Full Year 2025 Universal Corp Earnings Call
Operator: Hello, and thank you for standing by.
Hello, and thank you for standing by my name is Tiffany and I will be your conference operator today at this time I would like to welcome everyone to the Universal Corporation fourth quarter fiscal year 2025 earnings call. All lines have been placed on mute to prevent.
Tiffany: My name is Tiffany, and I will be your conference operator today.
Tiffany: At this time, I would like to welcome everyone to the Universal Corporation fourth quarter fiscal year 2025 earnings call. All lines have been placed on mute to prevent any background noise.
Any background noise.
Tiffany: After the speaker's remarks, there will be a question and answer session with instructions for participation provided at that time. Thank you.
After the Speakers' remarks, there will be a question and answer session with instructions for participation provided at that time.
Wushuang Ma: I would now like to turn the call over to Wushuang Ma, Vice President and Treasurer. Please go ahead. Good evening and thank you for joining us.
Speaker Change: Thank you I would now like to turn the call over to Woo song Mall, Vice President and Treasurer. Please go ahead.
Speaker Change: Good evening and thank you all for joining us principal Wigner, our chairman President and CEO and Johan Kroner, Our Chief Financial Officer are here with me today.
Wushuang Ma: President Wigner, our Chairman, President and CEO, and Johan Kroner, our Chief Financial Officer, are here with me today.
Wushuang Ma: Our agenda is for President Johan to provide an update on our fourth quarter and full year fiscal 2020 by operating and financial results. and share some strategic thoughts about the company.
Our agenda is for president Johann confront the update of our fourth quarter and full year fiscal 2025 operating.
Can you share some strategic thoughts about the company, we want to open up the call for questions.
Wushuang Ma: We will open up the call for questions. During the course of this call, we will be making four looking statements that are based on our current knowledge, and some assumptions about the future. These are representative as of today only actual results, performance and achievements could differ materially from the anticipated results, prospects, performance or achievements expressed or implied by such for looking statements and we assume no obligation to update any for looking statements except as required by law. For information on some of the risks and uncertainties related to this for looking statements, please refer to the report we filed with the ICC and under cautionary statements regarding for looking statements, you know, current earnings price rate.
During the course of this call we will be making forward looking statements that are based on current knowledge.
Assumptions about the future.
These are representative as of today only.
Actual results performance and achievements could differ materially from the anticipated results prospects performance or achievements expressed or implied by such forward looking statements and we assume no obligation to update any forward looking statements, except as required by law.
For information on some of the risks and uncertainties related to these forward looking statements. Please reinforced with the reports we filed with the ICC and under cautionary statements regarding forward looking statements.
<unk> earnings press release.
Wushuang Ma: Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification. Our comments today may also include certain non-GAAP financial measures. For details regarding these measures, including a reconsideration of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public material.
Finally, some of the information we have for you today, maybe it based on all the allocations and may be subject to reclassification.
Our comments today May also include certain non-GAAP financial measures for details regarding these measures, including a reconciliation of these non-GAAP measures. The most comparable GAAP measures. Please we have first of all our current earnings press release and other public materials.
Wushuang Ma: This call is being webcast live and will be available for replay on our website through August 28 2025. 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 on the won't be available for replay on our website through August 28, 20 and 25.
Other than the replay we have not authorized under disclaim responsibility for any recording replay or distribution of any of the transcription of this call. This call is being copyrighted and may not be used without our permission.
Wushuang Ma: This call is being copyrighted and may not be used without our permission.
Preston Wigner: I would like now to turn the call over to President. Thank you, Woosh. Good evening. Thank you for taking the time to join us today. I am new to the CEO role, but not new to Universal, having joined the company over 20 years ago. Over the last 20 years, I've seen many stages of our company's evolution, complete with both triumphs and challenges. Our ability to adapt to change and to turn challenges into opportunities have helped shape Universal into the company that we are today. I'm honored to lead such a strong company and excited about the opportunities ahead of us.
Preston: I'd like now to turn the call over to Preston.
Preston: Thank you wish good evening. Thank you for taking the time to join us today.
Preston: I am new to the CEO role, but not new to universal having joined the company over 20 years ago.
Over the last 20 years I've seen many stages of our company's evolution.
With both triumphs and challenges.
Preston: Our ability to adapt to change and to turn challenges into opportunities have helped shape universal lender. The company that we are today.
Preston: I'm honored to lead such a strong company and excited about the opportunities ahead of us.
Preston Wigner: Our fiscal year 2025 was a good example of how our teams around the world adapted to change and executed our strategy. We had an exceptional fiscal year, with revenue and operating income 7% and 5% higher, respectively, versus our strong fiscal year 2024. We navigated whether impacted tobacco crops and certain origins and historically high green tobacco prices. At the same time, we continue the development of universal ingredients, our plant-based ingredients business. We are also pleased to have declared our 55th annual dividend. Our quarterly dividend of $0.82 per share equates to an annualized rate of $3.28 per common share.
Preston: Our fiscal year 2025 was a good example of how our teams around the world adapted to change and executed our strategies, we had an exceptional fiscal year with revenue and operating income, 7% and 5% higher respectively versus our strong fiscal year 2024.
Preston: We navigated weather impacted tobacco crops in certain origins and historically high green tobacco prices, while at the same time, we continue the development of Universal ingredients are plant based ingredients business.
Preston: We were also pleased to have declared our 55th annual dividend increase.
Preston: A quarterly dividend of 82 per share equates to an annualized rate of $3 28 per common share.
Preston Wigner: This reflects our ongoing commitment to returning value to the shareholders through consistent performance and operational excellence.
Preston: This reflects our ongoing commitment to returning value to the shareholders through consistent performance and operational excellence.
Preston Wigner: As we will discuss today, fiscal year 2026 is well underway, and it will present new challenges and changes for us. If we can continue to execute our business strategy, I believe we can once again navigate those changes and challenge. and pursue the resulting opportunities and continue to strengthen our company for the future.
Preston: As we will discuss today fiscal year 2026 is well underway.
Preston: And they will present, new challenges and changes for us.
Preston: If we can continue to execute our business strategy I believe we can once again navigate those changes and challenges.
Preston: And pursue the resulting opportunities and continue to strengthen our company for the future.
Preston Wigner: Our business strategy focuses on three pillars. maximizing and optimizing our tobacco operation segment, growing our ingredients operation segment, and strengthening our organization. first in our tobacco operations sector.
Preston: Our business strategy focuses on three pillars.
Preston: Maximizing and optimizing our tobacco operations segment.
Preston: Growing our ingredients operations segment and strengthening our organization.
Preston: First in our tobacco operations segment.
Preston Wigner: We continuously look for opportunities to increase our sales volumes and market share, expand services across our customer supply chain, participate in the evolution of next generation products, and pursue efficiencies in our operations. Universal provides unparalleled access to tobacco that is supported by our farmer relationships.
Preston: We continuously look for opportunities to increase our sales volumes and market share.
Preston: Expand services across our customer supply chain participate in the evolution of next generation products and pursue efficiencies in our operations.
Preston: Universal provides unparalleled access to tobacco that is supported by our pharma relationships.
Preston Wigner: Ground Army Expertise and Sustainability Practice.
Preston: <unk> expertise and sustainability practices.
