Universal Doubles Income But Warns on JT Volumes

Source from:  Tobacco Reporter 08/06/2009

Universal Corporation's net income for its first quarter to the end of June, at $43.7 million, was up by 107 per cent on that of the first quarter of last year, $21.1 million. Net income by diluted share, at $1.47, was up by 130 per cent. Revenues were up by 22 per cent to $616 million and operating income increased by 83 per cent to $70 million. In announcing the results, George C. Freeman, III, chairman, president, and CEO, said the increases in net income and revenue had been primarily the result of earlier shipments of tobacco this year and a more favorable product mix. "We are very pleased with our performance during the first quarter," said Freeman. "Each of our operations performed as we had expected or better. Earlier shipments of Brazilian and European tobacco boosted our results, and leaf costs were lower due to the stronger US dollar. "Looking at the current worldwide situation, we see the US dollar beginning to weaken again, which could increase costs as we enter the next purchasing season. We will be monitoring these factors as the year progresses, and we will be working to control our costs. "We do not foresee any oversupply of flue-cured tobacco in the coming year. Global Burley availability improved after the shortage of filler style crops two years ago, and there is a large crop again this year. So it is likely that we will see some oversupply of Burley. "Worldwide dealer inventories for flue-cured and Burley tobacco are about 70 million kg compared to about 80 million kg last year." Freeman then turned his attention to one of Universal's biggest customers, Japan Tobacco Inc, which recently announced steps to enhance its direct leaf procurement capabilities by acquiring and entering joint ventures with smaller leaf merchants. "They enumerated several factors that prompted their moves, including the desire to enhance internal expertise in leaf procurement, actively manage the leaf supply chain, and work more directly with tobacco growers," he said. "Over time, these steps are likely to reduce our volumes with them in the United States, and may affect other regions as well. However, the overall impact and timing cannot yet be determined. We are continuing our dialogue with Japan Tobacco and believe that we will continue our long-term relationship." Enditem