Universal's Sales Down

Source from:  Tobacco Reporter 11/10/2011

Universal Corp's sales during the three months to the end of September, at $641.026 million, were down by 3.5 per cent on those of the three months to the end of September 2010. Operating income was down by 87.8 per cent to $9.713 million, mainly due to a $49.091 million charge following the loss of an appeal against European Commission fines in Italy and Spain. Net income of $51.831 million during the second quarter of last year became a net loss of $8.039 million during the second quarter of this year. Operating income for flue-cured and Burley operations declined by $9.1 million, to $61.5 million, while revenues for the group, at $602.9 million, were down by about two per cent on a combination of lower sales volumes in South America, higher volumes related to shipment timing in Asia, and the effects of local currency strengthening in Europe on US dollar translated sales. Sales during the six months to the end of September, which reflected the first quarter impact of last year's assignment of farmer contracts to Philip Morris International in Brazil, at $1,120.491 million, were down by 6.9 per cent on those of the six months to the end of September 2010. Operating income was down by 62.5 per cent to $45.226 million, while net income was down by 89.8 per cent to $7.849 million. Operating income for the flue-cured and Burley tobacco operations, at $88.0 million, was down from $106.6 million on lower margins in most regions, while revenues of $1.0 billion were down by 5.7 per cent. "Despite the effects on current year earnings of the rejection of our European Commission fine appeal, we are doing well in a very difficult market," said George C. Freeman, III, chairman, president, and CEO. "As the year is developing, the slow early season sales have been picking up. Although it is too early to indicate a correction, selling activity began to accelerate in the second quarter of the fiscal year. The increase in activity came after prices declined at both the farm and the dealer level. Today, lower margins appear to be largely due to the normal effects of a market correction in our business. Shipments are later this year in Brazil and Africa. "I am pleased to see the increase in selling activity since the end of the first fiscal quarter, and I am proud of our team's success in managing uncommitted inventory levels. That is one of the ways that we guard our financial resources to enable us to grow when we have opportunities. It also allows us to reward our shareholders as we have with our 41st consecutive annual dividend increase, which we announced today. "Most importantly, our customer relationships remain strong, and we continue to focus on keeping costs low by maximizing efficiencies in our procurement and production processes while supporting the core of our successful operation - sustainable tobacco production." Enditem