeat that this year. So that is a nice pick up there and again, we're seeing a nice nice.
Speaker Change: Pick up on volume.
Speaker: And it's going into right direction. So we expect that and we hope to continue that momentum.
Ann Gurkin: That's great. So can you get margins back to that mid-single-digit range by the end of the fiscal year? We certainly hope so. Congratulations. That's great. What are the new products? Can you give me an example?
Speaker Change: That's great. So can you get margins back to that mid single digit range by the end of the year fiscal year, certainly hope so congratulations.
Speaker Change: Congratulations that's great.
Speaker Change: What are the new products can you give me an example.
Speaker: Boy, there are lots of things we're putting out there. You know, we can't exactly, we have lots of NDAs, so we can't exactly be specific about it, but, you know, we're putting all kinds of flavors together for a number of customers, different customers, and, again, we have signed some, you know, beverages. We're producing all kinds of beverages at the moment, so it's really widespread, and we're throwing a wide net. Our guys are out there trying all kinds of different things, and, again, we have been spending a lot of money on R&D and commercial ramping that up, so we hope to see the fruit of that, you know, in the next couple of quarters and going into 26.
Unknown Executive: Boy, there are lots of things we're putting out there, you know; we can't exactly, we have lots of NDAs, so we can't exactly be specific about it. But, you know, we're putting in all kinds of flavors for a number of customers, different customers. And again, we have signed some, you know, beverages. We were producing all kinds of beverages at the moment. So it's, it's, it's really widespread. And we're throwing a wide net; our guys are out there trying all kinds of different things.
Speaker: Alright.
Speaker Change: There is there is lots of things that we're putting out there.
Speaker: We cant exactly we have lots of NDA. So we can't exactly be specific about it but we're putting in.
Speaker: All kinds of.
Speaker: Flavors.
Speaker: Swing for a number of customers.
Speaker: Different customers.
Unknown Executive: And again, we have been spending a lot of money on R&D and commercial, ramping that up. So we're hoping to see the fruit of that, you know, in the next couple of quarters and going into 26.
Speaker: And again, we have signed some.
Speaker: <unk>.
Speaker: Beverages, we were producing all kinds of beverages at the moment.
Speaker: It's really widespread.
Speaker: We're throwing widen and our guys are out there trying all kinds of different things.
Speaker: And again, we have been spending a lot of money on R&D and commercial.
Speaker: We are ramping that up so we would hope to see the fruit of that in the next couple of quarters and going into 'twenty six.
Speaker: Great. And then it looks like you did pull some business forward into this quarter. Can you give me a dollar amount?
Ann Gurkin: Great. And then it looks like you did pull some business forward into this quarter. Can you give me a dollar amount?
Speaker Change: Great and then it looks like you did pull some business forward into this does enter this quarter can you give me a dollar amount.
Unknown Executive: No, I can't give you a dollar amount, but it was nice to see that it was earlier than we had certainly anticipated. Those lines are now up and running. We have gotten the approvals and the certifications for the aseptic process, both on the high and the low acid, and we have started to produce product for a number of customers, albeit slowly. So we, again, hope to see that ramp up throughout the rest of the year and then be really meaningful into fiscal year 26.
Speaker: No I can't give you a dollar amount, but it was.
Speaker Change: Nice to see that it was earlier than we had certainly anticipated.
Speaker: Those lines are now up and running.
Speaker: We have gotten the.
Speaker: The approvals into certification for the AG septic both of them the high and low acid. So and we have started to produce product for for a number of customers.
Speaker Change: I'll buy albeit slowly.
Speaker: Again hope to see that ramp up throughout the rest of the year and then really meaningful.
Speaker: Fiscal year 'twenty six.
Speaker: Great. Okay, great. SG&A, for the full year, we have a range of $300 million or $310 million. Is that fair?
Ann Gurkin: Great. Okay, great. SG&A for the full year, we have a range of $300 or $310 million. Is that fair?
Speaker: Great.
Speaker Change: Okay great.
Speaker: SG&A for the full year, we have a range of 300 or $310 million is that fair.
Ann Gurkin: Yeah, look, in the first quarter, we were up about $3 million. Normally, we'll give you the variances there. Certainly, that was FX-related where we were up.
