Q1 2026 Universal Corp Earnings Call
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I would like to now turn the call over to Preston.
Thank you, push.
Good morning everyone. Thank you for joining us today.
We are off to a good start to our fiscal year on a Consolidated basis, operating income, increase 17 million to 34 million for the first fiscal quarter. Our revenue is down slightly to 594 million for the quarter.
Our tobacco operations segment delivered improved results.
Driven primarily by a favorable product mix.
Which offset lowered tobacco sales volumes.
Seasonally, our first fiscal quarter tends to be our smaller quarter.
Tobacco sales volumes in the first quarter are generally driven by shipments of carryover tobacco from the prior fiscal year.
Given strong customer demand. Last fiscal year, we ship significant volumes of tobacco earlier in the prior year.
As a result, carryover tobacco shipments and tobacco sales volumes were lower in the first quarter of the current fiscal year compared to the same quarter last year.
Pluto and Burley crop sizes, are significantly larger this fiscal year, in green tobacco, purchases are largely completed in Brazil and Africa
Although it is still early. We expect the flu cured in Burley. Tobacco will move to more balanced Supply positions during the fiscal year.
Given the current expected crop sizes. We believe it is likely that flu cured of Burley tobacco will be an oversupply positions by the end of the fiscal year.
Customer demand has remained firm despite larger crops and we believe this is a result of several years of short tobacco supply.
At the end of June, our uncommitted tobacco inventories were low. At about 11% of total tobacco inventory.
Turning to our ingredients, operation segment.
News and sales volumes both up in the quarter.
Operating income was lower in the quarter.
Segment results were impacted by a less favorable product mix.
Tariff uncertainty impacts on demand and higher fixed costs associated with our recently expanded production facility.
As we work to fill our new facility, we continue to see interest in our new value added products.
Supported by a foundational customer for our expanded facility. We are focused on converting additional interest from both new and existing customers into increase volumes and margins.
I will now hand it over to Johan to provide details of our financial and operational performance.
After which, I will offer additional thoughts.
And open the call for questions.
Thank you, Preston. Good morning, everyone.
As Preston mentioned, we are off to a good start to our fiscal year 2026 with improved results from our tobacco operations segment, and higher revenue and sales volumes in our ingredients operation segment.
For the first quarter of fiscal year, 2026 sales and other operating revenues were 593.8 million as compared to 597.1 million for the same quarter last fiscal year.
This was a slide decline of 3.3 million mainly due to lower sales of carryover crop tobacco.
Operating income for the quarter was 33.8 million.
as compared to 17.2 million for the same quarter in the fiscal year 2025.
The increase of 16.6 million was due to a favorable product mix in the tobacco operations segment.
Sgna expenses were 79.2 million during the quarter compared to 78.7 million for the same quarter last year, an increase of 500,000 primarily due to higher, compensation, and legal, and professional fees, which were largely offset by favorable foreign currency comparisons and lower tobacco sales commissions.
Net income attributable. To Universal Corporation was 8.5 million for the first quarter or 34 cents per share on a fully diluted basis as compared to a 100,000 or 1 cent per share for the same quarter in physical year 2025.
Adjusted net income, which excludes certain non-recurring items, was $9.6 million, or 38 cents per share on a fully diluted basis for the quarter, as compared to $100,000, or 1 cent per share for the same quarter last year.
Jackman reported operating income for the tobacco segment of $35.7 million for the quarter, compared to $14.5 million for the same quarter last year. The increase of $21.2 million was mainly due to a favorable product mix in Asia.
Segment, operating income for the ingredients operation, segment was 1.7 million for the quarter as compared to 2.9 Million for the same quarter last year.
The decrease of 1.2 million was due to less favorable product. Mix some Corte demand due to tariff uncertainty and higher fixed cost including depreciation from our recently expanded Universal ingredients production facility.
The corporate overhead, allocation to the segment was also higher in the quarter.
As of June 30th 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 equivalents was 1.1 billion.
47 million lower than, as of June 30th of last year.
We are focused on continuing to maintain a, strong balance sheet and conservative debt levels. I would like to now turn it back over to Preston,
Thank you, Johan.
It is still early in our fiscal year.
Uncertainties remain for the rest of the fiscal year including our customers, procurement strategies, and tariff impacts.
We believe that a challenges can present us with opportunities.
Our Global diversification long-term customer relationships and local expertise will position as well to capitalize on those opportunities.
Our leaf tobacco team is experienced in managing changes in market conditions.
We will continue pursuing opportunities, to maximize and optimize our tobacco business, including offering and providing additional services to our customers.
At the same time, we are dedicated to continuing our ingredient segments. Momentum
We are focused on driving organic growth capitalizing on our investments in Universal ingredients and converting customer interest into product sales.
With our investment in sales, marketing, and product development teams, we are creating value across the entire Universal Ingredients business and delivering unique, customized products to our customers.
