Universal Corp (UVV) 2014 Q4 法說會逐字稿

Good evening. My name is Alicia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Corporation FY14 results conference call.

(Operator Instructions)

Ms. Formacek, you may begin your conference.

Thank you, Alicia. Thank you all for joining us. George Freeman, our Chairman, President and CEO; and David Moore, our Chief Financial Officer, are here with me today. They will join me in answering questions after these brief remarks.

This call is being webcast live and will be available on our website and on telephone taped replay. It will remain on our website through August 19, 2014. If you are listening to this call after that date or if you are reading the transcription, we have not authorized such recording or transcription. It has been made available to you without our permission, review or approval.

We take no responsibility for such presentations. Any transcription inaccuracies or omissions or failure to present available updates are the responsibility of the party who is providing it to you.

Before I begin to discuss our results, I caution you that we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future. For information on some of the factors that can affect our estimates, I urge you to read our 10-K for the year ended March 31, 2013, as well as our form 10-K for the fiscal year ended March 31, 2014, which we expect will be filed with the SEC later this week. The factors that can affect our estimates include such things as customer mandated timing of shipments, weather conditions, political and economic environment, changes in currency, industry consolidation and evolution and changes in market structure or sources.

Finally, some of the information I have for you today is based on unaudited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may include non-GAAP financial measures. For details on these measures, including reconciliations to the most comparable GAAP measures, please refer to our FY14 earnings press release.

Net income for the fiscal year ended March 31, 2014 was $149 million, or $5.25 per share, compared with $132.8 million, or $4.66 per share for the same period last year. Those results included the Brazilian tax credit litigation gain of $1.87 per share and restructuring costs of $0.15 per share for FY14, as well as restructuring costs of $0.06 per share for 2013. Total segment operating income of $175.2 million for FY14 declined $57.6 million from the prior year, mainly attributable to lower results for the Other Regions segments.

Net income of $26.7 million, or $0.94 per share for the fourth fiscal quarter was higher, compared with net income for the prior year's fourth quarter of $26.1 million or $0.92 per share. Those results included restructuring cost of $0.04 and $0.01 per share, for 2014 and 2013 respectively. Segment operating income for the quarter of $44.9 million was down $2.1 million compared to the previous year, as improved results in the Other Regions segment were offset by declines for the North America and other tobacco operations segment.

Revenues for the fiscal year and fourth quarter 2014 were up about 3% and 7% respectively, as slightly lower volumes were offset by higher prices. We performed well in the face of a challenging environment this year, and our underlying business and customer relationships remain strong.

Given the larger crops this year, shipping volumes in the second half of FY14 exceeded those in the comparable period last year. These increased volumes partially offset lower levels of carryover volumes in the first half of the year, weaker margins in Brazil and negative foreign currency remeasurement and exchange loss comparisons this year.

Now, turning to the segment detail, in the Other Regions segment, full-year segment operating income of $133.4 million was down 31%, mainly influenced by factors that we have been discussing this year: fewer carryover shipments and weaker margins in South America from higher green leaf prices; and higher selling, general and administrative cost from negative currency remeasurement; and exchange comparisons in Africa, South America and Asia. These factors drove the decline despite higher volumes for the year in Africa and Asia.

Segment operating income of $30.7 million was up, however, by 25% for the fourth fiscal quarter, as those higher shipments from the larger current crops in Africa and stronger trading volumes in Asia more than offset decline in South America. North America segment operating income of $23.2 million increased to $3.5 million for the year on a more favorable product mix and reduced overheads, including post retirement benefit cost. However, operating results of $4.6 million declined for the fourth quarter on lower volumes, due to shipment timing comparisons in Central America and weather-related processing yield reductions in North America.

Other tobacco operations segment operating income was down $2 million for FY14 and $2.7 million for the fourth quarter mainly from declines for the Oriental joint venture. Operating results for FY14 for both the Oriental joint venture and the dark tobacco operations reflected underlying business improvements, which were negatively impacted by devaluation of local currencies.

Our higher working capital cash requirements this year were sharp contrast to the returns of working capital seen in FY13 when we had the advantage of sales of uncommitted inventory and large carryover crops that increased cash flows. In FY14, purchases of larger crops, tighter margins in Brazil from higher green leaf costs and investments in production growth in Africa utilized much of the substantial levels of cash flow from the previous fiscal year. Despite these requirements, we maintained our strong financial position this year by reducing debt by $80 million and continued to reward our shareholders with more than $75 million in dividends and share repurchases.

Looking ahead, margins in FY14 were affected by volatile Brazilian leaf markets. This has not been a factor in the current crop season. This year the Brazilian season has begun slowly with delayed sales and purchases as farmers and customers monitor market developments. Production volumes there are similar to last year's crop, and the flue-cured crop quality is lower than average. Our uncommitted inventories were higher at March 31, 2014 due in part to the slow start to the selling season in Brazil.

In Africa, the markets have opened at a normal pace, and there are production volume increases in certain origins. At the same time, due to declines in the US and Western European retail cigarette sales, we may see some reductions in purchases of certain styles of tobacco as customers adjust their inventory duration. Given the increased production and potential customer inventory adjustments, we expect an oversupply of tobacco in FY15, which may lead to lower leaf prices that typify such a cycle.

Our strategy remains focused on efficiently managing our business, meeting our customers' and suppliers' evolving needs and returning value to our shareholders. We continue to invest in opportunities to improve our business and to promote sustainable, compliant leaf production. Our long-term outlook for Africa remains strong, consistent with our ongoing investment to both expand production this year in Mozambique to serve our customers' requirements, and to enhance production efficiency in several other African origins.

We also continue to seek out growth opportunities to enhance our Company's value and help to sustain tobacco growers. Last month we announced our new food ingredient business which is not only an attractive business opportunity, but provides tobacco growers with a new market for sweet potatoes, which are often grown in rotation with tobacco.

We are excited about our future and believe that we are well-positioned to manage the cycles inherent in our industry while successfully executing on our strategy. At this time, we are available to take your questions.

(Operator Instructions)

There are no questions at this time.

Thank you very much.

This concludes today's conference call. You may now disconnect.