Q1 2027 Universal Corp Earnings Call

August 6, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the UNIVERSAL CORP 1st Quarter Fiscal Year 2027 Earnings Call. After today's prepared remarks, we will host a Q&A session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Universal Corporation Q1 fiscal year 2027 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Wush Ma, Vice President and Treasurer. Wush, please go ahead.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Universal Corporation Q1 Fiscal Year 2027 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Wush Ma, Vice President and Treasurer. Wush, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Wushuang Ma, Vice President and Treasurer.

Speaker #1: Wushuang, please go ahead.

Speaker #2: Good morning. And thank you for joining us. With me today are Preston Wigner, our Chairman, President, and CEO, and Steve Diehl, our Chief Financial Officer.

Wush Ma: Good morning. Thank you for joining us. With me today are Preston Wigner, our Chairman, President, and CEO, and Steve Diel, our Chief Financial Officer. During the course of this call, we will be making forward-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, or achievements could differ materially from the anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements. 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 refer to the reports we file with the SEC and under cautionary statements regarding forward-looking statements in our current earnings press release.

Speaker #2: During the course of this call, we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future.

Speaker #2: These are representative as of today only. Actual results, performance, or achievements could differ materially from the anticipated results, prospects, performance, or achievements expressed or implied by such forward-looking statements.

Speaker #2: 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 refer to the report we filed with the ICC and to the cautionary statements regarding forward-looking statements in our current earnings press release.

Wush Ma: 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 refer to the reports we file with the SEC and under cautionary statements regarding forward-looking statements in our current earnings press release. Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification.

Speaker #2: 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.

Wush 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 reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials. This call is being webcast live and will be available for replay on our website through 6 November 2026. This call is copyrighted and may not be used without our permission. Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay, or distribution of any transcription of this call. I would like to now turn the call over to Preston.

Wush Ma: Our comments today may also include certain non-GAAP financial measures. For details regarding these measures, including a reconciliation of these non-GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials. This call is being webcast live and will be available for replay on our website through 6 November 2026. This call is copyrighted and may not be used without our permission.

Speaker #2: For details regarding these measures, including reconciliation of these non-GAAP measures, to the most comparable GAAP measures, please refer to our current earnings price release and other public materials.

Speaker #2: This call is being webcast live, and there will be available for replay on our website through November 6, 2026. This call is a copyrighted and may not be used without our permission.

Speaker #2: Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay, or distribution of any transcription of this call. I would like to now turn the call over to Preston.

Wush Ma: Other than the referenced replay, we have not authorized and disclaim responsibility for any recording, replay, or distribution of any transcription of this call. I would like to now turn the call over to Preston.

Speaker #3: Thank you, Wushuang. Good morning, everyone, and thank you for joining us today. As we begin fiscal year 2027, our first quarter results reflect the market and operating conditions we anticipated.

Preston D. Wigner: Thank you, Wush. Good morning, everyone. Thank you for joining us today. As we begin fiscal year 2027, our Q1 results reflect the market and operating conditions we anticipated. Q1 results for our leaf tobacco business followed a seasonal pattern more consistent with historical trends than what we experienced in our exceptional Q1 of last year. The flue-cured and burley markets are in an oversupply position. As expected, customer buying activity has been slower. We have managed through these types of market cycles before. Our global footprint, experienced teams, and long-standing customer relationships give us a strong foundation for doing so again. Our focus is on buying with discipline, anticipating and monitoring green tobacco trends carefully, and maintaining the right inventory position. Against that backdrop, our expected customer demand remains consistent with our fiscal year sales plan.

Preston Wigner: Thank you, Wush. Good morning, everyone. Thank you for joining us today. As we begin fiscal year 2027, our Q1 results reflect the market and operating conditions we anticipated. Q1 results for our leaf tobacco business followed a seasonal pattern more consistent with historical trends than what we experienced in our exceptional Q1 of last year. The flue-cured and burley markets are in an oversupply position. As expected, customer buying activity has been slower. We have managed through these types of market cycles before.

Speaker #3: First quarter results for our leaf tobacco business followed a seasonal pattern more consistent with historical trends than what we experienced in our exceptional first quarter last year.

Speaker #3: The flu cure in Burley markets are in an oversupply position, and as expected, customer buying activity has been slower. We have managed to these types of market cycles before, and our global footprint, experienced teams, and longstanding customer relationships give us a strong foundation for doing so again.

Preston Wigner: Our global footprint, experienced teams, and long-standing customer relationships give us a strong foundation for doing so again. Our focus is on buying with discipline, anticipating and monitoring green tobacco trends carefully, and maintaining the right inventory position. Against that backdrop, our expected customer demand remains consistent with our fiscal year sales plan. In line with historical patterns, we expect shipments to be weighted more heavily in H2 of the fiscal year.

Speaker #3: Our focus is on buying with discipline, anticipating and monitoring green tobacco trends carefully, and maintaining the right inventory position. Against that backdrop, our expected customer demand remains consistent with our fiscal year sales plan.

Speaker #3: In line with historical patterns, we expect shipments to be weighted more heavily in the second half of the fiscal year. Turning to ingredients, first quarter results continue to reflect persistent consumer market headwinds, tariff volatility, and longer-than-anticipated product development cycles.

Preston D. Wigner: In line with historical patterns, we expect shipments to be weighted more heavily in H2 of the fiscal year. Turning to Ingredients, Q1 results continue to reflect persistent consumer market headwinds, tariff volatility, and longer than anticipated product development cycles. Despite these challenges, we continued efforts to improve performance across the Ingredients platform, leveraging the investments we have made and focusing on stronger commercial execution, improved facility utilization, and increased financial and operational efficiency. I will now turn the call over to Steve to review our financial results. After which, I will share a few additional thoughts.

Preston Wigner: Turning to Ingredients, Q1 results continue to reflect persistent consumer market headwinds, tariff volatility, and longer than anticipated product development cycles. Despite these challenges, we continued efforts to improve performance across the Ingredients platform, leveraging the investments we have made and focusing on stronger commercial execution, improved facility utilization, and increased financial and operational efficiency.

Speaker #3: Despite these challenges, we continue to efforts to improve performance across the ingredients platform, leveraging the investments we have made and focusing on stronger commercial execution, improved facility utilization, and increased financial and operational efficiency.

Speaker #3: I will now turn the call over to Steve to review our financial results. After which, I will share a few additional thoughts.

Preston Wigner: I will now turn the call over to Steve to review our financial results. After which, I will share a few additional thoughts.

Speaker #2: Thank you, Preston. Good morning, everyone. I will start by reviewing our segment, Financial Summary. For our tobacco operations segment, revenue was $437 million, for the first quarter of fiscal year versus the same quarter of last year.

Steven S. Diel: Thank you, Preston. Good morning, everyone. I will start by reviewing our segment financial summary. For our Tobacco Operations segment, revenue was $437 million for Q1 of fiscal year 2027, down 13% versus the same quarter of last year. Segment operating income was $3.5 million as compared to $35.7 million for the same quarter of last year. As Preston mentioned, in general, our fiscal Q1 tends to be a slow quarter due to the seasonality inherent in our leaf tobacco business model. During Q1 of fiscal year 2027, such seasonality was even more pronounced as customers delayed timing of purchasing decisions with the recent market shift to an oversupply dynamic. I should note that we see this as a timing issue, and our customer demand expectations for the full fiscal year are consistent with our initial sales plan.

Steve Diel: Thank you, Preston. Good morning, everyone. I will start by reviewing our segment financial summary. For our Tobacco Operations segment, revenue was $437 million for Q1 of fiscal year 2027, down 13% versus the same quarter of last year. Segment operating income was $3.5 million as compared to $35.7 million for the same quarter of last year. As Preston mentioned, in general, our fiscal Q1 tends to be a slow quarter due to the seasonality inherent in our leaf tobacco business model.

