Financial information provided by Financial Modeling Prep. Options data provided by Unusual Whales. Live transcripts provided by Quartr. Reported revenue and EPS data from Earnings powered by FinChat.io. All data is provided for informational purposes only, and is not intended for trading purposes or financial, investment, tax, legal, accounting or other advice.
Good evening, and thank you for joining us. President Wegener, our Chairman, President and CEO and Johan Kroner, our Chief Financial Officer are here with me today. Our agenda is for President Yohan to provide an update on our fourth quarter and full year fiscal twenty twenty five operating and financial results. And share some strategic thoughts about the company we will then open up the call for questions. 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 and achievements could differ materially from the anticipated results prospects, performance or achievements expressed or implied by such forward looking statements. And we assume no obligation 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 our current earnings press release. Finally, some of the information we have for you today may be based on unaudited allocations and maybe subject to reclassification.
12m 9s
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. Call is being webcast live and will be available for replay on our website through 08/28/2025. Other than the replay, we have not authorized and the disclaim responsibility for any recording, replay, or distribution of any transcription of this call. This call is being copyrighted and may now be used without our permission. I would like to now to turn the call over to Preston. Thank you, Wush. Good evening, Thank you for taking the time to join us today. I am new to the CEO role, but not new to Universal.
13m 1s
Having joined the company over twenty years ago. Over the last twenty years, I've seen many stages of our company's evolution. Complete with both triumphs and challenges. Our ability to adapt to change and to turn challenges into opportunities, has helped shape Universal into the company that we are today. I'm honored to lead such a strong company and excited about the opportunities ahead of us. Our fiscal year 2025 was a good example of how our teams around the world adapted to change and executed our strategies. We had an exceptional fiscal year with revenue and operating income 75% higher respectively versus our strong fiscal year 2024. We navigated weather impacted tobacco crops in certain origins historically high green tobacco prices. We at the same time, we continue the development of universal ingredients, our plant based ingredients business. We were also pleased to have declared our fifty fifth annual dividend increase. Our quarterly dividend of $0.82 per share equates to an annualized rate of $3.28 per common share. This reflects our ongoing commitment to returning value to the shareholders through consistent performance and operational excellence. As we will discuss today, fiscal year twenty twenty six is well underway. And it will present new challenges and changes for us.
14m 30s
If we can continue to execute our business strategy, I believe we can once again navigate those changes and challenges. And pursue the resulting opportunities and continue to strengthen our company for the future. Our business strategy focuses on three pillars, maximizing and optimizing our tobacco operations segment growing our ingredients operations segment and strengthening our organization. First, in our tobacco operations segment, we continuously look for opportunities to increase our sales volumes and market share. Expand services across our customers' supply chain participate in the evolution of next generation products, and pursue efficiencies in our operations. Universal provides unparalleled access to tobacco that is supported by our farmer relationships agronomy expertise, and sustainability practices. And backed by our investment grade credit rating and access to financing. We are capable of handling all varieties of tobacco commercializing all stock positions and sourcing and supplying from all major leaf tobacco tobacco exporting regions. Reliability, service, and predictability are all the hallmarks of our tobacco business. As our customers look to optimize their capital allocation, and seek supply chain efficiencies, or to expand their next generation product business. We believe that we have an ability to play an increasingly important role supporting them.
16m 5s
While generating additional earnings. I believe that our geographic diversity local expertise developed through decades of hand in hand work with farmers and suppliers, and global relationships with multinational customers are the keys to our ability to continue to generate stable cash flow and deliver unique value proposition for our shareholders. Turning to our Ingredients Operations segment. We intend to seek opportunities to grow Universal Ingredients. Both organically through measured acquisitions, to provide our customers with a solution based portfolio of value added product offerings. Since we set our strategy in 2018 to build a plant based food and beverage ingredients business, We took a proactive but deliberate approach in recruiting a management team, making acquisitions, and setting and executing commercial strategies. We paced ourselves as we integrated the three acquisitions to form a coherent platform and we made key investments in expanding platform capabilities and capacity. As a result, operating income grew in fiscal year twenty twenty five. Despite broader headwinds in the consumer products market, and the platform has given us a firm foothold in a very deep multi segment market. We strive to leverage our strong reputation for quality and service as well as our long standing relationships with customers to be a premier player in this space.