I also want to take a moment to acknowledge a recent leadership announcement.
Johan will be retiring from his role as senior vice president, and Chief Financial Officer. After more than 30 years with universal,
he will remain with the companies through July 1st 2026, to support a seamless transition.
We thank yon for his dedicated service and we value the financial disciplines instilled across the organization.
I look forward to working closely with you on the next year.
Finally, I'd like to highlight our ongoing commitment to sustainability.
At Universal, We Believe sustainability is good for business and it gives us a competitive advantage.
It also represents good stewardship in the communities in which we operate.
We recently completed our annual third-party assessment and verification of scope, 1 2 and relevant scope, 3 emissions.
This assessment is part of our broader emissions reduction efforts.
It ensures alignment with established standards and provides transparency into our mission reduction efforts.
It also helps us calculate the impact of projects like our newly commissioned biomass, boiler and Zimbabwe.
Once operational, this new boiler will help reduce coal use over time and contribute to our goal of Net, Zero greenhouse gas emissions and our value Chain by the year. 2050.
Universal will continue integrating sustainability into our operational decision-making.
Operator: Please open the floor for questions.
Thank you. We will now begin the question and answer session if you have dialed in and would like to ask a question. Please press star 1 on your telephone keypad to raise your hand and join the queue.
If you would like to be drawing questions seem to press star 1. Again, if you are called upon to ask your question and are listening via speaker phone in your device, please pick up your handset to ensure that your phone is not new. When asking your question. Again, press star 1 to join the queue,
and our first question comes from the line of anger in with David ports. Your line is open,
Good morning, everyone.
Morning in. Congratulations. On a very solid start to your fiscal year. Nice to see.
Thank you. Um I was wondering if we could start with um a conversation surrounding tariffs, both on Tobacco and ingredients business I guess, starting with tobacco. Um,
Leaf imported into the US. From Brazil. I think would represent maybe 5 to 10%.
Of tobacco sales for you all. Is that in the ballpark and how should I think about, um, navigating the Tariff situation uncertainty, ability to pass along, tariff costs, to customers, any kind of insight, you can share on the tobacco tariff situation.
Sure, you know, with respect to Brazil Imports.
you know, I think those Imports over the years, let's say they're around 35,000 40,000, tons per year,
Uh, which is a small portion of the total Brazil, crop.
And our portion of that is relatively small.
You know, on the tobacco side, the large majority of our business is obviously outside the United States. So, it's.
it's not a significant impact.
For imports in and out of the United States for us.
In our Diversified footprint.
And our broad customer base. They provide opportunities for us and solutions for our customers with with tariff impacts.
now, for our us customers, we can provide them with options if they need to shift purchases from high, tariff Origins, like Brazil,
Including selling them us tobacco.
And where we have tobacco and high tariff Origins.
Uh, we have a very broad Global customer base that we move that tobacco to them.
You know, tariffs are still fluid.
They continue to be monitored.
and we remain in very close contact with our customers, both on the tobacco side, and on the ingredients side,
but on the ingredient side, our ingredients business also has flexibility, you know, we
We evaluate and uh, and alter our buying strategies to account for tariffs.
And we import raw materials, for example, from China.
For 1 of our operations.
Uh, and we did buy forward to mitigate the Tariff impacts for those. Uh for those volumes that we bought
To mitigate tariffs. We've seen some tariff impacts.
On customers demand that are rising from challenges in their own Supply chains.
And we've worked with those customers to understand the impacts of those Supply chains and the timing and when they can increase their purchases from us,
and we work very closely with both our tobacco and our ingredients customers.
In those tariffs.
if if the Tariff costs,
Are included in the pricing. Then they're included in the pricing.
But we certainly try everything. We can to work with our customers to mitigate those impacts of tariffs.
To avoid those situations. So overall, you know, a global footprint
And our customer base broad customer base and really solid customer relationships. They're going to help us pursue these opportunities.
That tariffs are going to create, and we're really well placed to take advantage of that.
Great, thank you for all that detail. That's very helpful, I appreciate it.
Um,
speaking with tobacco, um,
Nice margin in the first quarter. Understand the the positive contribution from the mix from Asia. Um how should I think about or can you help me think about um, margin Pro projection and the um
And the second half of the fiscal year um reflecting uh customer orders and pricing and mix and how should I think about that? That margin, um really for the full year for the tobacco segment.
Yeah, of course, as we mentioned earlier in the coal, you know, the first quarter.
Is our seasonally low quarter. Uh, and so, you know, we certainly enjoyed an improved product mix for carryover sales for the quarter. But uh,
But it's a small quarter for us. You know, looking at
we have, uh, been very happy with
how things have progressed. We have largely completed, purchasing and Brazil and Africa.
And, uh, those crops are very large, and we expect very large crops.