Speaker #2: Segment operating income was $3.5 million, as compared to $35.7 million for the same quarter of last year. As Preston mentioned, in general, our fiscal first quarter tends to be a slow quarter due to the seasonality inherent in our leaf tobacco business model.

Speaker #2: During the first quarter of fiscal year 2027, such seasonality was even more pronounced as customers delayed timing of purchasing decisions with the recent market shift to an oversupply dynamic.

Steve Diel: During Q1 of fiscal year 2027, such seasonality was even more pronounced as customers delayed timing of purchasing decisions with the recent market shift to an oversupply dynamic. I should note that we see this as a timing issue, and our customer demand expectations for the full fiscal year are consistent with our initial sales plan. Prior year comparisons were also negatively impacted by lower tobacco carryover crop sales, which were closer to historical normalized levels in the current Q1 and a less favorable product mix.

Speaker #2: I should note that we see this as a timing issue, and our customer demand expectations for the full fiscal year are consistent with our initial sales plan.

Speaker #2: Prior year comparisons were also negatively impacted by lower tobacco carryover crop sales, which were closer to historical normalized levels in the current first quarter, and a less favorable product mix.

Steven S. Diel: Prior year comparisons were also negatively impacted by lower tobacco carryover crop sales, which were closer to historical normalized levels in the current Q1 and a less favorable product mix. Additionally, our Tobacco segment experienced -$4.4 million of operating income variance in Q1 of fiscal year 2027 versus the prior year due to foreign currency movements. For our Ingredients Operations segment, revenue was $87 million for Q1 of fiscal year 2027, down 3% as compared to the same quarter of last year. The segment generated an operating loss of $700,000 for the quarter as compared to operating income of $1.7 million for the same quarter of last year. During the quarter, our Ingredients segment continued to work through persistent consumer market headwinds and high fixed costs related to growth investments.

Speaker #2: Additionally, our tobacco segment experienced 4.4 million dollars of negative operating income variance in the first quarter of fiscal year 2027 versus the prior year, due to foreign currency movements.

Steve Diel: Additionally, our Tobacco segment experienced -$4.4 million of operating income variance in Q1 of fiscal year 2027 versus the prior year due to foreign currency movements. For our Ingredients Operations segment, revenue was $87 million for Q1 of fiscal year 2027, down 3% as compared to the same quarter of last year. The segment generated an operating loss of $700,000 for the quarter as compared to operating income of $1.7 million for the same quarter of last year.

Speaker #2: For our ingredients operations segment, revenue was $87 million, for the first quarter of fiscal year 2027, down 3% as compared to the same quarter of last year.

Speaker #2: The segment generated an operating loss of $700,000 for the quarter as compared to operating income of $1.7 million for the same quarter of last year.

Speaker #2: During the quarter, our persistent consumer market headwinds and high fixed costs related to growth investments persisted. While we're confident in our plan to improve segment performance, given the relatively long product development cycle in the ingredients space.

Steve Diel: During the quarter, our Ingredients segment continued to work through persistent consumer market headwinds and high fixed costs related to growth investments. While we're confident in our plan to improve segment performance, given the relatively long product development cycle in the ingredient space, we expect that tangible improvements will take some time to materialize. On a consolidated basis for Q1 of fiscal year 2027, revenue was $524 million, down 12% from the same quarter of last year.

Steven S. Diel: While we're confident in our plan to improve segment performance, given the relatively long product development cycle in the ingredient space, we expect that tangible improvements will take some time to materialize. On a consolidated basis for Q1 of fiscal year 2027, revenue was $524 million, down 12% from the same quarter of last year. Operating income was $2.3 million as compared to $33.8 million for the same quarter of last year. The net loss attributable to Universal was $5 million as compared to a net income of $8.5 million for the same quarter of last year. Regarding liquidity and capital structure, as of 30 June 2026, our net debt was slightly over $1 billion, approximately $52 million lower relative to the same point last year.

Speaker #2: We expect that tangible improvements will take some time to materialize. On a consolidated basis, for the first quarter of fiscal year 2027, revenue was $524 million, down 12% from the same quarter of last year.

Speaker #2: Operating income was $2.3 million, as compared to $33.8 million for the same quarter of last year. And the net loss attributable to UNIVERSAL was $5 million, as compared to a net income of $8.5 million for the same quarter of last year.

Steve Diel: Operating income was $2.3 million as compared to $33.8 million for the same quarter of last year. The net loss attributable to Universal was $5 million as compared to a net income of $8.5 million for the same quarter of last year. Regarding liquidity and capital structure, as of 30 June 2026, our net debt was slightly over $1 billion, approximately $52 million lower relative to the same point last year. This decrease was mainly due to lower working capital usage as a result of tobacco crop purchase timing and lower green tobacco prices.

Speaker #2: In regarding liquidity and capital structure, as of June 30, 2026, our net debt was slightly over $1 billion, approximately $52 million lower relative to the same point last year.

Speaker #2: This decrease was mainly due to lower working capital usage as a result of tobacco crop purchase timing and lower green tobacco prices. Our liquidity availability, which includes cash and availability under our committed and uncommitted credit lines, totaled approximately $1.1 billion.

Steven S. Diel: This decrease was mainly due to lower working capital usage as a result of tobacco crop purchase timing and lower green tobacco prices. Our liquidity availability, which includes cash and availability under our committed and uncommitted credit lines, totaled approximately $1.1 billion. I'll now turn the conversation back to Preston.

Steve Diel: Our liquidity availability, which includes cash and availability under our committed and uncommitted credit lines, totaled approximately $1.1 billion. I'll now turn the conversation back to Preston.

Speaker #2: I'll now turn the conversation back to Preston.

Speaker #3: Thank you, Steve. Looking ahead, we're approaching fiscal year 2027 with strategic focus and operational discipline. While keeping long-term value creation at the center of our work, we're guided by the three pillars of our corporate strategy: maximizing and optimizing tobacco, growing ingredients, and strengthening UNIVERSAL for the future.

Preston D. Wigner: Thank you, Steve. Looking ahead, we are approaching fiscal year 2027 with strategic focus and operational discipline while keeping long-term value creation at the center of our work. We're guided by the three pillars of our corporate strategy: maximizing and optimizing tobacco, growing ingredients, and strengthening Universal for the future. Across each of our strategic pillars, we will be disciplined in our approach and focused on execution. For tobacco, we will continue to navigate current market conditions by leveraging our global footprint and deep market experience, strategic focus on sustainability, and long-standing customer relationships. As we plan for the next crop cycle, we are also evaluating how forecasted El Niño conditions could affect crop supply in certain regions.

Preston Wigner: Thank you, Steve. Looking ahead, we are approaching fiscal year 2027 with strategic focus and operational discipline while keeping long-term value creation at the center of our work. We're guided by the three pillars of our corporate strategy: maximizing and optimizing tobacco, growing ingredients, and strengthening Universal for the future. Across each of our strategic pillars, we will be disciplined in our approach and focused on execution.

Speaker #3: Across each of our strategic pillars, we will be disciplined in our approach and focused on execution. For tobacco, we will continue to navigate current market conditions by leveraging our global footprint and deep market experience, our strategic focus on sustainability, and our longstanding customer relationships.

Preston Wigner: For tobacco, we will continue to navigate current market conditions by leveraging our global footprint and deep market experience, strategic focus on sustainability, and long-standing customer relationships. As we plan for the next crop cycle, we are also evaluating how forecasted El Niño conditions could affect crop supply in certain regions.

