Universal Grows Well in 'Extraordinary Economic Climate'

Source from:  Tobacco Reporter 05/25/2009

Improved volumes and margins were said to be behind a year-on-year rise in operating income from Universal's flue-cured and Burley operations, which increased by six per cent to $190 million during the financial year to the end of March 2009. Revenues from those operations increased by more than $440 million to $2.3 billion. The North American segment of the flue-cured and Burley operations reported operating income of $48 million, up nearly 40 per cent on that of the previous year; a rise that was primarily attributable to increased volumes, sales of old crop tobacco and improved margins. North American revenues were increased by 24 per cent. Flue-cured and Burley revenues for the 'Other Regions' also grew by 24 per cent, to $1.8 billion, but operating income fell by two per cent as significant improvements in African operations were offset by the effects of currency losses, primarily in South America. In Universal's Other Tobacco Operations segment, operating income was increased by five per cent to $42 million on revenues reduced by 11 per cent. Earnings in this segment were said to have been improved on higher volumes from early shipments of dark tobacco in anticipation of the enactment of US excise tax increases, some price increases related to higher costs, and higher volumes in the company's oriental tobacco joint venture. Overall, Universal reported diluted earnings per share up by nearly 17 per cent to $4.32. The increase was said to have reflected volume increases and improved margins in most regions, along with share repurchases, partially offset by significant foreign currency related losses. Net income for fiscal year 2009, at $131.7 million, was up from $119.2 million the previous year when the performance was reduced by restructuring charges of $12.9 million from employee separation costs related to rationalizing operations in or associated with Africa and Canada, and pension curtailment charges. Revenues for fiscal year 2009, at $2.6 billion, were increased by 19 per cent compared to those of the previous financial year. The increase in revenues was primarily caused by increased leaf prices and higher volumes. In announcing the results, George C. Freeman, III, chairman, president, and CEO, said the company was "extremely pleased with the results of its operations". "Setting aside significant currency effects, we produced improved results in almost every operation of our business," he said. "It was gratifying to see the improvements in our African results after several long, lean years while we worked to wind down our unprofitable growing projects. Teamwork and execution by our African management team and their counterparts in our corporate organization have been impressive. "The currency effects in this extraordinary economic climate were dramatic, as the US dollar strengthened by 44 per cent over a six-month period against the local currency in Brazil, our single largest origin. We absorbed those costs, and with our strong operations and our financial discipline, we closed the year with an overall improvement in earnings and a strong financial position." Enditem