All around the world. Uh, and with that, we would expect pricing to come down.
Despite that firm demand to date.
So that could create margin pressure that we would Monitor and work with our customers.
You know, additionally if we're handling larger volumes through our factories with those larger crops that also helps reduce our per unit costs and our Factory.
So, we're very happy with where we are today with our uncommitted inventory levels.
and with the more traditional buying patterns that we've seen in specially in Brazil versus what we've seen in the prior season,
Uh, with the accelerated buying everything all at 1 grade.
You know, that gives us options to satisfy our customers needs while also protecting the margins that we recognize.
For the value that.
That we bring to our customers, there's a value doing business with universal.
so it's still really early in the season, there's still a lot of tobacco to buy there are markets that still are opening
And we're going to continue to monitor those Dynamics and those markets and work hard with our customers to maintain good communication with them. And to
And to protect the value that we bring to them.
Super! Have you been able to increase, um, services or market share with customers?
Yeah, that's certainly a goal of ours. That's that's
part of our corporate strategy is maximizing and optimizing. Tobacco is to increase volumes increase market share.
and take advantage of opportunities to
These services we provide for them—I'm not going to talk about any customer in particular, but we're very happy with.
With where things are going so far early in the year.
Um, and we see we see benefits. We
still have a long way to go for the year, but
we're on the right track and we're optimistic.
Super and then Megan update on the um, progress of the US.
Large, it's uh more of a traditional crop.
Uh, buying is really just beginning, so it's really sort of early in the process for that. Uh, they've had very good weather conditions. So it should be uh, a really large crop and
a and pretty good quality.
Um, super um, switching to ingredients. So the margin was lower than we would have thought in the first quarter and you've outlined that
um, by that segment and the first quarter.
Given what we've seen in the first quarter, um, some customer challenges specific, customer challenges, um, maybe reduce purchases and forward purchases that shifted into Q4 last year. Um, I guess. Can you help me? Think about, um,
About that margin progression where where it could end land at the end of, um, fiscal 26 please.
Yeah, there are certainly a lot of moving pieces with that. You know, we're very happy with the momentum from increased revenue and volume and we continue to make progress with our ingredients strategy.
But we're focused on continuing to increase volume of the value added products especially through the new Universal ingredients shanks.
Expanded facility to increase sales and Achieve Returns on those Investments.
We did have those additional coughs that. In fact did the first quarter performance in margin.
And our goal is to keep increasing volume through the facility as well as across the entire platform to reduce those per unit costs and provide us more opportunities to increase margins. It's
similar story on the tobacco side with increasing volumes going through our factories.
We continue to see interest in the value, added products and capabilities, and we're absolutely dedicated to converting them.
With existing and new customers.
From existing business, new business pipeline business.
To additional volumes and and improved margins.
And you set a terrific, um, terrific investment in the new facility as you referenced Shanks. And then, um, the new capacity at the shanks facility and the investment in added sales force. So you've set a platform to to drive these higher revenues. Um,
And that um, is very exciting. I guess are, are you are you experiencing customer wins? Are you experiencing increased um, business that should help. Um, that you should be able to leverage those Investments.
And we, we certainly see those Investments as key to our strategy.
and,
You know, in terms of what we saw in the first quarter with those types of headwinds, you know, there's some some tariff impacts for example. Uh, you know, we think we can work through with our customers. I believe some of that will end up being a timing issue for them. If they've had tariff impacts in their supply chain,
Versus tariff impacts with us with our 1 facing in raw material from China.
but we have,
We've built this platform.
and we've invested in those R&D commercial marketing resources,
And invested in expanding capabilities.
Not just in the
Shanks facility, but in others,
to give us that opportunity to provide platform products, leveraging, the entire platform.
For customized value added products for our customers.
We are well set up for that.
and now, it's a matter of
Executing on our plans, executing on our commercial strategies.
To increase those volumes and get pipeline projects from the pipeline.
to the factory floor and running volume for those factories, we're very pleased with
With our strategy and our momentum, we're going to continue pushing hard for the rest of the year and the years beyond to keep increasing volume.
So, do you think that margin can increase in the back half of the year for the ingredient segment versus Q1?
Yeah, we
we have work to do to continue to execute on our strategy and to get things out of the pipeline.
Some pipeline projects.
Take months.
Some might take a year.
And they're all in different phases.
I'm optimistic.
For the rest of the year that we would continue to execute on our strategies and continue to drive volume growth.
And then have the margin opportunities.
as we continue to increase our volumes,
It's a lot of work, but we feel like we've got the right Investments and the right teams and the right relationships with the customers and the right strategies to make that happen.
Okay, great, well, we'll see how the year plays out. Um,
Um, best wishes to Johan and his retirement. That's fantastic. Um,
any update on, um, the announcement of a
a successor in terms of CFO.
