Universal Pleased With Results

Source from:  Tobacco Reporter 02/11/2011

Universal Corp. reported net income for the third fiscal quarter, which ended Dec. 31, 2010, of $52.3 million, up 14 percent over last year's net income of $45.7 million. Solid operating performance in flue-cured and burley leaf tobacco operations offset declines in the Other Tobacco Operations segment, producing an improvement in earnings compared to the prior year's results. Revenues for the quarter increased about 4 percent to $688.2 million reflecting a higher proportion of lamina sales and higher green leaf prices. During the third quarter, Universal completed the assignment of tobacco production contracts with approximately 8,100 farmers in Brazil, along with the sale of related assets, to a subsidiary of Philip Morris International and recorded a net gain of $19.4 million before taxes. In addition, the results for the quarter include combined restructuring and impairment charges of $11 million before taxes, related primarily to the planned closure and sale of related assets of the company's processing facility in Simcoe, Ontario. For the nine months ended Dec. 31, net income was $129.4 million, compared with last year's net income of $142 million for the same period. Revenues for the nine months of about $1.9 billion were level with the prior year. In addition to the gain on the PMI transaction in Brazil, results for the nine months also include restructuring and impairment charges of $14 million before taxes and income of $7.4 million before taxes for the second quarter reversal of a portion of a previously recorded European Commission fine due to a favorable court ruling. "Our operations continue to perform well although comparisons to the prior year are difficult given the record results that were achieved last year," said George C. Freeman, III, chairman, president, and chief executive officer of Universal. "Although transportation challenges remain, some of the shipments that were delayed due to logistical difficulties earlier in the year have been completed, with the remainder on track to be completed by fiscal year end. Except for the effect of the PMI transactions in Brazil, which will begin to impact operations next year, our comparisons this year reflect the majority of the impact of recent customer vertical integration efforts, and we continue to have some success in securing additional sales to replace lost volumes. We are working to make sure that we adjust our operations to accurately reflect these and other business changes and are committed to managing prudently our costs as well as our cash flow. Many of our global restructuring plans are already underway. We extend our sincere thanks to the current and past employees of our Simcoe Leaf organization in Canada. They delivered quality products and provided excellent customer service for decades, but market realities eventually prevailed. These types of decisions are never easy as they involve the livelihoods of valued co-workers, but they are necessary to allow us to adapt profitably and effectively to changes in our markets and in our customers' sourcing requirements. "Looking forward, we continue to believe that global leaf markets are moving into oversupply. We continue our efforts to stabilize markets by working closely with both farmers and customers to carefully plan for crop requirements. At the same time, we are actively managing our uncommitted inventory levels, which remain reasonable at 12 percent of total inventories at the end of December 2010. There are many challenges underway in the global economy as well as in our industry, and we are pleased with the results we are achieving in this environment." Enditem