Alliance Reports 2Q Loss But Fiscal Year on Track

Source from:  Tobacco Reporter 11/07/2011

Alliance One International reported a net loss of $3.7 million, or $0.04 per basic share for the second quarter ended September 30, compared with net income of $20.3 million, or $0.23 per basic share, during the second quarter of last year. Last years' results included $18.1 million of gains attributable to a one-off sale of farmer contracts to a Brazilian subsidiary of Philip Morris International. And income tax increased from a $0.5 million benefit last year to a $16.3 million expense this year. Sales and other operating revenues decreased by eight per cent to $514.5 million. The decrease was said to have been mainly due to reduced full service sales to PMI following implementation of its partial vertical integration strategy in Brazil, lower green tobacco costs for the current crop that were passed on to customers, and transportation shortages in Africa that have delayed the processing season and shipping. At the same time, the total volume of tobacco sold, including both full service business and third party processed volumes, increased year on year, though, as expected, full service volumes declined. Although revenues declined and depreciation expenses increased due to new efficiency enhancing factories and equipment, gross profit increased slightly and gross profit as a percentage of sales improved from 12.4 per cent to 13.8 per cent primarily due to product mix and efficiency improvements. Operating income decreased by $9.0 million to $37.0 million and pre-tax income decreased by $7.1 million to $11.3 million. For the six months ended September 30, the company reported a net loss of $2.4 million, or $0.03 per basic share, compared with net income of $34.1 million or $0.38 per basic share during the same period of the previous fiscal year. In announcing the results, CEO, Mark W. Kehaya, said in part that fiscal year 2012 was on track and that the company should deliver improved revenue and profitability from operations for the full year when compared to last year, on the back of increased volumes in its third and fourth fiscal quarters. "Consistent with our indications last quarter, there is further evidence that global oversupply may be shifting towards equilibrium, with farmers currently planting reduced crop sizes in a number of regions based on recent pricing," he said. "While our global inventories increased $53.6 million versus last year to $1,061.8 million, the percentage of uncommitted inventory to total inventory has decreased and is inside of the higher end of our target uncommitted range. "As global supply and demand moves towards equilibrium, we believe that we are well positioned to meet our customers' requirements based on a developed global agronomy team that supports farmers we have contracted or will buy from at auctions in key markets. "Importantly, efficiency improvements are gaining traction and are helping to achieve our goal of becoming the lowest cost producer in various locales where we operate. "We are focused on our customers' needs, deploying capital where they see value and implementing measures to minimize costs where they do not. "Factory investment to reduce operating expenses, as well as further investment in grower sustainability, social responsibility and farmer agronomy programs are key focus areas." Enditem