Preston Wigner: and back bar investment grade credit rating and access to finance. We are capable of handling all varieties of tobacco, commercializing all stock positions and sourcing and supplying from all major leaf tobacco exporting Reliability, service, and predictability are all the hallmarks of our tobacco business. As our customers look to optimize their capital allocation and seek supply chain efficiencies or to expand their next generation product business. We believe that we have an ability to play an increasingly important role in supporting them while generating additional earnings. I believe that our geographic diversity, local expertise developed through decades of hand-in-hand work with farmers and suppliers, and global relationships with multinational customers are the keys to our ability to continue to generate stable cash.
Preston: Backed by our investment grade credit ratings and access to financing.
Preston: We are capable of handling all varieties to tobacco commercializing all stock positions and sourcing and supply from all major leaf tobacco exporting regions.
Preston: Reliability service and predictability or all the hallmarks of our tobacco business.
Preston: As our customers look to optimize their capital allocation and seek supply chain efficiencies or to expand their next generation product business. We believe that we have an ability to play an increasingly important role in supporting them, while generating additional earnings.
Preston: I believe that our geographic diversity local expertise developed through decades of hand in hand work with farmers and suppliers and global relationships with multinational customers are the keys to our ability to continue to generate stable cash flow and deliver a unique value proposition for our shareholders.
Preston Wigner: and Deliver unique value proposition for our shareholders.
Preston Wigner: Turning to our ingredients operations. We intend to seek opportunities to grow universal ingredients, both organically and through measured acquisition. to provide our customers with a solution-based portfolio of value-added product.
Preston: Turning to our ingredients operations segment, we intend to seek opportunities to grow universal ingredients.
Preston: Organically and through measured acquisitions to provide our customers with a solution based portfolio of value added product offerings.
Preston Wigner: Since we set our strategy in 2018 to build a plant-based food and beverage ingredient. We took a proactive but deliberate approach in recruiting a management team, making acquisitions, and setting and executing commercial strategies. We paced ourselves as we integrated the three acquisitions to form a coherent platform. and we make key investments in expanding platform capabilities and capacity. As a result, operating income grew in fiscal year 2025 despite broader headwinds in the consumer product And the platform has given us a firm foothold in a very deep multi-segment market. We strive to leverage our strong reputation for quality and service, as well as our longstanding relationships with customers.
Preston: Since we set our strategy in 2018 to build a plant based food and beverage ingredients business, we took a proactive but deliberate approach and recruiting management team, making acquisitions and setting in executing commercial strategies.
Preston: We paced ourselves as we integrated the three acquisitions to form a coherent platform.
Preston: And we made key investments in expanding platform capabilities and capacity.
Preston: As a result operating income grew in fiscal year 2025, despite broader headwinds in the consumer products market and the platform has given us a firm foothold in a very deep multi segment market.
Preston: We strive to leverage our strong reputation for quality and service as well as our long standing relationships with customers to be a premier player in this space.
Preston Wigner: to be a premier player in the space.
Preston Wigner: The third pillar of our strategy is strengthening our organization. As a corporation, we will pursue strategies and initiatives designed to support and strengthen our operations for the future. These strategies and initiatives will focus on areas such as efficient financial management.
Preston: The third pillar of our strategy of strengthening our organization.
Preston: As a corporation, we will pursue strategies and initiatives designed to support and strengthen our operations for the future.
Preston: Strategies and initiatives will focus on areas such as efficient financial management.
Preston Wigner: Executive, Human Capital. Optimal Utilization of Technology, and Operational Synergies between our Business Sectors. Ultimately, our goal is to position Universal for long-term success and value creation. And I look forward to sharing more about these initiatives in the quarters to come.
Preston: <unk> of human capital management.
Preston: Optimal utilization of technology.
Preston: And operational synergies between our business segments.
Preston: Ultimately our goal is to position universal for long term success and value creation.
Preston: I look forward to sharing more about these initiatives in the quarters to come.
Preston Wigner: I cannot talk about our strategy without talking about our strong regional and local management teams around the world. Well, our operations span five continents and over 30 countries. The coordination between our executive management and our regional and local management teams makes our decision-making quite nimble. We are not afraid to make the right calls, like when we and our South America management team decided to accelerate green tobacco buying in Brazil last year. That decision temporarily increased the level of debt on our balance sheet, but established a favorable cost position and secure the green tobacco needed to supply our customers in a very tight weather impacted market.
Preston: I cannot talk about our strategy without talking about our strong regional and local management teams around the world.
Preston: While our operations span five continents in over 30 countries the coordination between our executive management, and our regional and local management teams. It makes our decision making quite nimble.
Preston: We are not afraid to make the right calls, Mike when we and our South American management team decided to accelerate green tobacco buying in Brazil last year.
Preston: That decision temporarily increased the level of debt on our balance sheet, but established a favorable cost position and secure the green tobacco needed to supply our customers in a very tight weather impacted market.
Preston Wigner: These types of decisions and the ability to execute on them are key to our success.
Preston: These types of decisions and the ability to execute on them are key to our success.
Johan Kroner: I'd like now to hand it over to Johan to provide details of our financial and operational After which I'll have a high level outlook for fiscal year 2026 and share a few additional thoughts. Thank you, Preston. Good evening, everyone. As Preston mentioned, Universal just delivered exceptional results for the full year of fiscal year 2025. Within the fiscal year, we saw accelerated timing for tobacco shipments to some customers, which shifted some sales volume from the fourth quarter to earlier in the year. The results for our fourth quarter, therefore, reflected the effect of such timing. for the fourth quarter of fiscal year 2025.
Preston: I'd like now to hand, it over to Johan to provide details of our financial and operational performance after which I will have a high level outlook for fiscal year 2026 and share a few additional thoughts.
Preston: Yeah.
Johan: Thank you Preston good evening, everyone as.
Preston: As Preston mentioned Universal just delivered exceptional results for the full year of fiscal year 2025.
Preston: Within the fiscal year, we saw accelerated the timing for tobacco shipments to some customers, which shifted some sales volume from the fourth quarter two earlier in the year.
Preston: The results for our fourth quarter, therefore reflected the effect of such timing shifts.
Preston: For the fourth quarter of fiscal year 2025.
Johan Kroner: Sales and other operating revenue were $702.3 million as compared to $770.9 million for the same quarter in fiscal year 2024. The decrease in revenue was mainly due to lower tobacco sales volumes as a result of the timing shift I just mentioned. Operating income for the quarter was $42.8 million as compared to $68.2 million for the same quarter in fiscal year 2024. The lower operating income was also mainly due to lower tobacco sales volume. selling general and administrative expenses were $9.5 million lower during the quarter as compared to the same quarter in fiscal year 2024, mainly due to lower compensation costs, a better currency comparison, but partially offset by higher legal and professional fees associated with the Mozambique embezzlement investigation.
Preston: <unk> and other operating revenue.
Preston: Were $702 3 million as compared to 779 million for the same quarter in fiscal year 2024.
Preston: The decrease in revenue was mainly due to lower tobacco sales volumes as a result of this timing shift I just mentioned.
Preston: Operating income for the quarter was $42 8 million as compared to $68 2 million for the same quarter in fiscal year 2020 for the lower operating income was also mainly due to lower tobacco sales volumes.
Preston: Selling general and administrative expenses were $9 5 million lower during the quarter as compared to the same quarter in fiscal year 2024, mainly due to lower compensation costs.
Preston: Better currency comparison, but partially offset by higher legal and professional fees associated with the Mozambique investment investigation.