17m 37s
The third pillar of our strategy is strengthening our organization. As a corporation, we will pursue strategies and initiatives designed to support and strengthen our operations for the future. These strategies and initiatives will focus on areas such as efficient financial management, effective human capital management, optimal utilization of technology, and operational synergies between our business segments. Ultimately, our goal is to position Universal for long term success and value creation And I look forward to sharing more about these initiatives in the quarters to come. I cannot talk about our strategy, without talking about our strong regional and local management teams around the world. While our operations span five continents and over 30 countries, the coordination between our executive management and our regional and local management teams makes our decision making quite nimble. We are not afraid to make the right calls, Like when we and our South America management team decided to accelerate green tobacco buying in Brazil last year. That decision temporarily increased the level of debt on our balance sheet but established a favorable cost position and secure the green tobacco needed to supply our customers in a very tight weather impacted market. These types of decisions and the ability to execute on them are key to our success.
19m 9s
I'd like now to hand it over to Johan to provide details of our financial and operational performance. After which I will have a high level outlook fiscal year twenty twenty six and share a few additional thoughts.
19m 24s
Thank you, Preston. Evening, everyone. As Preston mentioned, Universal just delivered exceptional results for the full year of fiscal year twenty twenty five. Within the fiscal year, we saw accelerated timing for tobacco shipments to some customers which shifted some sales volume from the fourth quarter to earlier in the year. The results for our fourth quarter therefore reflected the effect of such timing shifts.
19m 53s
For the fourth quarter of fiscal year twenty twenty five, sales and other operating revenue were 702,300,000.0 as compared to 770,900,000.0 for the same quarter in fiscal year twenty twenty four. The decrease in revenue was mainly due to lower tobacco sales volumes as a result of the timing shift I just mentioned. Operating income for the quarter was 42,800,000.0 as compared to $68,200,000 for the same quarter in fiscal year twenty twenty four. The lower operating income was also mainly due to lower tobacco sales volumes. Selling, general and administrative expenses were $9,500,000 lower during the quarter as compared to the same quarter in fiscal year twenty twenty four mainly due to lower compensation costs, a better currency comparison but partially offset by higher legal and professional fees associated with the Mozambique investment investigation. Net income attributable to Universal Corporation was $9,300,000 or $0.37 per share on a fully diluted basis as compared to $40,300,000 or $1.61 per share for the same quarter in fiscal year twenty twenty four During the quarter ended on 03/31/2025, Universal completed the pension risk transfer transaction resulted in a onetime pretax pension settlement charge of approximately €14,000,000 Adjusted net income which excludes certain nonrecurring items, was $20,200,000 or $0.80 per share for the fourth quarter of fiscal year twenty twenty five.
21m 38s
As compared to 44,800,000.0 or $1.79 per share for the same quarter in fiscal year twenty twenty four. Segment operating income for the tobacco operations segment was $45,800,000 for the quarter. As compared to 73,500,000.0 for the same quarter of fiscal year twenty twenty four The lower segment operating income was driven mainly by lower sales volumes partially offset by better pricing. Segment operating income for the Ingredients Operations segment was $4,400,000 for the quarter. As compared to a $1,000,000 loss for the same quarter of fiscal year twenty twenty four. The higher segment operating income was driven mainly by higher sales volumes. For the full year of fiscal year twenty twenty five, sales and operating revenue were 2,950,000,000.00 as compared to $2,750,000,000 fiscal year twenty twenty four. The increase in revenue was mainly due to higher tobacco sales prices partially offset by lower volumes. Operating income for fiscal year twenty twenty five was 232,800,000.0 as compared to $222,000,000 for fiscal year twenty twenty four. The increase was mainly driven by higher sales revenue partially offset by higher green tobacco purchase prices. SG and A expenses were $305,300,000 during fiscal year twenty twenty five as compared to $310,600,000 for fiscal year twenty twenty four The lower SG and A expenses were mainly the result of lower compensation costs and better recoveries on farmer advances, partially offset by higher legal and professional fees associated with the Mozambique investment investigation and higher sales commissions.