Speaker: Yes look.
Speaker Change: In the first quarter, we were up about $3 million normally we will give you the variances there certainly that with FX related where we were up last year. The number was 311, we expect to come in below that number for fiscal year 'twenty five.
Unknown Executive: Last year, the number was 311, and we expect to come in below that number for fiscal year 25.
Ann Gurkin: Great. Interest expense was higher, and you outlined the increased, partially due to the increased debt levels to carry the higher tobacco inventory. So how do I think about that interest expense in the back half as, hopefully, you ship and sell that tobacco?
Speaker Change: Interest expense was higher and you outlined the increased partially due to the increased debt levels to carry the higher tobacco inventories. So how do I think about that interest expense in the back half as hopefully you ship and sell that tobacco.
Speaker: Yeah, exactly right. And then we'll have to see what interest rates do later in the year, whether or not the Fed is actually going to do anything. So, you know, we do certainly expect to see the unwinding leverage come down later this year, and hopefully, you know, by buying that crop in Brazil earlier, we can ship it earlier as well. You know, we bought it slightly earlier in Africa in certain areas as well. So, hopefully, you know, we can speed that up a little bit and, you know, just bring that whole leverage down. And that will also help the interest expense later this year.
Unknown Executive: Yeah, exactly right. And then we'll have to see what interest rates do later in the year, whether or not the Fed is actually going to do anything. So, you know, we do certainly expect to see the unwinding leverage come down later this year, and hopefully, you know, by buying that crop in Brazil earlier, we can ship it earlier as well. You know, we bought slightly earlier in Africa in certain areas as well. So, hopefully, you know, we can speed that up a little bit and, you know, just bring that whole leverage down. And that will also help the interest expense later this year.
Speaker Change: Yes, exactly exactly right and then we'll have to see what interest rates do later in the year, whether or not the Fedex we are going to do something so we do certainly expect to see the unwinding and leverage to come down later this year, hopefully, but behind that drop in Brazil earlier, we can ship it earlier as well.
Speaker: We bought slightly earlier in Africa in certain origins as well so hopefully we can speed that up a little bit.
Speaker: Bring that whole leverage down.
Speaker: That will also help the interest expense.
Speaker: Expense later this year.
Ann Gurkin: Great. And CapEx looks like it was moderated a little bit. Any reason for that?
Speaker Change: Great and Capex looks like it was moderated a little bit and the reason for that yes.
Unknown Executive: Yeah, well, again, we made some hefty investments in Lancaster, so that everything is almost finished, so we do expect that to come down over time.
Speaker Change: Well again, we made some heavy investments in Lancaster so.
Speaker: That all of US is almost finished so we do expect that to come down overtime.
Ann Gurkin: And then congratulations on your hard work on sustainability and your progress against your goals. That is nice to see.
Speaker Change: Alright, and then congratulations on all your hard work on sustainability and your progress against your goals. It is nice to see I guess along that same line.
Speaker Change: <unk> commented on.
Speaker Change: Im working with farmers globally to grow additional crops I was wondering if you could just flush that out a little bit desktop opportunities.
Ann Gurkin: I guess along that same line, you've commented on working with farmers globally to grow additional crops. So I was wondering if you could just flesh that out a little bit as to opportunities for your farmer base to grow crops that maybe you could sell throughout your business. And at what point are you able to ramp up that program?
Speaker: Opportunities.
Speaker Change: Farmer base to grow crops that maybe you could sell throughout your business and at what point are you able to ramp up that that program.
Unknown Executive: And as part of our farmer programs over the last couple of years, we have provided our farmer base, our contracted farmer base, with food crops. We have done that for quite some time already.
Speaker Change: And as part of our farmer programs over the last couple of years, we have.
Speaker Change: Provided our farmer base that our contract with pharma base with with food crops.
Unknown Executive: So, you know, that is really, you know, a sustenance thing there. And we also, in certain markets, provide a market for those products for them to sell. So, you know, we've been doing that for quite some time, and we're trying to, you know, expand that. When you saw that video yesterday at the annual shareholders meeting, you know, that was specifically in Brazil, but we have been doing that in Africa for a number of years. So, you know, we're just going to continue that where possible.
