Alliance Sales Down But Future Looks Brighter

Source from:  Tobacco Reporter 11/08/2010

Alliance One International's sales and other operating revenues during its second quarter, which ended on September 30, at $559.2 million, were down by 17.2 per cent on those of the second quarter of last year. Gross profit was down by 34.9 per cent to $69.5 million. Alliance reported that the decreases were mainly attributable to a fall in the quantities sold, partially offset by increased average selling prices. Processing and other revenues also decreased slightly. At the same time, inventories increased by 12.9 per cent to $1,008.3 million. Reported net income during the second quarter was $20.3 million, or $0.23 per basic share, up from the previous second quarter's net loss of $1.5 million, or $0.02 per basic share. In South America, tobacco revenue decreased by $118.1 million primarily due to a fall in the quantities sold, partially offset by improved average sales prices due to a more favorable product mix this year. The decrease in volume was mainly attributable to the timing of shipments, which occurred during the first quarter of 2010 but during the second quarter of the prior year, and the impact of Japan Tobacco Inc's initiative in Brazil. As a result, increased average sales prices were not sufficient to offset the impact of decreased volumes and gross profit fell by $25.7 million. In other regions, tobacco revenue increased by $2.2 million, mainly driven by improved average sales prices partially offset by a "minimal" decrease in the quantities sold. Although revenue increased, gross profit decreased by $11.7 million. Revenue and gross profit were negatively impacted by delays in shipping including congestion at the Beira port, Mozambique, as well as product mix and the impact of JTI's initiatives. "As I mentioned last quarter, industry dynamics would enter a volatile period while certain historical customer and supplier relationships evolve to a new business model," said CEO, Robert E. Harrison. "While we have experienced an impact of this transition, we remain very optimistic over our prospects for the future once the global effect of the financial crisis begins to abate leading to increased demand and any potential residual transition issues settle out. "The key focus of our global organization over the near term will be on effectively managing crop costs and reviewing our productivity while delivering shareholder value despite this transitional period." Enditem