23m 31s
Net income attributable to Universal Corporation was $95,000,000 for year twenty twenty five or $3.78 per share, on a fully diluted basis as compared to $119,600,000 or $4.78 per share fiscal year 2024. Net income was lower mainly as a result of higher operating income being offset by higher interest expenses the aforementioned pension settlement charge and restructuring and impairment charges related to the consolidation and restructuring our European sheet operations. Adjusted net income which excludes certain nonrecurring items, was 116,300,000.0 or $4.63 per share on a fully diluted basis for fiscal year twenty twenty five as compared to 127,100,000.0 or $5.8 per share fiscal year twenty twenty four. Segment operating income for the tobacco operations segment was $240,200,000 for fiscal year twenty twenty five as compared to $222,400,000 for fiscal year twenty twenty four The higher segment operating income was driven mainly by higher sales prices partially offset by lower volumes. Segment operating income for the Ingredients Operations segment was $12,300,000 for fiscal year twenty twenty five, as compared to 3,900,000.0 for fiscal year twenty twenty four The higher operating income was mainly driven by higher sales volumes. Strong cash flow generated by this financial performance supported our effort to delever.
25m 6s
Effective revenue collection efforts and a more normalized green tobacco buying pattern in Brazil for the crop currently being purchased also improved our working capital usage. As of 03/31/2025, our net debt which is defined as the sum of notes payable overdrafts and long term obligations including current portion plus customer advances and deposits less cash and cash equivalents was $817,000,000 $180,000,000 lower than March thirty one of last year. Additionally, as of 03/31/2025, our accounts receivable balance was over $100,000,000 higher than at the end of fiscal year twenty twenty four. We remain focused on prudently and efficiently managing our working capital to maintain a conservative leverage level and solidify our investment grade credit ratings. I will now hand it back to Preston to discuss our outlook for the next fiscal year.
26m 6s
Thank you, Johan. Looking at fiscal year twenty twenty six, On the tobacco side, we see strong customer demand. Industry uncommitted inventory remains at low levels. Per our estimate, excluding China, global flu cure production is expected to increase this current growing season by about 20% and burley production is expected to increase by about 30%, as compared to the last growing season. If these anticipated production increases are achieved, we believe the incremental availability of tobacco will move the market from the recent undersupply position towards a more balanced or slight oversupply position. On the ingredient side, fiscal year twenty twenty five, we completed our major expansion project in Lancaster, Pennsylvania, which added an industry leading combination of extraction, blending, aseptic packaging and other capabilities. We also invested in strengthening our sales, marketing and product development teams and focused on creating value across the entire platform. The platform level support enables us to deliver unique customized products to our customers. Entering fiscal year twenty twenty six, we are energized by strong customer interest in these new innovative products as we shift our focus from platform building to organic growth. I would be remiss not to highlight some of our key and sustainability as well.
27m 40s
As the largest global leaf tobacco supplier, that directly contracts with over 175,000 farmers around the world, sustainability has been deeply embedded in our DNA. To us, a strategic part of our business is our commitment to setting high standards promoting a sustainable supply chain and providing transparency about our sustainability efforts. Sustainability is good for our business, and represents good stewardship in the communities in which we operate. Finally, I'll end my remarks with a note our prior filing delays related to our investigation in Mozambique. I'm pleased that the investigation is complete. And our filings have been made. And the embezzlement did not is not expected to have any material impact on our financials. As an organization, we learn from the matter and we implemented various initiatives to improve our processes and internal controls. We believe these incremental improvements will make us an even stronger and better company. Operator, please open up the call for questions.
28m 52s
Press To withdraw a question, simply press 1 again. Your first question comes from Ann Gurkin Davenport and Company. Please go ahead. Good evening, everybody. It's great to talk to you all.
29m 16s
Thank you, Hannah.
29m 17s
Congrats to Congrats on completing the investigation or at least filing the appropriate paperwork.
29m 24s
And congrats on a a very excellent fiscal twenty five.