Johan Kroner: Net income attributable to Universal Corporation was $9.3 million or $0.37 per share on a fully diluted basis as compared to $40.3 million or $1.61 per share for the same quarter in fiscal year 2024. During the quarter ended on March 31, 2025, Universal completed a pension risk transfer transaction which resulted in a one-time pre-tax pension settlement charge of approximately $14 million. Adjusted Net Income, which excludes certain non-recurring items, was $20.2 million, or $0.80 per share, for the fourth quarter of fiscal year 2025, as compared to $44.8 million, or $1.79 per share, for the same quarter in fiscal year 2024.
Preston: Net income attributable to the Universal Corporation was $9 3 million or <unk> 37 per share on a fully diluted basis as compared to $43 million or $1 61 per share for the same quarter in fiscal year 2024.
Preston: During the quarter ended on March 31, 2025 University completed the pension risk transfer transaction, which resulted in a onetime pretax pension settlement charge of approximately $14 million.
Preston: Adjusted net income, which excludes certain nonrecurring items was $20 2 million or <unk> <unk> per share for the fourth quarter of fiscal year 2025, as compared to $44 8 million or $1 79 per share for the same quarter in fiscal year 2024.
Johan Kroner: Segment operating income for the tobacco operations segment was $45.8 million for the quarter as compared to $73.5 million for the same quarter of fiscal year 2024. The lower segment operating income was driven mainly by lower sales volumes, partially offset by better prices. Segment operating income for the ingredients operations segment was $4.4 million for the quarter as compared to a $1 million loss for the same quarter of fiscal year 2024. The higher segment operating income was driven mainly by higher sales volume. for the full year of fiscal year 2025. sales and operating revenue for $2.95 billion as compared to $2.75 billion for fiscal year 2024.
Preston: Segment operating income for the tobacco operations segment was $45 8 million for the quarter as compared to $73 5 million for the same quarter of fiscal year 2024.
Preston: The lower segment operating income was driven mainly by lower sales volumes, partially offset by better pricing.
Preston: Segment operating income for the ingredients operations segment was $4 4 million for the quarter as compared to a $1 million loss for the same quarter of fiscal year 2020 for the higher segment operating income was driven mainly by higher sales volumes.
Preston: For the full year of fiscal year 2025.
Preston: And operating revenue were 2.95 billion as compared to $2 75 billion for fiscal year 2020 for.
Johan Kroner: The increase in revenue is mainly due to higher tobacco sales prices, partially upset by lower volumes. Operating income for fiscal year 2025 was $232.8 million as compared to $222 million for fiscal year 2024. The increase was mainly driven by higher sales revenue, partially offset by higher green tobacco purchase price. SG&A expenses were $305.3 million during fiscal year 2025 as compared to $310.6 million for fiscal year 2024. The lower SG&A expenses were mainly the result of lower compensation costs and better recoveries on farmer advances, partially offset by higher legal and professional fees associated with the Mozambique embezzlement investigation and higher sales commission.
Preston: The increase in revenue was mainly due to higher tobacco sales prices, partially offset by lower volumes.
Preston: Operating income for fiscal year, 2025 was $232 8 million as compared to $222 million for fiscal year 2020 for the increase was mainly driven by higher sales revenue, partially offset by higher green tobacco purchase prices.
Preston: SG&A expenses were $305 3 million during fiscal year 2025, as compared to $310 6 million for fiscal year 2024.
Preston: The lower SG&A expenses were mainly the result of lower compensation costs and better recoveries on farmer advances, partially offset by higher legal and professional fees associated with the Mozambique investment investigation and higher sales commissions.
Johan Kroner: Net income attributable to Universal Corporation was $95 million for fiscal year 2025, or $3.78 per share, on a fully diluted basis, as compared to $119.6 million, or $4.78. for fiscal year 2024. Net income was lower, mainly as a result of higher operating income being upset by higher interest the aforementioned pension settlement charge and restructuring and impairment charges related to the consolidation and restructuring of our European sheet operation. Adjusted net income, which excludes certain non-recurring items, was $116.3 million, or $4.63 per share, on a fully diluted basis for fiscal year 2025, as compared to $127.1 million, or $5.08 per share, for fiscal year 2024.
Preston: Net income attributable to Universal Corporation was 95 million for fiscal year, 2025, or $3 78 per share on a fully diluted basis as compared to $119 6 million or $4 78 per share for fiscal year 2024.
Preston: Net income was lower mainly as a result of higher operating income being offset by higher interest expenses.
Preston: The aforementioned pension settlement charge and restructuring and impairment charges related to the consolidation and restructuring of our European sheet operations.
Preston: Adjusted net income, which excludes certain nonrecurring items was $116 3 million or $4 63 per share on a fully diluted basis for fiscal year 2025, as compared to $127 1 million or $5 <unk> per share for fiscal year 2024.
Preston: Yes.
Johan Kroner: Segment operating income for the tobacco operation segment was $240.2 million for fiscal year 2025, as compared to $222.4 million for fiscal year 2024. The higher segment operating income was driven mainly by higher sales prices, partially offset by lower volume. Segment operating income for the ingredients operation segment was $12.3 million for fiscal year 2025, as compared to $3.9 million for fiscal year 2024. The higher operating income was mainly driven by higher sales volume. Strong cash flow generated by this financial performance supported our effort to deliver. Effective revenue collection efforts and a more normalized green tobacco buying pattern in Brazil for the crop currently being purchased also improved our working capital.
Preston: Segment operating income for the tobacco operations segment was 242 million for fiscal year 2025, as compared to $222 4 million for fiscal year 2024.
Preston: The higher segment operating income was driven mainly by higher sales prices, partially offset by lower volumes.
Preston: Segment operating income for the ingredients operations second was $12 3 million for fiscal year 2025, as compared to $3 9 million for fiscal year 2020 for the higher operating income was mainly driven by higher sales volumes.
Preston: Strong cash flow generated by this financial performance supported our efforts to de lever.
Preston: Effective revenue collection efforts and a more normalized green tobacco buying pattern in Brazil for the crop currently being purchased also improved our working capital usage.
Johan Kroner: As of March 31st, 2025, our net debt, which is defined as the sum of notes payable, overdrafts, and long-term obligations, including current portion plus customer advance in deposits, less cash in cash of equivalents was 817,000,180 million lower than March 31st of last year. Additionally, as of March 31 2025, our accounts receivable balance was over $100 million higher than at the end of fiscal year 2024. We remain focused on prudently and efficiently managing our working capital to maintain a conservative leverage level and solidify our investment grade credit ratings.
Preston: As of March 31, 2025, our net debt, which is defined as the sum of notes payable overdrafts and long term obligations, including current portion plus customer advances and deposits less cash and cash of equivalent was $817 million $180 million lower than March 30 <unk>.
Preston: <unk> of last year.
Preston: Additionally.
Preston: As of March 31, 2025, our accounts receivable balance was over $100 million higher than at the end of fiscal year 2024.
Preston: We remain focused on prudently and efficiently managing our working capital to maintain a conservative leverage level and solidify our investment grade credit ratings I will now hand, it back to Preston to discuss our outlook for the next fiscal year.
Preston Wigner: I will now hand it back to Preston to discuss our outlook for the next fiscal year. Thank you, Johan.
Preston: Thank you Johan.
Preston Wigner: Looking at fiscal year 2026. On the tobacco side, we see strong customer demand. and Industry Uncommitted Inventory remains at low level. Per our estimate, excluding China, global flu cure production is expected to increase this current growing season by about 20 percent. And burley production is expected to increase by about 30 percent as compared to the last growing. If these anticipated production increases are achieved, we believe the incremental availability of tobacco will move the market from the recent undersupply position towards a more balanced or slight oversupply.