Speaker Change: We've done that for quite some time already.
Speaker: So that is really is.
Speaker Change: Sustenance thing there.
Speaker: And we also in certain markets provide a market for those products to for them to sell it so.
Speaker Change: We've been doing that for quite some time and we are trying to expand that when.
Speaker: When you saw that video yesterday and in the end.
Speaker: Annual shareholders meeting that were specifically in Brazil, but we're doing that already in Africa for a number of years. So.
Speaker: We're just going to continue that.
Speaker Change: Where possible.
Speaker: So it's still in test mode; is that fair right now?
Ann Gurkin: So it's still in test mode. Is that fair right now?
Speaker Change: So it's still in a test mode is that fair right now.
Unknown Executive: No, I don't think it's a test mode. I think we, you know, we're doing that in the markets where it's possible to do so. And, you know, again, we're providing it to them for their own use. Now, if you are going to take it a step further and you want to look at what we can do on the ingredient side, yes, there is a test mode. We are from a number of origins.
Speaker Change: No I don't think its a test mode I think we you know what.
Speaker Change: We're doing that in the markets, where it's possible to do.
Speaker: And.
Speaker: Again, we are providing it to them for.
Speaker: Sure.
Speaker Change: For their own use now if you are going to take it a step further and you want to look at.
Speaker: for their own use. Now, if you are going to take it a step further and you want to look at what we can do on the ingredient side, yes, there is a test mode. We are in a number of origins. We're trying some things out, certain products that we currently use that we buy out of different markets where there might be some issues in the future. Certainly, we love to apply our traceability and sustainability on the ingredient side as well. So that's something that we're certainly looking at, and in the long term.
Speaker: What we can do on the ingredient side, yes, there its a test mode. We are in a number of origins. We're trying some things out certain products that we currently use that we're buying out of different markets, where there might be some issues in the future.
Unknown Executive: We're trying some things out, certain products that we currently use that we buy out of different markets where there might be some issues in the future. Certainly, we love to apply our traceability and sustainability on the ingredient side as well. That's something that we're certainly looking at, and in the long-term, think that we can achieve some really good results.
Speaker: We love to apply our traceability and sustainability on the ingredient side as well. So that's something that we're certainly looking at and in the long term.
Speaker: I think that we can achieve some really good results.
Ann Gurkin: That's great! That's great!
Speaker Change: Great. That's great. Thank you. Thank you all for your time, Thank you Youre.
Unknown Executive: Thank you. Thank you all for your time. Thank you. You're welcome. Thank you. And again, to our phone audience, that is.
Speaker: Well. Thank you. Thank you Ed.
Operator: You're welcome. Thank you. And again, to our phone audience, that is star and one. If you would like to ask a question, we'll pause for a moment to give our audience a chance, and Ms. Rowe, we have no signals from our audience. I'll turn it back to you for any additional or closing remarks.
Operator: And again, to our phone audience, that is.
Speaker Change: And again to our phone audience that is star one if you would like to ask a question, we'll pause for a moment to give our audience a chance.
Operator: And Ms. ROE, we have no signals from our audience I'll turn it back to you for any additional or closing remarks.
Operator: Thank you all for joining us on our call today.
Jennifer Rowe: Thank you all for joining us on our call today.
Operator: Thank you all for joining us on our call today.
Operator: Ladies and gentlemen, this does conclude today's session, and we thank you for your participation. You may now disconnect your lines. We hope you have a great day.
Operator: Ladies and gentlemen, this does conclude the day's session, and we thank you for your participation. You may now disconnect your lines. We hope you have a great day.
Speaker Change: Ladies and gentlemen, this does conclude today's session and we do thank you for your participation. You may now disconnect. Your lines. We hope you have a great day.
Unknown Executive: We can't go into exact numbers here, Certainly, there will be some cost savings. The number currently for restructuring is between 10 and 15 million, and that is not cash, but we're still talking to these workers' counsel and a number of other things that we need to look at to determine what the exact cost is going to be of that restructuring. We do see some efficiencies there by bringing all that under one roof. You know, that facility wasn't exactly efficient, so certainly there are going to be some benefits, but we need to see what that is going to cost.
Unknown Participant: I think it's a good idea to have a good time in the world.