29m 29s
Thanks.
29m 30s
I wanted to spend a few minutes thinking about fiscal twenty six and see what you can share. Beginning with s g and a. Should I think about SG and A for fiscal twenty six?
29m 43s
And I'll say that We can't provide forward looking guidance on our SG and A run rate, but can help you understand some of the components of our SG and A fiscal year '25 full year SG and A was about 3.05 down $5,000,000 versus prior year. There were a couple of moving pieces some one offs. There's legal and professional fees, of course, were up related to the Mozambique investigation. And we had some costs associated with value added tax settlement in 2024. So there's always these moving pieces. Other variances may be related to some specific aspects of our operations. For example, we had higher recoveries of former advances during fiscal year twenty twenty five. Due to strong market demand and pricing. Some higher commissions due to a shift in customer mix. Please also keep in mind that, you know, foreign currency comparisons could also impact SG and A. Overall, as we look to strengthen and grow the ARC Corporation, we may invest in additional SG and A to build capabilities while at the same time, we seek opportunities to drive efficiencies and reduce costs.
30m 57s
So are you going to have ongoing legal expenses that continue in fiscal twenty twenty for the Mozambique situation?
31m 4s
Not with regard to the Mozambique investigation. No, that that one that investigation has been completed.
31m 9s
That's completed. Okay. Great. Okay. Okay. And then switching to tobacco, very strong margins, business in fiscal twenty twenty five. I guess I'm talking to tobacco companies, customers, Looks like demand is strong. They're talking about lower expecting lower tobacco costs moving forward. So that raises the question of their expectations their inventory levels versus the likely move towards a more balanced tobacco lease global supply given the forecast. So how should I think about margins and the ability to price and ability to drive growth into tobacco segment in fiscal twenty twenty six versus fiscal twenty twenty five?
31m 56s
Yeah. That's you've touched on the key issue. And as we as we go from from undersupply into a balanced market with larger crops and and prices expected to come down. I think we're aligned with our customers in that viewpoint. As well. But as those as those crops grow, we're trying to think through, and, of course, we we coordinate with our customers to find out what their indications are, and we try to do that as far in advance as we can. We know what we need to be growing with our farmers. But know, an open question is what are they gonna do with their durations? Our customer is going to build them back up Our customer is going to continue with where they are and, allocate resources in other areas of their company, which is for capital allocation strategy. Is on the minds of some of our customers. So it's it's still too early in the season to tell but we know that there is still strong demand this year. As we go into this market even though we have really big crops coming in. Think the lower prices will help and we'll be able to meet our customers demands.
33m 10s
It's just at this time, it's a little difficult to know what the scope and extent of those demands are going to be. Until we really have a better understanding from all of our customers of how they're gonna manage those durations. You know? Some of them, those durations got very low. So we benefited last year And even though it was a historically high green price, crop in in lots of origins, and short crops in some places like Brazil. We were we were able to help them and source the tobacco that they needed. But they paid high prices. For those. And and this year, they're expecting better pricing, and when we we would expect better pricing as well. But we really have to have a better understanding of what their real needs are gonna be throughout the whole crop season. All of these areas, starting with Brazil and then into into Africa and then around the world.
34m 13s
Alright. Do you anticipate growing volumes for the tobacco business in fiscal twenty six?
34m 20s
Yeah. Again, it's going to for me, it's going to depend on they're gonna do with those durations. That would be the the variable for me. You know, they had we had a slight decrease in volume last year even though really strong demand You know? And even though, you know, a place like Brazil is gonna have a much larger crop, Doesn't mean automatically that everybody's going to be buying 20% more.
34m 47s
We're just gonna have to see. Some of them are are certainly going to increase durations, and some, I think, are gonna live with the tighter durations and rely on around us give them opportunities, especially maybe later in the crop year where in the crop season where might be able to come in if there's excess tobacco. Then we can buy on the market, and and help them where last year, in undersupply and tight markets, we couldn't.
35m 18s
All the time.
