Leaf oversupply situation might be extended
Global leaf tobacco inventories are high and might ‘have the effect of extending the duration of the oversupply conditions’, according to George C. Freeman, III, chairman, president, and CEO of Universal Corporation.
Commenting on Universal’s fourth quarter and full-year results, Freeman said he was pleased with the results the company had achieved, given fiscal year 2015’s oversupplied market conditions.
‘We ended the year with strong fourth quarter results, which helped to bring our segment operating earnings for the fiscal year in line with our expectations,’ he said. ‘We also realized higher margins, maintained our solid financial position, and returned over $90 million to our shareholders in dividends and share repurchases this fiscal year. Our performance demonstrates our ability to execute well on our objective of delivering a compliant product in an efficient manner to our customers, under challenging circumstances.
‘We are well-positioned as we enter fiscal year 2016 with substantial cash balances and manageable uncommitted inventory levels.
‘Markets in Africa and Brazil have opened at a similar pace compared to last year, and crop qualities are mixed, with production volumes expected to be lower in most origins.
‘Although we are not seeing significant delays in customer orders, we expect shipping instructions to be weighted towards the second half of our fiscal year.
‘In addition, while our own leaf inventories are well-managed, global tobacco leaf inventory volumes are high. This may have the effect of extending the duration of the oversupply conditions, despite reduced new crop production and a more positive outlook for demand from some customers based on recent recoveries in certain of their retail markets.
‘Looking beyond near-term market conditions, we are optimistic about the future as we believe there are several trends in our business that could provide opportunities for us to increase our market share and to offer additional services to our customers…’
Universal announced that net income for the fiscal year ended March 31, was $114.6 million, or $4.06 per diluted share, down from last year’s net income of $149.0 million, or $5.25 per diluted share. Excluding one-off items in both years, net income for the fiscal year increased by $1.2 million, or $0.07 per diluted share.
Segment operating income, which excludes one-off items, was $167.2 million for fiscal year 2015, down $8.0 million from that of the previous year. The reduction was said to be been primarily attributable to fiscal 2015’s lower sales volumes, partially mitigated by a reduction in selling, general, and administrative costs.
Revenues of $2.3 billion for fiscal year 2015 were down by 11 percent compared with those of the previous year, driven mainly by the lower volumes and ‘modestly lower green leaf costs’.