Speaker #3: As we plan for the next crop cycle, we're also evaluating how forecasted El Niño conditions could affect crop supply in certain regions. UNIVERSAL has a long history of operating through complex agricultural economic and geopolitical cycles, and our proven sourcing capabilities supported by local expertise in our operating regions remain an important competitive advantage in that work.

Preston D. Wigner: Universal has a long history of operating through complex agricultural, economic, and geopolitical cycles, and our proven sourcing capabilities, supported by local expertise in our operating regions, remain an important competitive advantage in that work. For ingredients, we are strengthening performance across the platform through greater commercial focus, improved facility utilization, and financial discipline while remaining focused on the long-term opportunity we see in the business. Realizing the benefits of these strategies will take time, and we expect some of the improvement efforts to continue through the next fiscal year. We are optimistic about our ability to make steady and incremental advancements towards our goal.

Preston Wigner: Universal has a long history of operating through complex agricultural, economic, and geopolitical cycles, and our proven sourcing capabilities, supported by local expertise in our operating regions, remain an important competitive advantage in that work. For ingredients, we are strengthening performance across the platform through greater commercial focus, improved facility utilization, and financial discipline while remaining focused on the long-term opportunity we see in the business.

Speaker #3: For ingredients, we are strengthening performance across the platform through greater commercial focus, improved facility utilization, and financial discipline. While remaining focused on the long-term opportunity we see in the business, realizing the benefits of these strategies will take time, and we expect some of the improvement efforts to continue through the next fiscal year.

Preston Wigner: Realizing the benefits of these strategies will take time, and we expect some of the improvement efforts to continue through the next fiscal year. We are optimistic about our ability to make steady and incremental advancements towards our goal.

Speaker #3: We are optimistic about our ability to make steady and incremental advancements towards our goal. To strengthen for the future, we will identify ways in which we can advance progress in foundational areas such as efficiencies and financial management, human resources and human capital management, as a strategic business function, and using technology like AI to innovate and enhance how we perform our work and operate our business.

Preston D. Wigner: To strengthen for the future, we will identify ways in which we can advance progress in foundational areas such as efficiencies in financial management, human resources and human capital management as a strategic business function, and using technology like AI to innovate and enhance how we perform our work and operate our business. We have entered this fiscal year clear on our priorities, confident in our strategy, and focused on executing with discipline. Thank you again for joining us today. We will now open the call for questions.

Preston Wigner: To strengthen for the future, we will identify ways in which we can advance progress in foundational areas such as efficiencies in financial management, human resources and human capital management as a strategic business function, and using technology like AI to innovate and enhance how we perform our work and operate our business. We have entered this fiscal year clear on our priorities, confident in our strategy, and focused on executing with discipline. Thank you again for joining us today. We will now open the call for questions.

Speaker #3: We have entered this fiscal year clear on our priorities, confident in our strategy, and focused on executing with discipline. Thank you again for joining us today.

Speaker #3: We will now open the call for questions.

Speaker #1: We will now begin the question and answer session. To make a question, press star one. And to withdraw your question, press star one again.

Operator: We will now begin the question and answer session.

Operator: We will now begin the question and answer session. To make a question, press star one, to withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Daniel Harriman with Sidoti. Daniel, please go ahead.

Operator: To make a question, press star one, to withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Daniel Harriman with Sidoti. Daniel, please go ahead.

Speaker #1: We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device.

Speaker #1: Please stand by while we compile the Q&A roster. Your first question comes from Daniel Harriman with Sadodi. Daniel, please go ahead.

Speaker #2: Hey, good morning, guys. Thank you so much for taking my questions. I'll start out with two this morning, both on tobacco. In the release you mentioned customer indications and commitments are consistent with your fiscal year sales plan, despite performance in the first quarter compared to last year.

Daniel Harriman: Hey, good morning, guys. Thank you so much for taking my questions.

Preston D. Wigner: Good morning, Daniel.

Preston Wigner: Good morning, Daniel.

Daniel Harriman: I'll start out with two this morning, both on tobacco. In the release, you mentioned customer indications and commitments are consistent with your fiscal year sales plan, despite performance in Q1 compared to last year. Can you give us a little bit of a sense of the visibility you have into the H2 that gives you confidence to reach the full-year sales plan? Regarding dark air-cured tobacco, you called out that as a headwind in Q4 of fiscal 2026. Could you provide us with a bit of an update on current market conditions in that brand, and for that tobacco style, and whether you see additional write-down risk as we move through fiscal year 2027? Really appreciate it, guys. Thank you.

Speaker #2: Can you give us a little bit of a sense of the visibility you have into the back half of the year that gives you confidence to reach the full year sales plan?

Speaker #2: And then regarding dark air cured tobacco, you called out that as a headwind in the fourth quarter of fiscal '26. Could you provide us with a bit of an update on current market conditions in that brand, and for that tobacco style, and whether you see additional write-down risk as we move through fiscal year '27?

Daniel Harriman: Could you provide us with a bit of an update on current market conditions in that brand, and for that tobacco style, and whether you see additional write-down risk as we move through fiscal year 2027? Really appreciate it, guys. Thank you.

Speaker #2: Really appreciate it, guys. Thank you.

Speaker #3: Sure. Thank you, Daniel. Let me start with tobacco overall. Early in the season, but so far, based on how we've executed in a very disciplined way, our buying strategies in the fields how we're procuring tobacco, getting the right grades, at the right price, and having access, given the large size of the crops, we're off to a good start getting the customers' demands.

Preston D. Wigner: Sure. Thank you, Daniel. Let me start with tobacco overall. It's early in the season, but so far, based on how we've executed in a very disciplined way, our buying strategies in the fields, how we're procuring tobacco, getting the right grades at the right price, and having access, given the large size of the crops, we're off to a good start getting the tobacco we need to satisfy our customers' demands. We're, of course, in close communication with our customers, understanding what they need, when they need, and where they need it. Given our global footprint and the diversity that gives them options if you have issues in one origin versus another, we've got full complement to satisfy their needs in an oversupply market in both flue-cured and burley. As the largest global leaf tobacco supplier in the world, we're well-positioned to navigate these market dynamics.

Preston Wigner: Sure. Thank you, Daniel. Let me start with tobacco overall. It's early in the season, but so far, based on how we've executed in a very disciplined way, our buying strategies in the fields, how we're procuring tobacco, getting the right grades at the right price, and having access, given the large size of the crops, we're off to a good start getting the tobacco we need to satisfy our customers' demands. We're, of course, in close communication with our customers, understanding what they need, when they need, and where they need it.

Speaker #3: And we're, of course, in close communication with our customers understanding what they need, when they need, and where they need it. Given our global footprint and the diversity that gives them options if you have issues in one origin versus another, we've got full complement to satisfy their needs in an oversupply market in both blue cured and barley.

Preston Wigner: Given our global footprint and the diversity that gives them options if you have issues in one origin versus another, we've got full complement to satisfy their needs in an oversupply market in both flue-cured and burley. As the largest global leaf tobacco supplier in the world, we're well-positioned to navigate these market dynamics. Deep experience and strong regional teams are really key around the world, and they've given us those opportunities to navigate the large oversupply market and to find those opportunities with our customers.

Speaker #3: And as the largest global leaf tobacco supplier in the world, we're well positioned to navigate these market dynamics. Deep experience and strong regional teams are really key around the world.