Speaker Change: Looking at fiscal year 2026.
Preston: Well on the tobacco side, we see strong customer demand.
Speaker Change: And industry uncommitted inventory remains at low levels.
Speaker Change: Our estimate excluding China.
Speaker Change: Global flue cured production is expected to increase this current growing season by about 20% and Burley production is expected to increase by about 30% as compared to the last growing season.
Speaker Change: If these anticipated production increases are achieved we believe the incremental availability of tobacco will move the market from the recent under supply position towards a more balanced or slight oversupply position.
Preston Wigner: on the ingredients side.
Speaker Change: On the ingredient side.
Preston Wigner: During fiscal year 2025, we completed our major expansion project in Lancaster, Pennsylvania, which added an industry leading combination of extraction, lending, aseptic packaging, and other capabilities. We also invested in strengthening our sales, marketing, and product development. and focus on creating value across the entire platform. The platform level support enables us to deliver unique customized products to our customers.
Speaker Change: During fiscal year 2025, we completed our major expansion project in Lancaster, Pennsylvania, which added an industry, leading combination of extraction blending ace uptick packaging and other capabilities.
Speaker Change: We also invested in strengthening our sales marketing and product development teams and focused on creating value across the entire platform.
Speaker Change: The platform level support enables us to deliver unique customized products to our customers.
Preston Wigner: Entering fiscal year 2026, we are energized by strong customer interest in these new innovative products as we shift our focus from platform building to organic growth.
Speaker Change: Entering fiscal year 2026, we are energized by strong customer interest in these new innovative products as we shift our focus from platform building to organic growth.
Preston Wigner: I would be remiss not to highlight some of our key accomplishments in sustainability as well. as the largest global leaf tobacco supplier that directly contracts with over 175,000 farmers around the world. Sustainability has been deeply embedded in our DNA. to us, a strategic part of our business. is our commitment to setting high standards. Promoting a sustainable supply chain and providing transparency about our sustainability. Sustainability is good for our business and represents good stewardship in the communities in which we operate.
Speaker Change: I would be remiss not to highlight some of our key accomplishments and sustainability as well.
Speaker Change: As the largest global leaf tobacco supplier that directly contracts with over 175000 farmers around the world.
Speaker Change: Sustainability has been deeply embedded in our DNA.
Speaker Change: To us the strategic part of our business is our commitment to setting high standards promoting a sustainable supply chain and providing transparency about our sustainability efforts.
Speaker Change: Sustainability is good for our business and represents good stewardship and the communities in which we operate.
Preston Wigner: Finally, I'll end my remarks with a note about our prior filing delays related to our investigation in Mozambique. I'm pleased that the investigation is complete and our filings have been made and the embezzlement did not and is not expected to have any material impact on our financial. As an organization, we learned from the matter and we implemented various initiatives to improve our processes and internal control.
Speaker Change: Finally, I'll end my remarks with a note about our prior filing delays related to our investigation in Mozambique.
Speaker Change: I am pleased that the investigation is complete and our filings have been made.
Speaker Change: And the embezzlement did not and is not expected to have any material impact on our financials.
Speaker Change: As an organization, we learned from the matter and we implemented various initiatives to improve our processes and internal controls.
Preston Wigner: We believe these incremental improvements will make us an even stronger and better company.
Speaker Change: We believe these incremental improvements will make us an even stronger and better company.
Tiffany: Operator, please open up the call for questions. At this time, if you would like to ask a question, press star, then the number one on your telephone keypad. To withdraw a question, simply press star one again. We will pause for just a moment to compile the Q&A roster.
Speaker Change: Operator, please open up the call for questions.
Speaker Change: At this time, if you would like to ask a question Press Star then the number one on your telephone keypad to withdraw your question simply press Star. One again, we will pause for just a moment to compile the Q&A roster.
Anne Gurkin: Your first question comes from Anne Gurkin with Davenport and Company. Please go ahead. Good evening, everybody. It's great to talk to y'all. Thank you. Congrats to Preston. Congrats on completing the investigation, or at least filing the appropriate paperwork. And congrats on a very excellent fiscal 25. Thanks.
Speaker Change: Your first question comes from Ann Gurkin, with Davenport and company. Please go ahead.
Ann Gurkin: Good evening, everybody, it's great to talk to you all.
Speaker Change: Thank you and congrats surplus then congrats on completing the investigation or at least filing the appropriate paperwork.
Speaker Change: Congrats on a very excellent fiscal 'twenty five.
Anne Gurkin: I wanted to spend a few minutes thinking about fiscal 26 and see what you can share, beginning with SG&A. How should I think about SG&A for fiscal 26? And I'll take that.
Speaker Change: Thanks.
Speaker Change: Wanted to spend a few minutes thinking about fiscal 'twenty six let's see what you can share beginning with SG&A.
Speaker Change: How should I think about SG&A for fiscal 'twenty six.
Speaker Change: And I will say that we can't provide forward looking guidance on our SG&A run rate, but I can help you understand some of the components of our SG&A.
Johan Kroner: We can't provide forward-looking guidance on our SG&A run rate, but I can help you understand some of the components of our SG&A. Fiscal year 25, 4-year SG&A was about 305, down 5 million versus prior year. There were a couple of moving pieces, you know, some one-offs, you know, there's legal and professional fees, of course, related to the Mozambique investigation. And, you know, we have some costs associated with value-added tax settlement in 24, so, you know, there's always these moving pieces. Other variances may be related to some specific aspects of our operations. For example, we had higher recoveries of farmer advances during fiscal year 2025 due to strong market demand and pricing, and some higher commissions due to a shift in customer metrics.
Speaker Change: Fiscal year 'twenty five forward your SG&A was about 305.
Speaker Change: Down 5 million versus prior year.
Speaker Change: Couple of moving pieces.
Speaker Change: Some one off legal and professional fees of course were off as it relates to the Mozambique investigation, and we have some cost associated with value added tax settlement and 24. So there.
Speaker Change: There's always moving pieces all of them.
Speaker Change: Variances maybe related to some specific aspects of our operations. For example, we had higher recoveries of farmer advances during fiscal year 2025, due to strong market demand and pricing and some higher commissions due to a shift in customer mix.
Johan Kroner: Please also keep in mind that, you know, foreign currency. comparisons could also impact SG&A.
Speaker Change: Please also keep in mind that you know.
Speaker Change: Foreign currency.
Speaker Change: Comparisons could also impact SG&A.
Johan Kroner: Overall, as we look to strengthen and grow the corporation, we may invest in additional SG&A to build capabilities, while at the same time we seek opportunities to drive efficiencies and reduce costs.
Speaker Change: Overall, as we look to strengthen and grow the Art Corporation, we may invest in additional SG&A to build capabilities.
Speaker Change: While at the same time, we seek opportunities to drive efficiencies and reduce costs.
Johan Kroner: So are you going to have ongoing legal expenses that continue in fiscal 26 for the Mozambique situation? Not with regard to the MotionBeak investigation, no, that investigation has been completed. That's completed. Okay, great. Okay.
Speaker Change: So are you going to have ongoing legal expenses that continue in fiscal 'twenty for the Mozambique situation.
Speaker Change: Now with regard to the Mozambique investigation.
Speaker Change: The investigation has been completed definitely okay, great. Okay. Okay.