Keep everybody. Informed, of course.
Great. And then always ask about the use of cash and the updates there.
Okay.
Are you still there?
Um,
technically difficulty.
Give us 1 moment.
And we'll proceed to our next question comes from the line of Daniel Harryman.
With sidoti and Company, your line is open.
Hey, wuss. Preston Johan. Good morning. Thank you so much for taking my question. Thank you, congrats on the quarter.
um, I've got 2 questions this morning, um, and I understand you already hit on both of these and the prepared remarks and then the prior questions, but
just for educational purposes. Is someone newer to the story at a high level? Could you just walk us through? You know, how seasonality and crop carry over typically affect results as the year? Progresses? Obviously, we know the impact from the first quarter and then with the oversupply, uh, expected in the market which is hoping you might be able to comment a little bit on how you're managing that risk of the oversupply while maintaining pricing and inventory discipline as the
Goes on.
sure, Daniel, you know, I think for carryover for us
you know, a lot of that is timing and a lot of that is mixed and it varies year to year,
um, and again with with the first quarter being our seasonally low quarter, you know, we're doing less selling and more buying uh
Small changes in mix and small changes in volume for carryover can make a big difference for the quarter.
Um, for us.
With these short crops for the past few years.
You know, we haven't had much carryover.
To carry over. It's just like last year as I said in my remarks,
You know, there was such high demand. We shipped product earlier in the year, and we just had less carryover.
To sell into the fourth into the first quarter.
Uh, you know, in addition because uncommitted inventories were so low.
At the end of the year because it was an Underside situation.
We didn't have the flexibility that we like with additional uncommitted inventory, to be able to make sales towards the end of a season or the end of a year for opportunity purchases with our customers.
and now, as we move into a more balanced Supply,
And then as we said, you know, likely oversupply by the end of the fiscal year.
The key for us is access to tobacco.
If we can access tobacco, we believe we can sell it given our strategies and our competitive advantages.
Now, our diverse side footprint, gives us access to all the necessary crops to meet customer needs.
And our strong relationships with our customers and our close communication with them.
Help us to really mutually navigate market dynamics.
Shifting from smaller crops.
And undersupply to larger crops in balanced or oversupply.
Those should logically reduce costs.
Great attractive opportunities. You know, they should reduce our working capital requirements.
And as I mentioned earlier, we also benefit.
From increasing volumes through our factories which reduces our per kilo. Coughs.
And we generally prefer balanced to slight oversupply markets for all of those reasons that we believe. We have competitive advantages that make us really valuable partner for our customers, especially in these changing market dynamics.
It provides us with more access and more flexibility to meet all our customers' evolving needs.
And what's also really key for us to remember is that we don't buy tobacco on a speculative basis.
We buy it with an understanding of what we believe. Our customers needs are
so that when you do get into oversupply markets because we don't buy on a speculative basis,
It mitigates that risk that we would end up a year with a lot of uncommitted inventory.
And as oversupply continues.
What you traditionally see is prices screen prices to the farmer.
Here.
Until you get back into balance.
And what we're very careful about is understanding what tobacco we have in inventory. How we're going to move it so that we don't end the year with large volumes of expensive tobacco. Going into another oversupply season.
So we have there are some unique things for this.
Current change in the market dynamics.
you know, we're going from historically High green prices that we just have never seen before, but
But our teams around the world.
We're very experienced in dealing with changes in Dynamics. These aren't the first times we've seen shifts from under Supply to oversupplied to balance Supply.
and again, based on our Global Diversified footprint, the advantages that give us the flexibility that gives us
Our strong teams on the ground, who are experts.
In buying tobacco how to buy it when to buy it.
We think we're very well set up to take advantage of that and to help our customers and also, to retain the value that we see in doing business with us.
Great. That's really helpful. And I appreciate your willingness to kind of take a step back there. But um, congrats on the quarter and best of luck moving forward.
Thank you, Daniel.
And we would like to call out and gather in for any additional questions. Your line is now open. Thank you so much. I just wanted to follow up on the use of cash. I know you have an outstanding share repurchase program.
And the youth for investing in working capital needs and um ingredients business. Although it sounds like you're going to grow that organically more at this point, that was my question.
Yeah and the uh the the repurchase and and the 100 million that we have out there, you know uh we just renewed that and you know we just have it out there just in case the opportunity arises in in any of the situations that you just mentioned. So current leader are no big plans there but because we have lots of other things and uh to to to look at at the yeah, it is out there. Just just in case we need it.
Great. Thank you.
Thank you.
There are no further questions at this time. I would like to turn the call back over to Preston Wigner for closing remarks.
Thank you, Desiree. Thank you all for joining our call today and we look forward to speaking to you.
For our next quarter.
Have a very good day.
ladies and gentlemen, that concludes today's call, thank you all for joining and you may now disconnect