Sales Increasing After Weaker First Quarter

Source from:  Tobacco Reporter 08/08/2011

Universal Corp's net income for the first quarter of fiscal year 2012, which ended on June 30, at $15.9 million, or $0.52 per diluted share, was down by about 37 per cent on that of the first quarter of fiscal 2011, $25.3 million, or $0.87 per diluted share. The company's chairman, president and CEO, George C. Freeman, III, said that so far the year had unfolded as had been expected. "We expected pressure on comparisons of this quarter against the strong results we achieved in the same period last year," he said. "We also expected a slow start to the season, which is typical in a cycle of oversupply as customers and farmers alike delay action to evaluate how the market develops; and we have seen that in some areas. We are managing that process well. "We are also seeing the effects in Brazil of reduced sales of leaf due to the assignment of some of our farmer contracts to a subsidiary of Philip Morris International last year. We believe that the entire impact of those reduced sales has been reflected in our first quarter. "We continue to sell leaf to Philip Morris International from Brazil. We have also agreed to process leaf for them there." Freeman went on to say that, despite these challenges, Universal was pleased with its success to date in managing crop purchases and customer requirements and believed that it was well-positioned to avoid excessive uncommitted stock levels throughout the season. "Although levels of uncommitted inventory are up in both absolute and relative terms, we are beginning to see them decline in some areas as the trading season develops in the second fiscal quarter. In fact, sales activity has increased through July and remains at a brisk pace, and we are having good results in strengthening relationships with customers - both new and old. "We continue to make progress as well on our restructuring programs in several regions, to further reduce operating cost structures where necessary." Meanwhile, operating income for the company's flue-cured and Burley tobacco operations decreased by 26 per cent to $26.5 million, while revenues for those operations declined by 10 per cent to $417 million. Enditem