Preston D. Wigner: Deep experience and strong regional teams are really key around the world, and they've given us those opportunities to navigate the large oversupply market and to find those opportunities with our customers. We've got the access that we need. We've got the large portfolio of customers. They all need something from everywhere we are. We've seen lower farmer pricing, which is what we would have expected in the large oversupply in most of those markets. We expect to see those industry stocks rise through the year. For us, with our stocks in mind, it's critical that we utilize that expertise and that we really do follow those disciplined buying strategies. That gives us the ability to succeed and to give the customers the quality and quantity of tobacco that they have been accustomed to expect from us.

Speaker #3: And they've given us those opportunities to navigate the large oversupply market and to find those opportunities with our customers. We've got the access that we need.

Preston Wigner: We've got the access that we need. We've got the large portfolio of customers. They all need something from everywhere we are. We've seen lower farmer pricing, which is what we would have expected in the large oversupply in most of those markets. We expect to see those industry stocks rise through the year. For us, with our stocks in mind, it's critical that we utilize that expertise and that we really do follow those disciplined buying strategies.

Speaker #3: We've got the large portfolio of customers they all need something from everywhere we are. And we've seen the lower farmer pricing. Which is what we would have expected in the large oversupply.

Speaker #3: And most of those markets and we expect to see those industry stocks rise through the year. For us, with our stocks in mind, it's critical that we utilize that expertise and that we really do follow those disciplined buying strategies.

Speaker #3: That gives us the ability to succeed and to give the customers the quality and quantity of tobacco that they haven't been accustomed to expect from us.

Preston Wigner: That gives us the ability to succeed and to give the customers the quality and quantity of tobacco that they have been accustomed to expect from us. When you add that to sustainability practices, our agronomy and logistics expertise, our financial stability, it's all key components to our competitive advantage. It gives us those opportunities to maintain and gain market share in this oversupplied market. Today, even though it's early, the year is going the way we expect. There's still nine more months to go and a lot of work to do.

Speaker #3: And you add that to sustainability practices, our agronomy and logistics expertise, our financial stability, and it's all key components to our competitive advantage. And it gives us those opportunities to maintain and gain market share in this oversupply market.

Preston D. Wigner: When you add that to sustainability practices, our agronomy and logistics expertise, our financial stability, it's all key components to our competitive advantage. It gives us those opportunities to maintain and gain market share in this oversupplied market. Today, even though it's early, the year is going the way we expect. There's still nine more months to go and a lot of work to do. We're pleased where we are with our communications with customers, with customer demand being consistent with our fiscal year sales plan. Say, on the dark side to your second question, I'll pick up really where we left off in Q4. We see wrapper demand is still strong and non-wrapper, which is a broad group of styles, but I'll just generally say non-wrapper, is generally still in oversupply.

Speaker #3: So today, even though it's early, the year is going the way we expect. There's still nine more months to go, and a lot of work to do.

Speaker #3: But we're pleased where we are with our communications with customers, with customer demand, being consistent with our fiscal year sales plan. Say on the dark side, to your second question, I'll pick up really where we left off in the fourth quarter.

Preston Wigner: We're pleased where we are with our communications with customers, with customer demand being consistent with our fiscal year sales plan. Say, on the dark side to your second question, I'll pick up really where we left off in Q4. We see wrapper demand is still strong and non-wrapper, which is a broad group of styles, but I'll just generally say non-wrapper, is generally still in oversupply. We talked about initiatives that we were putting in place to improve performance and how we manage that non-wrapper business.

Speaker #3: We see rapid demand is still strong. And non-wrapper which is a broad group of styles, but I'll just generally say non-wrapper, is generally still an oversupply.

Speaker #3: We talked about initiatives that we were putting in place to improve performance and how we manage that non-wrapper business. And we've put those in place or implementing those that I'm pleased with the progress there.

Preston D. Wigner: We talked about initiatives that we were putting in place to improve performance and how we manage that non-wrapper business. We've put those in place. We're implementing those, and I'm pleased with the progress there. Those primarily involve sales strategy and inventory management strategy. On the sales strategy side, we support a large number of customers, and core to that sales strategy is to maintain close communications with them to align these current market conditions with their sales expectations. We've enhanced our communications and planning so we can better understand and plan for their needs this year. Close communication and customer indications of what they need shape our tobacco purchasing plans also, as well as our sales plans for the tobacco that we hold in inventory.

Preston Wigner: We've put those in place. We're implementing those, and I'm pleased with the progress there. Those primarily involve sales strategy and inventory management strategy. On the sales strategy side, we support a large number of customers, and core to that sales strategy is to maintain close communications with them to align these current market conditions with their sales expectations. We've enhanced our communications and planning so we can better understand and plan for their needs this year.

Speaker #3: Those primarily involve sales strategy and inventory management strategy. On the sales strategy side, we support a large number of customers. And core to that sales strategy is to maintain close communications with them to align these current marketing conditions with their sales expectations.

Speaker #3: So we've enhanced our communications and planning so we can better understand and plan for their needs this year. Close communication and customer indications of what they need shape our tobacco purchasing plans also, as well as our sales plans for the tobacco that we hold in inventory.

Preston Wigner: Close communication and customer indications of what they need shape our tobacco purchasing plans also, as well as our sales plans for the tobacco that we hold in inventory. On that inventory management strategy side, with the sales strategy that aligns with customer indications and accounts for the required tobacco and inventory, we can more accurately set our new crop purchase strategy. That will help ensure that we're buying the right quantities and the styles of the tobacco that we need.

Speaker #3: On that inventory management strategy side, with the sales strategy that aligns with customer indications and accounts for the required tobacco and inventory, we can more accurately set our new crop purchase strategy that will help ensure that we're buying the right quantities and the styles of the tobacco that we need.

Preston D. Wigner: On that inventory management strategy side, with the sales strategy that aligns with customer indications and accounts for the required tobacco and inventory, we can more accurately set our new crop purchase strategy. That will help ensure that we're buying the right quantities and the styles of the tobacco that we need. Our objective is to reduce inventory levels by converting wrapper and non-wrapper to cash. To reduce new crop volumes to obtain the high demand wrapper that we need, but to minimize the non-wrapper volumes that come with that run of crop purchase from our farmers. Those initiatives, they're all designed to drive margin optimization, cost alignment, and working capital efficiencies. It's early in the year for them as well, but we expect to see the benefits from those initiatives this fiscal year and beyond.

Speaker #3: Our objective is to reduce inventory levels by converting wrapper and non-wrapper to cash and to reduce new crop volumes to obtain the high-demand wrapper that we need but to minimize the non-wrapper volumes that come with that run of crop purchase from our farmers.

Preston Wigner: Our objective is to reduce inventory levels by converting wrapper and non-wrapper to cash. To reduce new crop volumes to obtain the high demand wrapper that we need, but to minimize the non-wrapper volumes that come with that run of crop purchase from our farmers. Those initiatives, they're all designed to drive margin optimization, cost alignment, and working capital efficiencies. It's early in the year for them as well, but we expect to see the benefits from those initiatives this fiscal year and beyond.

Speaker #3: So those initiatives, they're all designed to drive margin optimization, cost alignment, working capital efficiencies. So it's early in the year for them as well.

Speaker #3: But we expect to see the benefits from those initiatives this fiscal year and beyond. And with those initiatives and discipline and execution in those strategies, we're comfortable with our inventory levels.

Preston D. Wigner: With those initiatives and discipline and execution in those strategies, we're comfortable with our inventory levels, we're comfortable with our sales plan, and I would not expect to see the large inventory write-downs that we had last year.

Preston Wigner: With those initiatives and discipline and execution in those strategies, we're comfortable with our inventory levels, we're comfortable with our sales plan, and I would not expect to see the large inventory write-downs that we had last year.

Speaker #3: We're comfortable with our sales plan. And I would not expect to see the large inventory write-downs that we had last year.