Anne Gurkin: And then switching to tobacco, very strong margins, nice business and fiscal 25. I guess in talking to tobacco companies, customers, looks like demand is strong. They're talking about lower, expecting lower tobacco costs moving forward.
Speaker Change: And then switching to tobacco I'm very strong margins nice nice business in fiscal 'twenty five.
Speaker Change: I guess I'm talking to tobacco companies customers.
Speaker Change: It looks like demand is strong they're talking about lower expecting lower tobacco cost moving forward. So that raises the question of their expectations.
Preston Wigner: So that raises the question of their expectations, their inventory levels versus the likely move towards a more balanced tobacco lease global supply given the forecast. So how should I think about margins and the ability to price and ability to drive growth into tobacco segments and fiscal 26 versus fiscal 25? Yeah, that's you've touched on the key issue. And as we as we go from from undersupply into a balanced market with larger crops and in price. expected to come down. I think we're aligned with our customers in that viewpoint as well. But as those as those crops grow, we're trying to think through and of course we coordinate with our customers.
Speaker Change: Their inventory levels versus the likely move towards a more balanced tobacco leaf.
Speaker Change: Global supply given the forecast so how should I think about margins and the ability to price and ability to drive growth and to tobacco segment in fiscal 'twenty six versus fiscal 'twenty five.
Speaker Change: That's you've touched on the key issue and as we as we go from.
Speaker Change: From under supply into a balanced market with larger crops and.
Speaker Change: And prices.
Speaker Change: I expect it to come down I think we're aligned with our customers and that viewpoint as well.
Speaker Change: But as those as those crops grow.
Speaker Change: We're trying to think through and of course, we coordinate with our customers to find out what their indications are and we try to do that as far in advance as we can so we know what we need to be growing with our farmers, but you know the open question is what are they going to do with their durations, where a customer is going to build them back up.
Preston Wigner: to find out what their indications are, and we try to do that as far in advance as we can, so we know what we need to be growing with our farmers. But an open question is, what are they gonna do with their duration? Our customer is going to build them back up. Our customer is going to continue with where they are and allocate resources and other areas of their company, which is for capital allocation strategy, is on the minds of some of our customers.
Speaker Change: Our customer is going to continue with where they are and allocate resources.
Speaker Change: In other areas of the company, which is for capital allocation strategy.
Speaker Change: Is on the minds of some of our customers. So it's still too early in the season to tell.
Preston Wigner: So it's still too early in the season to tell. But we know that there is still strong demand this year. As we go into this market, even though we have really big crops coming in, we think the lower prices will help. And we'll be able to meet our customers demands. It's just, at this time, it's a little difficult to know. What the scope and extent of those demands are going to be until we really have a better understanding from all of our customers. of how they're going to manage this duration. some of them, those durations got very low.
Speaker Change: But we know that there is still strong demand this year.
Speaker Change: As we go into this market, even though we have really big crops coming in.
Speaker Change: We think the lower prices will help.
Speaker Change: And we will be able to meet our customers' demands.
Speaker Change: At this time, it's a little difficult to know.
Speaker Change: What the scope and extent of those demands are going to be until we really have a better understanding from all of our customers of how theyre going to manage those durations some of them Mr.
Speaker Change: Those durations got very low so we benefited last year.
Preston Wigner: So we benefited last year. And even though it was a historically high green price crop and lots of origin. and short crops in some places like Brazil. We were able to help them and source the tobacco that they needed. that they paid high prices for those and. And this year they're expecting better pricing and we we would expect better pricing as well. But we really have to have a better understanding of what their real needs are going to be throughout the whole crop season.
Speaker Change: And even though it was a historically high green price crop and loves the origins.
Speaker Change: And short Trups in some places like Brazil.
Speaker Change: We were able to help them and source of tobacco that they needed.
Speaker Change: But they paid high prices for those and.
Speaker Change: And this year they are expecting better pricing.
Speaker Change: We would expect better pricing as well.
Speaker Change: But we really have to have a better understanding of what their real needs are going to be throughout the whole crop season, and all of these areas starting with Brazil, and then enter.
Preston Wigner: And all of these areas, starting with Brazil and then in into Africa and then around the world.
Speaker Change: In the Africa and around the world.
Preston Wigner: Great to anticipate growing volumes for the tobacco business in Fiscal 26. Yeah, again, it's gonna, to me, it's going to depend on what they're going to do with those durations.
Speaker Change: Great you anticipate growing volumes, but the tobacco business in fiscal 'twenty.
Speaker Change: Okay.
Speaker Change: Yeah again, it's going to it's going to depend on what theyre going to do with those durations that would be the the variable for me.
Preston Wigner: That would be the variable for me. You know, they had, we had a slight decrease in volume last year, even though really strong demand. You know, even though, you know, a place like Brazil is going to have a much larger crop. doesn't mean automatically that everybody's going to be buying. 20% more, we're just gonna have to see some of them are certainly going to increased durations and some I think are going to live with. the tighter durations and rely on us.
Speaker Change: Uh huh.
Speaker Change: You know they had we had a slight decrease in volume last year, even though really strong demand.
Speaker Change: And even though.
Speaker Change: Places like Brazil is going to have a much larger crop.
Speaker Change: Doesn't mean automatically that everybody is going to be buying.
Speaker Change: 20% more.
Speaker Change: Just going to have to see some of them are certainly going to.
Speaker Change: Increased durations and some I think are going to live with.
Speaker Change: The tighter durations and rely on us.
Johan Kroner: to give them opportunities, especially maybe later in the crop year, where in the crop season, where they might be able to come in if there's excess tobacco, that we can buy on the market and help them where last year, in undersupply and tight markets, we couldn't. If I may add, Preston, All things being equal and, you know, crops are larger, we're going to buy our share. But we do not buy on a speculative basis. So again, this is where the customer angle comes in. But under normal circumstances, we buy our share. And, you know, we have the contracts with our farmers.
Speaker Change: To give them opportunities, especially maybe later in the crop year, where in the crop season, where they might be able to come in if theres excess tobacco that.
Speaker Change: If we can find in the market.
Speaker Change: And help them where last year.
Speaker Change: And under supply in tight markets, we couldnt.
Speaker Change: Done.
Speaker Change: If I may add.
Speaker Change: Sure.
Speaker Change: All things being equal and crops are larger we're going to buy our share, but we do not buy on a speculative basis. So again this is where the customer angle comes in.
Speaker Change: Under normal circumstances, we buy our share and we at the conference with our farmers Superrich farmers grow more thats, what were buying and we will end up with some additional tobacco.
Johan Kroner: If the farmers grow more, that's what we're buying. So we will end up with some additional tobacco. You know, it's cheaper, so that will help us a little bit. But, you know, we do expect, volumes to go up a little bit.
Speaker Change: Cheaper so that will help us a little bit, but we do expect volumes to go up a little bit in <unk>, but we have to be able to place and Thats, where the big question is at the moment.
Johan Kroner: But we have to be able to play. And that's where the big question is at the moment.
Johan Kroner: And what are Universal's uncommitted inventory levels right now? tobacco amateur. We're currently at 20% as of March 31st, 2020.
Speaker Change: And what are Universal's uncommitted inventory levels right now.
Speaker Change: Tobacco laboratory.
Speaker Change: We're currently at.
Speaker Change: 20% as of March 31, 2025.
Johan Kroner: and Worldwide Uncommitted Lease Inventories. So the estimated unsold flu-cured birdie stock was 22 million kilos as of March 31st, which is up 11 million from December 31st.
