Seeking new alliances

Alliance One International’s volume sales during the nine months to the end of December, at 255.8 million kg, were 1.7 percent up on those of the nine months to the end of December 2016.
In announcing its nine-months and third-quarter results, the company said the higher volume was made possible by South America’s crop having been returned to a more normal level after the weather-affected, smaller crop of the previous year, and by the timing of shipments in North America, offset by volume decreases in Africa caused by unhelpful weather, primarily in Malawi.
Total sales and other operating revenues were said to have increased by $97.0 million to $1,202.1 million because of a 7.5 percent increase in the average sales price brought about by a favorable product mix, primarily in South America, North America, Asia and Europe, and because of the increase in volume sales.
Average tobacco costs per kg increased by 7.9 percent because of the product mix and the impact of European currency movements, partially offset by lower conversion costs.
‘Gross profit increased 14.7 percent to $171.5 million and gross profit as a percentage of sales improved to 14.3 percent from 13.5 percent last year,’ Alliance said. ‘The increase in gross profit was driven by revenues increasing by 8.8 percent with total costs of goods and services sold increasing by 7.9 percent. The larger South America crop size this year was the primary driver of processing and other revenues increasing 2.1 percent, with processing costs decreasing 10.1 percent from lower conversion costs.’
President and CEO Pieter Sikkel (pictured) said, fiscal year 2018 continued to progress in line with the company’s expectations. “We achieved solid sales growth during the third quarter when compared to last year,” he said. “Our volume sold has increased, as crop sizes have returned to more normal levels in many key markets despite reduced crop sizes in Africa.
“We are pleased with this quarter’s results and with the continued progress against our key initiatives and strategic objectives.”
Sikkel said he was excited to announce that Alliance One had embarked on an ambitious transformation plan called ‘One Tomorrow’. “This initiative will drive future growth opportunities and reshape our brand as the trusted provider of responsibly produced, independently verified, sustainable, and traceable agricultural products and services,” he said. “As part of our ‘One Tomorrow’ long-term business strategy, we are actively developing new business lines and building upon the strength of our core operations.
“Most of our new business lines focus on products that are value-added or require some degree of processing. These products generally have higher margin potential than our core business and play well to our strengths.
“In January, we successfully acquired majority stakes in two new joint ventures. The extension into growth segments, namely e-liquids, industrial hemp and cannabis, expands Alliance One’s presence in higher-margin, fast-growing categories.
“We intend to broaden our business portfolio over the next three to four years by focusing on consumer-driven agricultural products, with increased operating margins when compared to our historical leaf processing business.
“Consistent with our commitment to growth and incremental to our core leaf earnings, our goal is to generate a significantly increasing portion of our profit from new, higher-margin businesses by 2020.”