Speaker #1: Your next question comes from Ann Gurkin with Davenport. Please go ahead.

Operator: Your next question comes from Ann Gurkin with Davenport. Please go ahead.

Speaker #4: Good morning, everybody.

Ann Gurkin: Good morning, everybody.

Speaker #3: Good morning.

Preston D. Wigner: Good morning.

Preston Wigner: Good morning.

Speaker #2: Good morning, Ann.

Steven S. Diel: Good morning, Ann.

Steve Diel: Good morning, Ann.

Speaker #4: I'd love to continue with discussion about the tobacco. So I've never seen the tobacco margin down this low. I realize it's a seasonally low recorder.

Ann Gurkin: I'd love to continue with discussion about the tobacco. I've never seen the tobacco margin down this low. I realize it's a seasonally lower quarter. I understand the oversupply. I was curious if you could flesh out any expectations for the tobacco margin in the H2 of the year, and expectations for Universal's uncommitted tobacco leaf inventory levels as the year progresses as well.

Speaker #4: And I understand the oversupply. But I was curious if you could flesh out any expectations for the margin, tobacco margin in the second half of the year.

Speaker #4: And expectations for Universal's uncommitted tobacco leaf inventory levels as the year progresses as well.

Speaker #3: Sure, Ann. As far as the uncommitted levels go, we've as Preston was talking about earlier, as far as us getting comfortable with our plan for the full year, we saw coming out of the gate, it was in different pockets, the velocity through in different markets, say, South America, or pieces of Africa and Malawi, things were pretty slow.

Steven S. Diel: Sure. Ann, as far as the uncommitted levels go, as Preston was talking about earlier, as far as us getting comfortable with our plan for the full year, we saw coming out of the gate it was in different pockets, the velocity through in different markets, say South America or pieces of Africa and Malawi, things were pretty slow. That's what drove the higher uncommitted levels early. Areas like Zimbabwe were moving pretty quickly. Just over the last few months, we've seen a pickup in the pace, even in those slower markets. We've seen our uncommitted inventories come down even from where they were on 30 June from what we've reported. We fully expect to get those levels back down to our 20% target as the season progresses, and we're pretty comfortable with that.

Steve Diel: Sure. Ann, as far as the uncommitted levels go, as Preston was talking about earlier, as far as us getting comfortable with our plan for the full year, we saw coming out of the gate it was in different pockets, the velocity through in different markets, say South America or pieces of Africa and Malawi, things were pretty slow. That's what drove the higher uncommitted levels early. Areas like Zimbabwe were moving pretty quickly. Just over the last few months, we've seen a pickup in the pace, even in those slower markets.

Speaker #3: And that's what drove the higher uncommitted levels early. Areas like Zimbabwe, we're moving pretty quickly. Just over the last few months, we've seen a pickup in the pace, even in those slower markets, so we've seen our uncommitted inventories come down even from where they were on June 30, from what we've reported.

Steve Diel: We've seen our uncommitted inventories come down even from where they were on 30 June from what we've reported. We fully expect to get those levels back down to our 20% target as the season progresses, and we're pretty comfortable with that. As far as margins, going through the next few quarters, we expect margins to be pretty normalized from a percentage basis on where they were before. Our plans aren't seeing any deterioration.

Speaker #3: So we fully expect to get those levels back down to our 20% target as the season progresses. And we're pretty comfortable with that. As far as margins, yeah, we going through the next few quarters, we expect margins to be pretty normalized.

Steven S. Diel: As far as margins, going through the next few quarters, we expect margins to be pretty normalized from a percentage basis on where they were before. Our plans aren't seeing any deterioration. The Q1 was really about product mix, last quarter versus this quarter, and sales of some carryover crops. I don't see any concerns with margin as we progress through the years.

Speaker #3: From a percentage basis on where they were before, our plans aren't seeing any deterioration. The first quarter was really about product mix. Last quarter versus this quarter, and sales of some carryover crops.

Steve Diel: The Q1 was really about product mix, last quarter versus this quarter, and sales of some carryover crops. I don't see any concerns with margin as we progress through the years.

Speaker #3: So I don't see any concerns with margin as we progress through the years.

Speaker #4: That's great. That's super. And then I was curious if we could talk about working capital for the year. I guess in a release, I'm a little confused.

Ann Gurkin: That's great. That's super. I was curious if we could talk about working capital for the year. I guess in the release, I'm a little confused. You talk about working capital outlays for tobacco purchases, but then you talk about on the balance sheet, lower working capital usage on timing of crop purchases. Can I just get a better understanding of expectations for working capital for the full year?

Speaker #4: You talk about working capital outlays for tobacco purchases, but then you talk about on the balance sheet, lower working capital usage on timing of crop purchases.

Speaker #4: So can I just get a better understanding of expectations for working capital for the full year?

Speaker #3: I think working capital should be reduced from where you've seen in the last few years as far as the price impact goes because we're buying green tobacco at lower prices.

Steven S. Diel: I think working capital should be reduced from where you've seen the last few years as far as the price impact goes, because we're buying green tobacco at lower prices. Now, when you look at quarter-end levels, it's really going to depend on the pace of sales and as we go through shipping timing and customer orders. It's hard to say how the working capital is going to fluctuate through the year and where we end up with carryover crops at the end of the year. Again, fundamentally, we see a reduction due to lower pricing, but that's going to fluctuate as timing of shipments progresses.

Steve Diel: I think working capital should be reduced from where you've seen the last few years as far as the price impact goes, because we're buying green tobacco at lower prices. Now, when you look at quarter-end levels, it's really going to depend on the pace of sales and as we go through shipping timing and customer orders. It's hard to say how the working capital is going to fluctuate through the year and where we end up with carryover crops at the end of the year.

Speaker #3: Now, when you look at quarter-end levels, it's really going to depend on the pace of sales. And as we go through shipping timing and customer orders, so it's hard to say how the working capital is going to fluctuate through the year.

Speaker #3: And where we end up with carryover crops at the end of the year. So again, kind of fundamentally, you see we see a reduction due to lower pricing.

Steve Diel: Again, fundamentally, we see a reduction due to lower pricing, but that's going to fluctuate as timing of shipments progresses.

Speaker #3: But that's going to fluctuate as timing of shipments progresses.

Speaker #2: Yeah, absolutely.

Preston D. Wigner: Yeah. Some of it.

Preston Wigner: Yeah. Some of it.

Speaker #4: Okay. And then what I use oh, sorry. Go ahead.

Ann Gurkin: Okay. What I use Okay, go ahead.

Speaker #2: Well, say some of it's also driven by volume. And based on sales plans, some of it will also depend on the volume that we're buying.

Preston D. Wigner: I'll say some of it's also driven by volume. Based on sales plans, some of it will also depend on the volume that we're buying. If we're picking up market share, if we're picking up opportunities, we will be looking for those additional volumes to satisfy those customers. As Steve said, we would expect benefits from the lower green pricing, but really how we're buying and our ability to buy the right grades at the right price and then move that tobacco with an emphasis on trying to convert that inventory to cash and try to ship as quickly as we can.

Preston Wigner: I'll say some of it's also driven by volume. Based on sales plans, some of it will also depend on the volume that we're buying. If we're picking up market share, if we're picking up opportunities, we will be looking for those additional volumes to satisfy those customers.

Speaker #2: And if we're picking up market share, if we're picking up opportunities, we will be looking for those additional volumes to satisfy those customers. But as Steve said, we would expect benefits from the lower green pricing, but really how we're buying and our ability to buy the right grades at the right price and then move that tobacco.

Preston Wigner: As Steve said, we would expect benefits from the lower green pricing, but really how we're buying and our ability to buy the right grades at the right price and then move that tobacco with an emphasis on trying to convert that inventory to cash and try to ship as quickly as we can.