35m 19s
If if I may add, Preston, all things being equal and, you know, crops are larger, we're gonna buy our share. But we do not buy on a spec speculative basis. So again, this is where the customer angle comes in. But under normal circumstances, we buy our share we have the contracts with our farmers. If the farmers grow more, that's what we're buying. So we will end up with some some additional tobacco. You know? It's cheaper, so that will help us a little bit. But, you know, we do expect, you know, volumes to go up a little bit and but we have to be able to place, and and that's where the big question is at the moment.
35m 56s
And what are Universal's uncommitted inventory levels right now? Tobacco inventory?
36m 2s
We're currently at 20% as of 03/31/2025.
36m 10s
And worldwide uncommitted lease inventories?
36m 13s
So the estimated unsold, flue cured and burly [indiscernible] 22,000,000 kilos as of March 31, which is up 11,000,000 from December 31.
36m 25s
Okay. And how does The US crop look right now, tobacco crop?
36m 30s
Too early, Ann. Yes, it's a little too early. Too early.
36m 33s
Okay. Okay. Switching to ingredients, nice to see the improvement in the operating profit versus $20.24 for the ingredient segment. How do I think about the profit outlook for the ingredient segment? And are you still targeting ingredient the profit for the ingredient segment to total 10% to 12% of EBITDA. Is that still a long term target for that segment?
36m 57s
Well, we put that target out a while back. And so we hit it and then we moved on. Again, we have made some significant investments and that's where we need to deliver. And that's what we have been saying the the the entire time that, you know, by putting in these additional capabilities and all these things that we can do, Now that the sales guys need to do their thing. You know, we we ramped up commercial department. We ramped up the R and D. There is a lot of cost associated with that in the numbers. Which you can see in 2025. And before. So you're going to see the fruits of this going forward, which is now we just need to sell it, and and and we need to margin up. You know? Some of these things we don't like to be in the commodity business. We like to be in the specialized stuff. And that's why we did what we did and we made these significant investments in Lancaster, Pennsylvania.
37m 51s
Yeah. We were we were certainly pleased for the year with increased sales, increased volumes for the platform and ending ending the quarter on a strong note. And and our goal is to grow That's strategy, grow ingredients. And and we expect to do that. We need to to leverage as much as we can with our platform resources get as much value from those resources that we can.
38m 15s
It's it's been paying off this year, and and, and that's our goal next year and in the continuing years.
38m 23s
Can you quantify the increased sales due to anticipated tariffs? I assume some business shifted into Q4.
38m 31s
Yes. There was some I'd say there was some modest modest activity in the fourth quarter in anticipation of tariffs. And, you know, tariffs it depends on what time of day you wanna check the news to know what's going on with tariffs.
38m 48s
But but we we would expect with those types of challenges we'll have opportunities. And and we're working through those. We've seen tariffs in the past. It's really gonna be focused on what the tariffs really are and and are there other areas that we can also source products from to mitigate maybe additional cost with tariffs and have have a more diversified supply base to mitigate any impacts like that.
39m 24s
So that 10% of the sales in q four would have been due to timing of tariffs purchases?
39m 30s
No. Not that high.
39m 31s
No. Not that high?
39m 33s
No. No.
39m 33s
Okay. Okay. And then can you talk about tariffs? What is caught up in tariffs for y'all? What both on the tobacco side and the ingredient side, is there anything Yeah. I guess it it sort of depends on what As of today at their properties are. You know, if we're thinking of of tariffs with China, You know, that's that's gonna impact how much if anything, the Chinese are going to buy in The US. For us, you know, that's that's not a large part of our business. No.
40m 5s
We handle some processing for them. So for the Chinese side, you know, that's really for The US, know, maybe volumes go down in The US. It gives us opportunities in other areas they're gonna shift their needs because they do have requirements. And and we worked very hard last year to meet those requirements in tough markets. And we'll do the same this year as well. Think on the ingredient side, it's the Chinese sourcing we have, which is really our dehydrated vegetable company, Silva. International. That's gonna depend on the level of tariffs where they end up. And as we saw, the customers were buying forward a little bit, and we're working on additional areas of supply in case the tariffs go up. If the tariffs come down, we're good shape. We also carry as part of our strategy, a little longer inventories at Silva. With our products. So, we've got some breathing room with that as we navigate the changes. If tariffs apply to other origins, that's really going to impact purchases that our US customers have. From our operations around the world. And and we're, you know, keenly aware of of our commitment to our customers to help them any way we can.
