Production declines point to more balanced market

The current outlook for 2015 tobacco crops indicates decreased production volumes in the key growing areas, which is an important step towards more balanced markets, according to George C. Freeman, III, chairman, president, and CEO of Universal Corporation.

Freeman was speaking yesterday as he presented the company’s third-quarter results.

“The current fiscal year continues to develop as we expected, with shipments heavily weighted towards the second half of the year,” he said. “Third quarter lamina volumes shipped by our flue-cured and Burley operations were the highest that we’ve seen for several years. In addition, our third quarter operating earnings benefitted from lower selling, general, and administrative costs, as well as improved gross margins. Our prudent inventory management has kept uncommitted levels in the normal range, at 14 percent. The robust third quarter sales volumes and operating profit improvements offset a portion of the large declines we reported in the first half of the year from the later start to the markets and delayed receipt of shipping instructions from customers caused by the oversupply conditions this year.

“Although it is early and logistics delays can always occur, the fourth fiscal quarter’s processing and shipping schedules are proceeding as anticipated, with the largest portion of shipping volumes coming from the Africa origins. We continue to expect stronger fourth quarter sales volumes compared to the same quarter last year. The current outlook for the 2015 crops, which will impact our fiscal year 2016 results, indicates decreased production volumes in the key growing areas, which is an important step towards more balanced markets.”

Universal reported that net income for the third quarter of fiscal year 2015, which ended December 31, was $53.0 million, or $1.87 per diluted share, compared with net income for the previous year’s third fiscal quarter of $38.6 million, or $1.36 per diluted share.

Segment operating income for the third fiscal quarter of $93.5 million increased by 25 percent on that of the previous year, primarily due to improved results from higher gross margins and lower selling, general, and administrative costs.

Consolidated revenues decreased by about 1 percent to $758.1 million mainly attributable to lower prices and flat total volumes.