Speaker #2: With an emphasis on trying to convert that inventory to cash and try to ship as quickly as we can.

Speaker #4: Great. And do you anticipate volumes for tobacco to grow in fiscal '27 versus '26 given the oversupply?

Ann Gurkin: Great. Do you anticipate volumes for tobacco to grow in fiscal 2027 versus 2026 given the oversupply?

Speaker #2: I would say it's early in the year, but we have those opportunities. Like I said, given our competitive advantages and all the things we do for our customers in supporting them and coordinating with them, we would have opportunities.

Preston D. Wigner: I would say it's early in the year, we have those opportunities, like I said. Given our competitive advantages, and all the things we do for our customers in supporting them and coordinating with them, we would have opportunities. A little bit is going to depend on the year, some of it, I mentioned El Niño. We're communicating with our customers about El Niño, and as the year goes on, it's still a little early to have an accurate prediction on that in terms of the exact timing and the exact way El Niño is going to manifest in our origins. Customers are factoring in El Niño impacts on next season's crops as they're thinking about what's available this season.

Preston Wigner: I would say it's early in the year, we have those opportunities, like I said. Given our competitive advantages, and all the things we do for our customers in supporting them and coordinating with them, we would have opportunities. A little bit is going to depend on the year, some of it, I mentioned El Niño. We're communicating with our customers about El Niño, and as the year goes on, it's still a little early to have an accurate prediction on that in terms of the exact timing and the exact way El Niño is going to manifest in our origins.

Speaker #2: It's a little bit it's going to depend on the year and some of it I mentioned El Niño. We're communicating with our customers about El Niño.

Speaker #2: And if and as the year goes on, it's still a little early to have an accurate prediction on that in terms of the exact timing and the exact way El Niño is going to manifest in our origins.

Speaker #2: But customers are factoring in El Niño impacts on next season's crops as they're thinking about what's available this season. And so we could see given the opportunities we've got, if there are concerns about that, we could see potentially additional volumes this year to hedge against risks that could occur next season.

Preston Wigner: Customers are factoring in El Niño impacts on next season's crops as they're thinking about what's available this season. We could see, given the opportunities we've got, if there are concerns about that, we could see potentially additional volumes this year to hedge against risks that could occur next season.

Preston D. Wigner: We could see, given the opportunities we've got, if there are concerns about that, we could see potentially additional volumes this year to hedge against risks that could occur next season.

Speaker #4: That's great. That's great. And then can we just review capital allocation priorities for the company? You raised your dividend. I think back in May, you bought back some stock in the quarter.

Ann Gurkin: That's great. Can we just review capital allocation priorities for the company? You raised your dividend, I think back in May. You bought back some stock in the quarter. What's the reason for that? It looks like cash flow is pretty tight, given the lower earnings. Working capital may be down, but may be flat versus last year. CapEx $55 to 65 million. I know you have adequate liquidity using credit lines, can we just walk through the cash flow, the capital allocation, the reason for buying back the stock this past quarter? Anything else you can share would be great.

Speaker #4: What's the reason for that? It looks like cash flow is pretty tight given the lower earnings. And working capital, maybe down, but maybe flat versus last year.

Speaker #4: CapEx is $55 to $65 million. I know you have adequate liquidity using credit lines, but can we just kind of walk through the cash flow, the capital allocation, and the reason for buying back the stock this past quarter?

Ann Gurkin: I know you have adequate liquidity using credit lines, can we just walk through the cash flow, the capital allocation, the reason for buying back the stock this past quarter? Anything else you can share would be great.

Speaker #4: Anything else you can share would be great.

Speaker #3: Sure. And I'll take that. On the share repurchases, that was mainly just to offset dilution for equity compensation. We hadn't repurchased in a couple of years.

Steven S. Diel: Sure, Ann, I'll take that. On the share repurchases, that was mainly just to offset dilution for equity compensation. We hadn't repurchased in a couple of years. Typically, we would buy enough to offset that dilution and keep our diluted shares around 25 million outstanding. That's what that program was about. From a capital allocation standpoint, our priorities still remain as we have stated them before, as far as investing in tobacco operations, supporting the dividend, growing the ingredient segment, and then last on the priority list is returning capital to shareholders through those share repurchases. Our CapEx is estimated to be above maintenance levels this year. If you look back over the last couple of years, we made the investment in ingredients. Okay? That's where the higher levels of growth investment came from, was on the ingredient side, particularly up at our Lancaster campus.

Steve Diel: Sure, Ann, I'll take that. On the share repurchases, that was mainly just to offset dilution for equity compensation. We hadn't repurchased in a couple of years. Typically, we would buy enough to offset that dilution and keep our diluted shares around 25 million outstanding. That's what that program was about.

Speaker #3: Typically, we would buy enough to offset that dilution and keep our diluted shares around 25 million outstanding. So that's what that program was about.

Speaker #3: From a capital allocation standpoint, our priority still remains, as we have stated them before, as far as investing in tobacco operations, supporting the dividend, growing the ingredient segment, and then last on the priority list is returning capital to shareholders through those share repurchases.

Steve Diel: From a capital allocation standpoint, our priorities still remain as we have stated them before, as far as investing in tobacco operations, supporting the dividend, growing the ingredient segment, and then last on the priority list is returning capital to shareholders through those share repurchases. Our CapEx is estimated to be above maintenance levels this year. If you look back over the last couple of years, we made the investment in ingredients. Okay?

Speaker #3: Our capex is estimated to be above maintenance levels this year. So if you look back over the last couple of years, we made the investment in ingredients, okay?

Speaker #3: So that's where the higher levels of growth investment came from, was on the ingredient side, particularly up at our Lancaster campus. This year, it's more about investing in the tobacco side.

Steve Diel: That's where the higher levels of growth investment came from, was on the ingredient side, particularly up at our Lancaster campus. This year, it's more about investing in the tobacco side, and it's spread across multiple regions for us, South America, Africa, and Asia. It's a mix of growth investments, facility efficiencies, automation. We're investing in the tobacco business this year on the CapEx side with some really exciting projects that we expect to provide very good returns.

Steven S. Diel: This year, it's more about investing in the tobacco side, and it's spread across multiple regions for us, South America, Africa, and Asia. It's a mix of growth investments, facility efficiencies, automation. We're investing in the tobacco business this year on the CapEx side with some really exciting projects that we expect to provide very good returns.

Speaker #3: And it's spread across multiple regions for us, South America, Africa, Asia. It's a mix of growth investments, facility, efficiencies, automation, so we're investing in the tobacco business this year on the capex side with some really exciting projects that we expect to provide very good returns.

Speaker #2: Yeah, and I guess just to add to that, our focus and our goal is to grow this company—both in tobacco and in ingredients. And on the tobacco side, in addition to growing market share, we also want to find opportunities to support our customers through additional services and other opportunities.

Preston D. Wigner: Yeah. Ann, I guess I'd say to add to that, our focus and our goal is to grow this company on tobacco and on ingredients. On the tobacco side, in addition to growing market share, we also want to find opportunities to support our customers through additional services, additional other opportunities. That's a focus throughout the year. We think we're in a position, given how we support our customers, our relationship with our customers, our financial strength, if we have opportunities to grow and require additional investment, we'll make them, because we get such a good return on tobacco and it's stable, and we have such good relationships long-term with our customers. We do think of those throughout the year as we're looking at our management of cash and investment levels.

Preston Wigner: Yeah. Ann, I guess I'd say to add to that, our focus and our goal is to grow this company on tobacco and on ingredients. On the tobacco side, in addition to growing market share, we also want to find opportunities to support our customers through additional services, additional other opportunities. That's a focus throughout the year.