Speaker Change: And worldwide uncommitted leaf inventory.
Speaker Change: So the estimated unsold flue cured Burley stock was 22 million kilos as of March 31, which is up 11 million from December 31.
Johan Kroner: Okay, and how does the US crop look right now? Tobacco crop? Too early, Anne. Yeah, it's a little too early. Too early. Okay, okay.
Speaker Change: Okay, and how does the U S crop book right now tobacco crop.
Speaker Change: Too early and it's a little too early to really okay. Okay switching to ingredients nice to see the improvement in the operating profit versus 2024 for the ingredients segment, how do I think about.
Anne Gurkin: Switching to ingredients. Nice to see the improvement in the operating profit versus 2024 for the ingredients segment. How do I think about The profit outlook for the ingredient segment. And are you still targeting ingredient, the profit for the ingredient segment to total 10 to 12% of EBITDA. That's still a long term target for that segment. Well, we put that target out a while back. And so, you know, we hit it and then we moved on, you know, again, we have made some significant investments. And that's where we need to deliver. And that's what we have been saying the entire time that, you know, by putting in these additional capabilities and all these things that we can do.
Speaker Change: The profit outlook for the ingredient segment and are you still targeting.
Speaker Change: My gradient profit for the ingredient segment.
Speaker Change: Total, 10% to 12% of EBITDA is that still a long term target for that segment.
Speaker Change: Well, we put that target out while a while back and so we hit it and then we moved on again, we have made some significant investments.
Speaker Change: And that's where we need to deliver and that's what we have been saying the entire time that by putting.
Speaker Change: Putting in these additional capabilities and all these things that we can do.
Johan Kroner: Now, the sales guys need to do their thing. You know, we ramped up the commercial department, we ramped up the R&D, there is a lot of costs associated with that. In the numbers, you know, which you can see in 2025, and before, so you're going to see the fruits of this, you know, going forward, you know, we just now we just need to sell it and we need to margin up, you know, some of these things, we don't like to be in the commodity business, we like to be in the specialized stuff. And that's why we did what we did.
Speaker Change: Now to the sales guys need to do their thing.
Speaker Change: <unk> ramped up the.
Speaker Change: The commercial department, we ramped up the R&D there is a lot of cost associated with that in the numbers.
Speaker Change: You can see into 'twenty, five and before so you're going to see the fruits of this.
Speaker Change: Going forward with it.
Speaker Change: Now, we just need to sell it and we need to margin up some of these things we don't like to be in the commodity business, we like to be in the specialized itself and that's why we did what we did and we might be significant investment in Lancaster, Pennsylvania.
Johan Kroner: And we made these significant investment in Lancaster, Pennsylvania. Yeah, we were we were certainly pleased for the year with increased sales, increased volumes for the platform and and ending the quarter on a strong note. And our goal is to grow, that's our strategy, grow ingredients. and we expect to do that. To leverage as much as we can with our platform resources, get as much value from those resources as we can. It's, it's been paying off this year and, and, and that's our goal for next year and in the continuing.
Speaker Change: Yeah, we were.
Speaker Change: Pleased for the year with increased sales increased volumes for the platform and.
Speaker Change: And then ending the quarter on a strong note.
Speaker Change: And our goal is to grow.
Speaker Change: Rajeev grow ingredients.
Speaker Change: And we expect to do that we need to.
Speaker Change: To leverage as much as we can with our platform resources get as much value from those resources that we can it's been paying off this year and.
Speaker Change: And that's our goal for next year and in the continuing years.
Anne Gurkin: Can you quantify the increased sales due to anticipated tariffs on assets and some business shifted into Q4? Yeah, there was some, I'd say there was some modest, modest activity in the fourth quarter, in anticipation of tariffs.
Speaker Change: Can you quantify the the increased sales due to anticipated tariffs on us and some business shifted into Q4.
Speaker Change: Yeah, there was some.
Speaker Change: I'd say there was some modest modest activity in the fourth quarter in anticipation of tariffs.
Johan Kroner: And you know, tariffs It depends on what time of day you want to check the news to know what's going on. that But we we would expect with those types of challenges. You will have opportunities in. And we're working through those. We've seen tariffs in the past, it's really going to be focus on what the tariffs really are. And are there other areas that we can also source products from to mitigate maybe additional costs with tariffs? and have a more diversified supply base.
Speaker Change: And tariffs it depends on what time of day, you want to check the news to know us but.
Speaker Change: Yeah.
Speaker Change: But we would expect with those types of challenges.
Speaker Change: We will have opportunities and.
Speaker Change: And we're working through those we've seen tariffs in the past, it's really going to be.
Speaker Change: Our focus on what the tariffs really are.
Speaker Change: And are there other areas that we can also source products from to mitigate maybe additional cost with tariffs.
Speaker Change: And have a more diversified supply base.
Johan Kroner: to mitigate any impacts like So about 10% of the sales in Q4 would have been due to timing of tariff purchases. Not that high. Okay.
Speaker Change: To mitigate any impacts like that.
Speaker Change: About 10% of the sales in Q4 would have been due to the timing of tariffs purchases.
Speaker Change: No not that not that high.
Speaker Change: Okay, Okay and then.
Johan Kroner: And then, can you talk about tariffs? What is caught up in tariffs for y'all? What, both on the tobacco side and the ingredient side? Is there anything? Yeah, I guess it depends on what, as of today, if we're thinking of, of tariffs with China. that's that's going to impact how much, if anything, the Chinese are going to buy in the US. For us, you know, that's that's not a large part of our business now. We handle some processing for them. So for the Chinese side You know, that's really for the U.S., you know, maybe volumes go down in the U.S.
Speaker Change: Can you talk about tariffs what is caught up in tariffs for you all what.
Speaker Change: Both on the tobacco side in the ingredient side is there anything.
Speaker Change: Yeah, I guess so.
Speaker Change: It depends on what as of today.
Speaker Change: And if we're thinking of of tariffs with China.
Speaker Change: That's going to impact how much if anything the Chinese are going to buy in the U S.
Speaker Change: For us.
Speaker Change: That's not a large part of our business.
Speaker Change: Handle some processing for them so for the Chinese.
Speaker Change: That's really for the U S. Maybe volumes go down in the U S. It gives us opportunities in other areas, where they're going to shift their needs because they do have requirements.
Johan Kroner: It gives us opportunities in other areas where they're going to shift their needs because they do have requirements. and we worked very hard last year to meet those requirements in tough markets. and we'll do the same this year as well. I think on the ingredient side, it's for the Chinese sourcing we have, which is really our dehydrated vegetable company, Silva International. That's gonna depend on the level of tariffs, where they end up. And as we saw, the customers were buying forward a little bit, and we're working on additional areas of supply in case the tariffs go up.
Speaker Change: And we worked very hard last year to meet those requirements in tough markets.
Speaker Change: And we will do the same this year as well I think on the ingredients side.
Speaker Change: It's where the Chinese sourcing, we have which is really our dehydrated.
Speaker Change: Vegetable company Sylva International.
Speaker Change: That's going to depend on the level of tariffs, where they end up and as we saw that.
Speaker Change: Customers were buying forward a little bit.
Speaker Change: And we're working on additional areas of supply in case, the tariffs go up if the tariffs come down.
