Universal impacted by leaf oversupply
Universal Corp’s results continue to be impacted by an oversupply in leaf tobacco markets and the effects of softer demand from its customers.
“As is typical under these conditions, markets have developed slowly in some origins, with a later start to purchasing and processing, as well as delayed receipt of shipping instructions from customers,” said chairman, president and CEO, George C. Freeman, III, in announcing the company’s six months results to the end of September.
“While we usually ship a large portion of our volumes in the second half of our fiscal year, this year significantly more volume is being pushed into this period.”
But Freeman said that improvements that Universal had made in Africa, including the opening of its second processing line in Mozambique, would help to move shipments out prior to the current fiscal year end, barring any unexpected logistical challenges.
Universal expected modestly lower lamina volumes in fiscal year 2015 compared to those of the prior fiscal year due to soft customer demand, but the company believed it remained well-positioned in the industry with “our strong customer relationships, increasing customer satisfaction with our products and services, and our solid market share”.
“Revenues for the fiscal year are also expected to be down compared to the previous fiscal year primarily due to declining prices and the soft demand that is typical of an oversupply environment,” Freeman added.
“We are confident in our ability to adapt and manage through this period, as we have demonstrated in the past.”
Universal reported that net income for the first half of fiscal year 2015, which ended on September 30, was $15.7 million, or $0.35 per diluted share, compared with $83.8 million, or $2.95 per diluted share during the same period of last year. Last year’s results included a non-recurring gain in the first fiscal quarter of $81.6 million before tax ($53.1 million after tax, or $1.96 per diluted share), which resulted from the favorable outcome of litigation in Brazil related to excise tax credits. Results for the current fiscal year included an income tax benefit of $8.0 million (or $0.34 per diluted share) arising from a subsidiary’s payment of a portion of a fine following the unsuccessful appeal of a long-running court case. Excluding those items in both years, net income for the six months decreased by $23.0 million compared to that of the same period last year.
For the second fiscal quarter ended September 30, net income was $15.0 million, or $0.48 per diluted share, compared with net income for the prior year’s second quarter of $25.4 million, or $0.90 per diluted share.