Speaker #2: And that's a focus throughout the year. We think we're in a position—given how we support our customers, our relationship with our customers, and our financial strength—that if we have opportunities to grow and require additional investment, we'll make them.

Preston Wigner: We think we're in a position, given how we support our customers, our relationship with our customers, our financial strength, if we have opportunities to grow and require additional investment, we'll make them, because we get such a good return on tobacco and it's stable, and we have such good relationships long-term with our customers. We do think of those throughout the year as we're looking at our management of cash and investment levels.

Speaker #2: Because we get such a good return on tobacco and a stable and we have such good relationships long-term with our customers. So we do think of those throughout the year as we're looking at our management of levels.

Speaker #4: Great, that helps. Any guidance on SG&A for the year, or interest expense for the year?

Ann Gurkin: Great. That helps. Any help on SG&A for the year or interest expense for the year?

Speaker #3: SG&A, if you look back, I think last year we were around $300 million. If you look back the last few years, we've kind of been in that $300 to $310 million band.

Steven S. Diel: SG&A, if you look back, I think last year we were around $300 million. If you look back the last few years, we've been in that $300 to $310 million band. I think that's a pretty good point to use to start to think about SG&A. Then interest expense, again, due to the slower pace of purchasing and potential lower working capital from lower green pricing, we expect interest expense to be down a little bit from last year.

Steve Diel: SG&A, if you look back, I think last year we were around $300 million. If you look back the last few years, we've been in that $300 to $310 million band. I think that's a pretty good point to use to start to think about SG&A. Then interest expense, again, due to the slower pace of purchasing and potential lower working capital from lower green pricing, we expect interest expense to be down a little bit from last year.

Speaker #3: I think that's pretty good weight, good point to use, to start to think about SG&A. And then interest expense, again, due to the slower pace of purchasing and potential lower working capital from lower green pricing, we expect interest expense to be down a little bit from last year.

Speaker #4: Okay, great. Have you gotten any tariff refunds?

Ann Gurkin: Okay, great. Have you gotten any tariff refunds?

Speaker #3: We have. We are working through those. Now, we have started to see some movement of getting refunds in. And the affected businesses have been in discussions with customers on how best to manage what could flow back to them.

Steven S. Diel: We have. We are working through those now. We have started to see some movement of getting refunds in. The affected businesses have been in discussions with customers on how best to manage what could flow back to them. It's early in the process and it's a work in process.

Steve Diel: We have. We are working through those now. We have started to see some movement of getting refunds in. The affected businesses have been in discussions with customers on how best to manage what could flow back to them. It's early in the process and it's a work in process.

Speaker #3: But it's early in the process, and it's a work in progress.

Speaker #4: Okay. Great. And then worldwide uncommitted leaf number?

Ann Gurkin: Okay, great. Worldwide uncommitted leaf number?

Speaker #2: Yeah. Estimated unsold food curtain burley stocks were about 180 million kilos. At June 30th, which is an increase of approximately 11 million kilos from March 31st.

Preston D. Wigner: Yeah. Estimated unsold flue-cured and burley stocks were about 180 million kilos at 30 June, which is an increase of approximately 11 million kilos from 31 March. 31 March was 57 million over 31 December.

Preston Wigner: Yeah. Estimated unsold flue-cured and burley stocks were about 180 million kilos at 30 June, which is an increase of approximately 11 million kilos from 31 March. 31 March was 57 million over 31 December.

Speaker #2: And March 31st was 57 million over December 31st.

Speaker #4: Okay. And then lastly, ingredient segment. You announced a leadership change in that business. I guess, can we just have a conversation about target margin, target pace of recovery?

Ann Gurkin: Okay. Lastly, Ingredients segment. You announced a leadership change in that business. I guess, can we just have a conversation about target margin, target pace of recovery? Obviously, customers still are facing weak volumes and challenging environments, and you have fixed cost issues in Lancaster just due to the overall macro challenges.

Speaker #4: Obviously, customers still are facing weak volumes and challenging environments. And you have fixed cost issues in Lancaster just due to the overall macro challenges.

Preston D. Wigner: Yeah.

Preston Wigner: Yeah.

Speaker #4: How should I think about that business and pace of recovery? And what is your level of commitment to that segment long-term? Preston and Steve, I think you were the architects of a lot of that investment.

Ann Gurkin: How should I think about that business and pace of recovery, and what is your level of commitment to that segment long-term? Preston and Steve, I think you were the architects of a lot of that investment, and I'd just be curious your level of confidence, timeline, and expectations. That would be very helpful. Thank you.

Speaker #4: And I'd just be curious your kind of level of confidence, timeline, expectations. That would be very helpful. Thank you.

Speaker #2: Yeah. That's well, first, we are absolutely committed to Universal Ingredients. As a growth engine for the company. And we're committed for the long-term. Making investments we need to make as we've shown in the past in the last six years.

Preston D. Wigner: Well, first, we are absolutely committed to Universal Ingredients as a growth engine for the company, and we're committed for the long term. Making the investments we need to make, as we've shown in the past, in the last six years, giving them the tools they need to grow, the resources they need to grow. I guess a lot of that starts with where we left the Q4, talking about initiatives that we were implementing to improve performance. Particularly, as you mentioned, at our Lancaster, Pennsylvania campus. Our objective is to ensure that those operations are fully utilizing those growth investments we've made in capacity, in capabilities, and in the resources related to commercial sales, research and development, and marketing. By leveraging that platform, we can see increased volume. We can obtain increased volume through our product portfolio, with an emphasis on solutions-based value-added products.

Preston Wigner: Well, first, we are absolutely committed to Universal Ingredients as a growth engine for the company, and we're committed for the long term. Making the investments we need to make, as we've shown in the past, in the last six years, giving them the tools they need to grow, the resources they need to grow. I guess a lot of that starts with where we left the Q4, talking about initiatives that we were implementing to improve performance. Particularly, as you mentioned, at our Lancaster, Pennsylvania campus.

Speaker #2: Giving them the tools they need to grow, the resources they need to grow, I guess a lot of that starts with where we left the fourth quarter.

Speaker #2: Talking about initiatives that we were implementing to improve performance. And particularly, as you mentioned, at our Lancaster, Pennsylvania campus. Our objective is to ensure that those operations are fully utilizing those growth investments we've made in capacity, in capabilities, and in the resources related to commercial sales research and development and marketing.

Preston Wigner: Our objective is to ensure that those operations are fully utilizing those growth investments we've made in capacity, in capabilities, and in the resources related to commercial sales, research and development, and marketing. By leveraging that platform, we can see increased volume. We can obtain increased volume through our product portfolio, with an emphasis on solutions-based value-added products. The commercial execution initiatives, those are designed to improve the business flow and facilitate growth of the business.

Speaker #2: By leveraging that platform, we can see increased volume. We can obtain increased volume. Through our product portfolio, with an emphasis on solutions-based value-added products.

Speaker #2: The commercial execution initiatives those are designed to improve the business flow and facilitate growth of the business. And that complements our initiatives to improve facility utilization with a specific focus on our Lancaster campus.

Preston D. Wigner: The commercial execution initiatives, those are designed to improve the business flow and facilitate growth of the business. That complements our initiatives to improve facility utilization with a specific focus on our Lancaster campus. It's the same goal that I've been talking about last year as well, that increasing volume across the factory floor, but making sure that volume is more profitable. Within those operations, our initiatives are also designed to advance gains in operational and financial efficiencies. The goal there is to ensure that we're running the facilities efficiently, we are responsibly managing and reducing costs, and we're increasing margin. Our leadership enhancements that we had mentioned previously, which include additional organizational alignment across the company, those support all those initiatives.

