Universal lowers crop estimates
Universal Corporation has lowered its estimates of big-leaf tobacco production for the 2016 crop year and is now forecasting an 11 percent decline in the flue-cured harvest outside of China and a six percent decline in the Burley harvest when compared with the harvests of the 2015 crop year.
“The El Nino weather pattern has negatively impacted crop production levels in Brazil, and this weather pattern also has the potential to affect African crops,” said George C. Freeman, III, Universal’s chairman, president, and CEO, in announcing the company’s nine months results.
“We believe that production declines resulting from this weather pattern, combined with reduced plantings in some origins, will bring markets largely into balance in fiscal year 2017.
“While we are pleased to see the movement away from the oversupplied conditions that have characterized the past two years, we remain cautious in our future crop planning and contracting commitments in order to remain in alignment with the global leaf requirements of our customers.
“We continue to work with our longstanding customers to find ways to improve supply chain efficiencies in origins where such opportunities are available…”
Universal reported that its net income for the nine months to the end of December was $61.1 million, or $2.18 per diluted share, down from $68.8 million, or $2.43 per diluted share, during the same period of 2014.
For the quarter to the end of December, net income was $44.5 million, or $1.60 per diluted share, down from $53.0 million, or $1.87 per diluted share, during the quarter to the end of December 2014.
Universal reported that its uncommitted inventories, at about 14 percent, were well within its target range
“We are still expecting the current fiscal year’s lamina sales volumes to slightly exceed last year’s, however, we have a large amount of tobacco scheduled to ship in the fourth fiscal quarter,” said Freeman. “As a result, we may encounter logistical challenges that could push some of those volumes into the first fiscal quarter of 2017 as carryover crop sales.”
Meanwhile, Freeman said also that Universal’s new food ingredient facility had begun commercial production and that the company was working with customers on the extensive process of qualifying its processing plant and juice products.