Leaf demand remains ‘soft’
After consecutive years of leaf tobacco supply and demand imbalance, global demand remains soft, according to the chairman, president and CEO of Universal Corporation, George C. Freeman, III.
In reporting Universal’s first-half and second-quarter results to the end of September, Freeman said that the demand situation might contribute to delays in some customer purchase and shipment timing decisions.
‘Consequently, our shipments are still expected to be weighted to the second half of the year, and we anticipate that total lamina sales volumes in fiscal year 2017 will be lower than those of last year,’ he said.
‘Reduced crop purchases in Brazil in the current fiscal year, as well as challenging market conditions in Tanzania, will negatively impact our sales volumes for this fiscal year.
‘We expect the most significant drop in volumes to occur in the fourth quarter of our current fiscal year as Brazil shipped heavily in the fourth fiscal quarter of 2016, and we do not expect to attain a similar level of shipments there this fiscal year.
‘At the same time, the lower current crop levels have reduced our working capital needs this year, decreasing our seasonal borrowing requirements and increasing our cash reserves.
‘Our uncommitted inventories have been well-managed and remained within our target range at 14 percent for the end of the second fiscal quarter.
‘As a result, we have continued to maintain our very strong balance sheet and are pleased to reward our shareholders with an annual dividend increase for the 46th consecutive year …’
Universal’s net income for the first half was $19.8 million, or $0.54 per diluted share, compared with $16.5 million, or $0.40 per diluted share for the same period of last year.
Operating income of $35.3 million was increased by $3.3 million.