41m 30s
And and we'll work with them if if there are unexpected tariffs and origins that they typically would buy we work with them and and and help them in other origins as best we can. So it's it's it's just a tough one to to predict. You know, even today. You know, it's tariffs are off, tariffs are on. Tariffs are stayed, We're just gonna wait and see. But we've we've dealt with these types of challenges in the past, whether they're tariffs and other things. And and we always make a plan, and and we will and we'll produce results despite the challenges. Always an opportunity with every challenge.
42m 9s
So are you buying products from China that has the 45% tariff on it? Or did you build enough inventory to not have to buy that at that moment? I know the tariffs dropped down to 30%, but where are you in that cycle? Sorry.
42m 25s
Yeah.
42m 26s
I'd say I've I don't think we're buying anything at that level. It would just be too difficult to to move. I think we bought some some strategic times to avoid the tariffs or to have minimal tariffs And that plus our inventory were were fine. But we'll have to see how long the tariffs last also.
42m 47s
And then you talk about recent increases in raw material for certain traditional products. What does that mean? I'm sorry. I don't know what that is.
42m 55s
For our ingredients business, for example, there's been historically low prices for apples impact FruitSmart, our operation in Washington. On the fruit processing company, and on vanilla, or shanks, is one of their core products. Those sales have been good. It's just his it's just historically low levels which impacts our our dollar margins. On that business. So we've got good sales. We've we've got good margin percentages, but of course, if your raw material prices are low, it's impacting your absolute dollar margins.
43m 34s
So can you grow margin on the ingredients business in fiscal twenty six versus '25?
43m 39s
No. That's what and that's again, we're why I said that, you know, we need we need to margin up on on these things. So that's where our goal is to improve the margins on that business.
43m 49s
And that's why we did what we did in Lancaster Pennsylvania by you know, creating something that that that is a differentiator for us and for the market.
44m
Right. And you know, and add on to that. You know, the big part of our strategy in growing ingredients is to grow volume and grow scale. We've got a platform investments in product development and in sales and in marketing. And and the more we scale up, you know, the more we we spread those costs across our across our units, and we become even more competitive. And then we've got better pricing and better margins as well. We get the return that we need. For those investments.
44m 37s
Have you invested in the Salesforce to support growth to fill that platform?
44m 41s
Yes.
44m 44s
Great. That's great. And then can I just ask two more things? One about, the 100,000,000 share repurchase program and you didn't buy any stock back in the quarter. What are your thoughts on using that program? You ended the year with, I think, $260,000,000 in cash, and you've done a lot of work on reducing working capital needs or managing working capital How should I think about that opportunity to buy back stock?
45m 9s
Well, to the capital allocation and we have some other things that are more prioritized at the moment. So we we we it's out there. If if the the timing is right, we will use it. But right now, you know, we would like to deliver more, and we wanna do some other things, make some investments, strategic investments if the opportunity arises. So all those things are before we start buying back stock big time.
45m 35s
Okay. And how do I think about interest expense for '26 versus '25?
45m 39s
Yeah. Interest expense, we have to work on clearly because of the pricing last year, the early buying in Brazil. That was elevated Working capital was up. This year, it's certainly better in Brazil. It's a more normal buying season, it appears. So that will help We set on quite a bit of cash at the end of the year. So all of that the goal is to bring interest expense down.
46m 7s
Great. And then CapEx for fiscal twenty six, it looks like it was $62,000,000 in twenty five. '26?
46m 12s
Yes. Currently, we're looking at between 45,000,000 and 55,000,000 Ann.
46m 16s
Okay. Okay.
46m 17s
Thank you all for the time. I appreciate it very much.
46m 20s
Thank you, Anne. Thank you. You don't know how much. I was looking forward to talking to you today.
46m 26s
You know I was. So thank you.
46m 30s
Thank you, Anne.