Preston Wigner: That complements our initiatives to improve facility utilization with a specific focus on our Lancaster campus. It's the same goal that I've been talking about last year as well, that increasing volume across the factory floor, but making sure that volume is more profitable. Within those operations, our initiatives are also designed to advance gains in operational and financial efficiencies. The goal there is to ensure that we're running the facilities efficiently, we are responsibly managing and reducing costs, and we're increasing margin.

Speaker #2: It's the same goal that I've been talking about. Last year as well. That increasing volume across the factory floor. But making sure that that volume is more profitable.

Speaker #2: So within those operations, our initiatives are also designed to advance gains in operational and financial efficiencies. The goal there is to ensure that we're running the facilities efficiently, we were responsibly managing and reducing costs, and we're increasing margin.

Speaker #2: Our leadership enhancements that we had mentioned previously which include additional organizational alignment across the company. Those support all those initiatives. So we're working tirelessly to increase the profitability of our business.

Preston Wigner: Our leadership enhancements that we had mentioned previously, which include additional organizational alignment across the company, those support all those initiatives. We're working tirelessly to increase the profitability of our business, provide those products and services to our existing and new customers that they need to succeed in the marketplace that's challenging, and to grow Universal Ingredients and Universal as a whole. Those initiatives are prioritized, and they're going to take time.

Preston D. Wigner: We're working tirelessly to increase the profitability of our business, provide those products and services to our existing and new customers that they need to succeed in the marketplace that's challenging, and to grow Universal Ingredients and Universal as a whole. Those initiatives are prioritized, and they're going to take time. We're dedicated to making the steady incremental advances that we need to make, and we're excited to see the benefits over time. With those initiatives, with that progress, and still, day after day, year after year, looking at entering new markets, gaining new customers, growing with existing customers. The volume will come, the margins will come, and we'll grow. It's a steady incremental progress with Universal Ingredients as I see it, as a natural evolution of growth of a new company that we've created just over the 6-year period.

Speaker #2: Provide those products and services to our existing and new customers that they need to succeed in the marketplace. It's challenging. And to grow Universal Ingredients and Universal as a whole.

Speaker #2: So those initiatives are prioritized. And they're going to take time. So we're dedicated to making the steady incremental advances that we need to make and we're excited to see the benefits over time.

Preston Wigner: We're dedicated to making the steady incremental advances that we need to make, and we're excited to see the benefits over time. With those initiatives, with that progress, and still, day after day, year after year, looking at entering new markets, gaining new customers, growing with existing customers. The volume will come, the margins will come, and we'll grow. It's a steady incremental progress with Universal Ingredients as I see it, as a natural evolution of growth of a new company that we've created just over the 6-year period.

Speaker #2: With those initiatives, with that progress, and still, day after day, year after year, looking at entering new markets, gaining new customers, growing with existing customers—the volume will come, the margins will come.

Speaker #2: And we'll grow. But it's a steady, incremental progress with Universal Ingredients, as I see it as a natural evolution of growth of a new company that we've created.

Speaker #2: Just over the six-year period. And with Pat's announcement, as we mentioned in the announcement, we made a lot of progress in six years. Now we've got an opportunity where we are in six years to now find a new leader to come in with a real growth mindset to take us from where we are today to where we want to be in the future.

Preston D. Wigner: With Pat's announcement, as we mentioned in the announcement, we made a lot of progress in 6 years. Now we've got an opportunity where we are in 6 years to now find a new leader to come in with a real growth mindset to take us from where we are today to where we want to be in the future. There's a lot going on. I'm really excited about where we are, the direction we're going. I'm very happy with the strategies that we have, we must execute. We have to have strategic focus, we've got to have operational discipline, and we need to execute. For Ingredients, that's number 1 focus for this year is to implement these initiatives, get them to work, and start to see the benefits.

Preston Wigner: With Pat's announcement, as we mentioned in the announcement, we made a lot of progress in 6 years. Now we've got an opportunity where we are in 6 years to now find a new leader to come in with a real growth mindset to take us from where we are today to where we want to be in the future. There's a lot going on. I'm really excited about where we are, the direction we're going. I'm very happy with the strategies that we have, we must execute.

Speaker #2: So there's a lot going on. I'm really excited about where we are, the direction we're going. I'm very happy with the strategies that we have.

Speaker #2: But we must execute. And we have to have strategic focus. We've got to have operational discipline and we need to execute. And that's for ingredients.

Preston Wigner: We have to have strategic focus, we've got to have operational discipline, and we need to execute. For Ingredients, that's number 1 focus for this year is to implement these initiatives, get them to work, and start to see the benefits.

Speaker #2: That's number one focus for this year is to implement these initiatives, get them to work, and start to see the benefits.

Speaker #4: What does capacity utilization at Lancaster right now?

Ann Gurkin: What is capacity utilization at Lancaster right now?

Speaker #2: At Lancaster, we don't have a public number. It's relatively low because it's still relatively new. And I'm talking about I mean, it's a large campus.

Preston D. Wigner: At Lancaster, we don't have a public number. It is relatively low because it's still relatively new. I'm talking about, it's a large campus. I'm really talking about the expanded campus where we've cut the ribbon a little less than 2 years ago. That is not as high as we want it to be or that it needs to be. In executing, especially operational financial efficiencies and the commercial strategies, we can increase that volume and increase capacity.

Preston Wigner: At Lancaster, we don't have a public number. It is relatively low because it's still relatively new. I'm talking about, it's a large campus. I'm really talking about the expanded campus where we've cut the ribbon a little less than 2 years ago. That is not as high as we want it to be or that it needs to be. In executing, especially operational financial efficiencies and the commercial strategies, we can increase that volume and increase capacity.

Speaker #2: I'm really talking about the expanded campus. Where we've cut the ribbon. A little less than two years ago. That is not as high as we want it to be, or that it needs to be.

Speaker #2: But in executing especially operational financial efficiencies, and the commercial strategies, we can increase that volume and increase capacity.

Speaker #4: Do you use 60%, 70%, or lower?

Ann Gurkin: Are you 60%, 70% lower?

Speaker #2: Anne, I'm not going to give you a number, but it's not as high as I want.

Preston D. Wigner: Anne, I'm not going to give you a number, but it's not as high as I want.

Preston Wigner: Anne, I'm not going to give you a number, but it's not as high as I want.

Speaker #4: Okay. Okay. That's great. It's a great opportunity—very exciting. That's super. Thank you for taking all my questions. I appreciate it very much.

Ann Gurkin: Okay. Great opportunity. Very exciting.

Preston D. Wigner: Thank you.

Preston Wigner: Thank you.

Ann Gurkin: That's super. Thank you for taking all my questions. I appreciate it very much.

Speaker #2: Sure. Thank you very much.

Preston D. Wigner: Sure. Thank you very much.

Preston Wigner: Sure. Thank you very much.

Speaker #1: This concludes the question and answer session. I will now turn the call back to Preston Wigner for closing remarks.

Operator: This concludes the question and answer session. I will now turn the call back to Preston Wigner for closing remarks.

Speaker #2: Thank you, Rebecca. Thank you all for taking the time to join us today. We look forward to speaking with you again for our second quarter fiscal year 2027 earnings call.

Preston D. Wigner: Thank you, Rebecca. Thank you all for taking time to join us today. We look forward to speaking with you again for our Q2 fiscal year 2027 earnings call.

Preston Wigner: Thank you, Rebecca. Thank you all for taking time to join us today. We look forward to speaking with you again for our Q2 fiscal year 2027 earnings call.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q1 2027 Universal Corp Earnings Call

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