Johan Kroner: If the tariffs come down, we're in good shape. We also carry. as part of our strategy, a little longer inventories at Silva with our products. So we've got some breathing room with that as we navigate the change. If tariff apply to other origins, that's really going to impact Purchases that our U.S. customers have. from our operations around the world. And, and we're, you know, keenly aware of of our commitment to our customers to help them any way we can, and we'll work with them. If there are unexpected tariffs and origins that they typically would buy from, we'd work with them and.
Speaker Change: And we're in good shape, we also carry.
Speaker Change: As part of our strategy is a little longer inventories at silver with our products. So we've got some breathing room with that as we navigate the changes.
Speaker Change: If tariffs.
Speaker Change: Apply to other origins, that's really going to impact.
Speaker Change: Purchases that are U S customers have.
Speaker Change: From our operations around the world and.
Speaker Change: And we are keenly aware of.
Speaker Change: Of our commitment to our customers to help them any way we can.
Speaker Change: And we'll work with them if if there are unexpected tariffs and origins that they typically with lifetime, we've worked with them and.
Johan Kroner: and help them in other origins as best we can. It's just a tough one to predict. Even today, you know, it's tariffs are off, tariffs are on, tariffs are stayed. We're just going to wait and see, but we've we've dealt with these types of challenges in the past, whether they're tariffs and other things. And we always make a plan and we will produce results. Despite the challenges, there's always an opportunity with every challenge.
Speaker Change: And help them in other origins as best we can so it's it's it's just a tough one to.
Speaker Change: To predict you know.
Speaker Change: Even today.
Speaker Change: Tariffs are off tariffs are on tariffs or stayed.
Speaker Change: We're just going to wait and see but we've we've dealt with these types of challenges in the past whether their tariffs and other things.
Speaker Change: And we always make a plan and we will.
Speaker Change: Will produce results. Despite the challenge is always an opportunity with every challenge.
Johan Kroner: So are you buying product from China that has the 145% tariff on it? Or did you build enough inventory? to not have to buy that at that moment. I know the tariffs dropped now to 30%. But where are you in that cycle? Yeah. I'd say I don't think we're buying anything at that level. It would just be too difficult to move. I think we bought some strategic times to avoid the tariffs or to have minimal tariffs. And that plus our inventory, we're fine. But we'll have to see how long the tariffs last.
Speaker Change: So are you buying product from China that has the 145% tariff on it or did you build enough inventory.
Speaker Change:
Speaker Change: And not have to buy that at that moment I know the tariffs dropped down to 30%, but where are you in that cycle.
Speaker Change: Yeah.
Speaker Change: I'd say I don't think we're buying anything at that level. It was just too difficult to move I think they bought some strategic times.
Speaker Change: To avoid the tariffs or to have minimal tariffs.
Speaker Change: And that plus our inventory.
Speaker Change: Were fine, but we'll have to see how long the tariffs last also.
Johan Kroner: And then you talk about recent increases in raw material prices for certain traditional products. What does that mean? I'm sorry.
Speaker Change: And then you talk about recent increases in raw material prices for certain traditional products, what does that mean im sorry, I don't know about us.
Johan Kroner: I don't know what that means. So for our ingredients business, for example, there's been historically low prices for apples, which impact fruit smart or operation in Washington on the fruit processing company and on vanilla or shanks, which is one of their core products. Those sales have been good. It's just it's just historically low levels which impacts our our dollar margins on that business. So we've got good sales, we've we've got good margin percentages. Of course, if your raw material prices are low, it's impacting your absolute dollar margins.
Speaker Change: So far our ingredients business for example, that's been historically low prices for apples, which impact for smart our operation in Washington on the food processing company and vanilla.
Speaker Change: <unk>, which is one of their core products.
Speaker Change: Those sales have been good it's just it's just historically low levels, which impacts our.
Speaker Change: Our dollar margins on that business. So we got good sales, we've got good margin percentages, but of course, if your raw material prices are low.
Speaker Change: It's impacting your absolute dollar margins. So can you go to Martin on the ingredients business in fiscal 'twenty six versus 25.
Johan Kroner: Can you go to margin on the ingredients business in fiscal 26 versus 25? And that's, again, why I said that, you know, we need to margin up on these things. So that's where, you know, our goal is to improve the margins on that business. And that's why we did what we did in Lancaster, Pennsylvania, by, you know, creating something that is a differentiator for us and for the market. Right. And, you know, an add on to that. The big part of our strategy in growing ingredients is to grow volume and grow scale. We've got to platform investments in product development and in sales and in marketing.
Speaker Change: Alright.
Speaker Change: And Thats again, why I said that we need we need margin up on these things. So that's where our goal is to improve the margins on that business and that's why we did what we did in Lancaster, Pennsylvania.
Speaker Change: Creating something that is a.
Speaker Change: A differentiator for us.
Speaker Change: And for the market right.
Speaker Change: And to add onto that.
Speaker Change: Yeah, the big part of our strategy in growing ingredients is to grow volume and grow scale, Yeah, We've got a platform.
Speaker Change: <unk> in product development and then.
Speaker Change: Sales and marketing.
Speaker Change: Marketing and.
Johan Kroner: And the more we scale up, the more we spread those costs. across our across our units and we become even more competitive and then we've got better pricing and better margins as well. We get the return that we need. for those.
Speaker Change: And the more we scale up.
Speaker Change: We spread those costs.
Speaker Change: Across our across our units and we become even more competitive and then we've got.
Speaker Change: Better pricing and better margins as well, we get the return that we need.
Speaker Change: For those investments.
Johan Kroner: Have you invested in the Salesforce to support growth to fill that platform? Yeah. Great, great.
Speaker Change: Have you invested in our sales force to support growth to fill that platform.
Speaker Change: Yes.
Speaker Change: Alright, great.
Anne Gurkin: And then can I just ask two more things one about the 100 million share repurchase program and you didn't buy any stock back in the quarter.
Speaker Change: And then can I just ask two more things one about.
Speaker Change: The 100 million share repurchase program that you didn't buy any stock back in the quarter what are your thoughts on.
Johan Kroner: What are your thoughts on on using that program? You ended the year with I think 260 million in cash and you've done a lot of work on reducing working capital needs or managing working capital. How should I think about that opportunity to buy back stock? Well, according to the capital allocation strategy, and you know, we have some smaller things that are more prioritized at the moment. So we, it's out there. If the timing is right, we will use it. But right now, you know, we would like to deliver more. And we want to do some other things, make some investments, strategic investments, if the opportunity arises.
Speaker Change: Using that program you ended the year with I think $260 million of cash and you've done a lot of work on reducing working capital needs are managing working capital how should I think about that opportunity to buy back stock.
Speaker Change: Well according to the capital allocation strategy and we have some smaller things that are more prioritized at the moment.
Speaker Change: So it's out there.
Speaker Change: The timing is right, we will use it but right now we would like to Delever more and we want to do smaller things make some investments strategic investments if the opportunity arises. So all those things are.
Johan Kroner: So, you know, all those things are before we start buying back stock big time.
Speaker Change: Before we start buying back stock big time.
Johan Kroner: Okay, and how do I think about interest expense for 26 versus 25? Interest expense, we have to work on clearly, you know, because of the pricing last year, the early buying in Brazil, you know, that was elevated, working capital was up. This year, it's certainly better in Brazil. It's a more normal buying season, it appears. So that will help. We sat on quite a bit of cash at the end of the year. So all of that, you know, the goal is to bring interest expense down. Great.
Speaker Change: Okay, and how do we think about interest expense for 26 versus 25.
Speaker Change: Interest expense, we have to work on clearly because of the pricing last year to early buying in Brazil.