46m 31s
Yep.
46m 33s
Your next question comes from Chris Reynolds with Neuberger Berman. Please go ahead. Mr. Reynolds, your line is open.
46m 50s
Yes. Thank you for taking my call. I wanted to see if you can provide some some general comments about nicotine pouches and that, obviously, there's been explosive growth there. And I'm wondering how that affects your the demand for tobacco leaf. It's my understanding that these products use, you know, nicotine from from tobacco leaf, but I guess there's always a possibility you could use some sort of you know, synthetic nicotine. But based on sort of what you're seeing right now, is this something that that potentially increases demand for leaf tobacco? Or are these products going to reduce you know, demand for tobacco leaf? It's hard hard to figure that out.
47m 42s
Chris. I understand. It's it is hard to figure out. You know, that's for our customers. This is part of this is part of their portfolio. They've got their traditional products. They've got their next generation products. Some use tobacco.
47m 57s
Pouches.
47m 59s
Some use nicotine derived from from tobacco. You know, the way we see it, there are opportunities in nicotine. You know, it is it is a commodity. At the moment, and, is being produced you know, in a number of places around the world. We, of course, through AmeronHick, we further refine it here in The US. But it's it's really driven by by cost. And how you can produce it at the lowest cost and where that tobacco is at the lowest cost. Which, for example, is overseas and not currently really in The United States. For us, you know, we still see strong demand for our leaf business. And and we support our customers in all of our portfolio. And part of our strategy is to participate in their next generation product categories. So if they use leaf, we wanna be in that leaf. And if they use nicotine, in in the most efficient and effective cost effective way for us, where it makes sense, we wanna participate in that too. That nicotine market is pretty volatile And and it's very cost sensitive. And so we keep an eye on it. We participate in it. But it's it's hard to predict where it's really going longer term.
49m 30s
And how it might change. And to your point, what role synthetic nicotine might play. Long term in the market.
49m 40s
Mhmm. And and one other follow-up question. Let's just say you have a customer that wants nicotine derived from your tobacco leaf and you you do some form of processing to extract it. What happens with that tobacco leaf afterwards? Is something that's just discarded? Or is there another use for it?
50m 4s
No. I think in that I think in most of those processes and we don't we don't extract directly from leaves ourselves. I think in that process, you know, what's left is is not used. It's it's waste. You can't reuse it.
50m 19s
Okay. Well, well, thank you for for for answering those questions.
50m 24s
Sure. Anytime, Chris.
50m 27s
There are no further questions at this time. I will now turn the call over to Preston Wigner for closing remarks.
50m 35s
Thank you, Tiffany. Thank you all for taking the time to join us today. We look forward to connecting again during our next earnings call. Thank you.
50m 47s
Ladies and gentlemen, that concludes today's call. Thank you all for joining. May now disconnect.
Key Insights
Fiscal year 2025 was strong for UVV, with revenue and operating income up 7% and 5% respectively versus FY24, driven by higher tobacco sales prices despite lower volumes; full-year sales reached $2.95B and operating income was $232.8M.
Q4 FY25 results were impacted by timing shifts in tobacco shipments, resulting in lower sales ($702.3M vs. $770.9M in Q4 FY24) and operating income ($42.8M vs. $68.2M), but SG&A expenses decreased due to lower compensation costs.
Ingredients Operations segment showed improvement, with FY25 operating income rising to $12.3M (from $3.9M in FY24), supported by higher sales volumes and recent investments in platform capabilities; the company is now focused on organic growth and margin improvement in this segment.
Net debt as of 3/31/2025 was $817M, down $180M year-over-year, reflecting strong cash flow and improved working capital management; CapEx for FY26 is projected at $45M–$55M (down from $62M in FY25), and interest expense is expected to decrease due to normalized buying patterns.
For FY26, UVV anticipates strong customer demand in tobacco, with global production expected to increase (flue-cured up 20%, burley up 30%), potentially moving the market toward balance or slight oversupply; the company remains committed to shareholder returns (annualized dividend of $3.28/share) and does not expect material financial impact from the completed Mozambique investigation.