Speaker Change: That was elevated working capital was up this year, it's certainly better in Brazil, It's a more normal buying season. It appears so that will help we set on quite a bit of cash.
Speaker Change: At the end of the year. So all of that the goal is to bring bringing interest expense down.
Johan Kroner: And then CapEx for fiscal 26, it looks like it was 62 million and 25.
Speaker Change: Great and then Capex for fiscal 'twenty six it looks like it was $62 million in 'twenty five 'twenty six yes. Currently we're looking at $3 45 to 55.
Johan Kroner: What's 26? Yeah, currently, we're looking at between 45 and 55.
Speaker Change: Okay.
Anne Gurkin: Okay, thank you all for the time. I appreciate it very much. Thank you, Anne. Thank you.
Speaker Change: Thank you all for the time I appreciate it very much.
Speaker Change: Thank you and thank you you don't know how much I was looking forward to talking to you today.
Anne Gurkin: You don't know how much I was looking forward to talking to you today. You know, I was. Thank you. Yep.
Speaker Change: Uh huh.
Speaker Change: I was.
Speaker Change: Thank you Anne.
Speaker Change: Yeah.
Chris Reynolds: Your next question comes from Chris Reynolds with Neuberger Berman. Please go ahead. Mr. Reynolds, your line is open. Yeah, thank you for taking my call.
Speaker Change: Your next question comes from Chris Reynolds with Neuberger Berman. Please go ahead.
Speaker Change: Okay.
Speaker Change: Uh huh.
Speaker Change: Mr. <unk> your line is open.
Speaker Change: Yeah. Thank you for taking my call Oh I wanted to see if you can provide some some general comments about.
Chris Reynolds: I wanted to see if you can provide some some general comments about nicotine pouches and that obviously there's been explosive growth there. And I'm wondering how how that affects your demand for tobacco leaf. It's my understanding that these products use, you know, nicotine from from tobacco leaf, but I guess there's always a possibility you could use some sort of, you know, synthetic nicotine, but Based on sort of what what you're seeing right now, is this something that that potentially increases demand for leaf tobacco or, or these products, you know, going to reduce demand for tobacco leaf.
Speaker Change: Nicotine pouches and that obviously theres been explosive growth there and.
Speaker Change: I'm wondering how how that affects your <unk>.
Speaker Change: Man for tobacco leaf, it's my understanding that these products.
Speaker Change: Use nicotine from tobacco leaf, but I guess, there's always a.
Speaker Change: Possibility you could use some sort of synthetic.
Speaker Change: Synthetic nicotine but.
Speaker Change: Based on sort of what Youre seeing right now is this something that that potentially increases demand for leaf tobacco or where are these products.
Speaker Change: Yeah.
Speaker Change: Going to reduce demand for tobacco leaf.
Preston Wigner: It's hard to figure that out. Yeah, Chris, I understand. It is hard to figure out live it for our customers. This is part of part of their portfolio. They've got their traditional products. They've got their next generation products. Some use tobacco pouches. Some use nicotine derived from from tobacco. You know, the way we see it. There are opportunities in nicotine, you know, it is a commodity. at the moment and And it's being produced in a number of places around the world. We, of course. through Amerinac, we further refine it here in the US. But it's it's really driven by by cost.
Speaker Change: Our hard to figure that out.
Chris: Yes, Chris I understand it's a it is hard to figure out did it for our customers.
Speaker Change: This is part of as part of their portfolio.
Speaker Change: Yeah, they've got their traditional products they've got their next generation products some use tobacco.
Speaker Change: <unk>.
Speaker Change: Some use nicotine derived from from tobacco.
Speaker Change: <unk>.
Speaker Change: Yes, the way we see it.
Speaker Change: Are there are opportunities in nicotine.
Speaker Change: Is it is a commodity.
Speaker Change: At the moment and.
Speaker Change: It is being produced.
Speaker Change: A number of places around the world we of course.
Speaker Change: Through a Marin heck, we further refined it here in the U S.
Speaker Change: <unk>.
Speaker Change: But it's really driven by.
Speaker Change: Cost.
Preston Wigner: and how you can produce it at the lowest cost and where that tobacco is at the lowest cost.
Speaker Change: And how you can produce at the lowest cost and where that tobacco is at the lowest cost.
Preston Wigner: which, for example, is overseas and not currently really in the United States. You know, we still see strong demand for our leaf business. and we support our customers in all of our portfolios. And part of our strategy is to participate. in their next generation product category. So if they use leaf, we want to be in that leaf. And if they use nicotine. In the most efficient and effective cost effective way for us where it makes sense. We want to participate in that to that nicotine market is is pretty volatile and And it's very cost sensitive.
Speaker Change: Which for example is overseas and not currently really in the United States.
Speaker Change: For us.
Speaker Change: We still see.
Speaker Change: Strong demand for our leaf business.
Speaker Change: And.
Speaker Change: And we support our customers in all of our portfolios and part of our strategy is to participate.
Speaker Change: And our next generation product categories.
Speaker Change: If they use leaf we wanted to be in that Leif and if they use nicotine.
Speaker Change: And the most efficient and effective cost effective way for us where it makes sense, we want to participate in that too.
Speaker Change: Nicotine market is pretty volatile and.
Speaker Change: And it's very cost sensitive and so.
Preston Wigner: And so we keep an eye on it, we participate in it.
Speaker Change: So we keep an eye on it we participate in it.
Preston Wigner: But it's hard to predict. where it's really going longer term and how it might change. And to your point.
Speaker Change: But it's hard to predict.
Speaker Change: Where it's really going well.
Speaker Change: Longer term and how it might change and to your point.
Preston Wigner: what role synthetic nicotine might play long-term in the And one other follow up question. Let's just say you have a customer that wants nicotine derived from your tobacco leaf and you do some form of processing to extract it. What happens with that tobacco leaf afterwards? Is it something that's just discarded or is there another use for it? Now, I think in that, I think in most of those processes, and we don't we don't extract directly from leaves ourselves. I think in that process, you know, what's left is is not used. It's, it's waste. You can't reuse it.
Speaker Change: What role synthetic nicotine might play long term in the market.
Speaker Change: And one other follow up question is lets just say you have.
Speaker Change: A customer that wants nicotine derived from your tobacco leaf in the new.
Speaker Change: We do some form of processing to extract it.
Speaker Change: What happens with that tobacco leaf afterwards is it something that's just discarded or is there another.
Speaker Change: Useful.
Speaker Change: No I think in that I think most of those processes and we don't we.
Speaker Change: We don't extract directly from leaves ourselves.
Speaker Change: I think in that process you know what's left is not used it's it's waste you can't read okay.
Preston Wigner: Okay, okay.
Speaker Change: Okay, Okay, well, thank you for that.
Tiffany: Well, thank you for answering those questions. Sure, anytime. There are no further questions at this time.
Speaker Change: Those questions.
Speaker Change: Sure anytime Chris.
Speaker Change: Yeah.
Speaker Change: There are no further questions at this time I will now turn the call over to Preston Wagner for closing remarks.
Preston Wigner: I will now turn the call over to Preston Wigner for closing remarks. Thank you, Tiffany. Thank you all for taking the time to join us today.
Preston Wagner: Thank you Tiffany.
Preston Wagner: Thank you all for taking the time to join US today, we look forward to connecting again during our next earnings call. Thank you.
Tiffany: We look forward to connecting again during our next earnings call. Thank you.
Tiffany: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.