AOI reports nine-month results
Alliance One International (AOI) today announced results for the nine months ended Dec. 31, 2015.
Gross profit as a percentage of sales improved for the nine months from 12.5 percent to 13 percent, primarily due to the result of net currency impacts on sales and costs related to foreign currency devaluation versus the U.S. dollar, as well as product mix.
Selling, general and administrative expenses decreased 18.1 percent to $87 million mainly related to lower reserves for customer receivables, decreased compensation costs resulting from headcount reduction, reduced travel costs, and favorable currency movement impacts. This year includes $1.8 million of legal and professional costs related to a Kenyan investigation.
Global restructuring and efficiency improvement initiatives commenced March 2015 are on track to exceed $35 million of anticipated end-state recurring annualized savings with approximately 95 percent of targeted actions enacted.
Sales decreased 12.2 percent to $1.17 billion primarily due to lower green prices.
“While the slow start to purchasing this year has continued to affect shipment and sales volumes through the first three quarters, we are pleased to see steadily improving operating income in our Other Regions segment as the impact of our global footprint rationalization, cost reduction initiatives and some reversal of partial vertical integration strategies by certain customers are starting to show results,” said Pieter Sikkel, AOI’s CEO and president.
“Despite the continued expectation of full service sales volume increases this year, there are several significant key offsetting factors that impacted consolidated sales and profitability. These include the strong U.S. dollar and weather-related reduced crop sizes in the United States. Smaller U.S. crops resulted in decreased processing volumes and sales, as well as increased costs per unit.
“We believe that global oversupply is continuing to correct and that the fourth quarter, as anticipated, will be the largest sales and profit quarter this fiscal year based on later crop timing and associated sales versus last year. We are currently closing our fiscal year 2016 books and expect sales of approximately $1.9 billion and adjusted EBITDA similar to the prior year.
“Our comprehensive global restructuring program that began in the fourth quarter last year is continuing to reduce our cost structure and further optimize our global footprint. Improvements to our global footprint include rationalizing underperforming markets and maximizing core markets where we have made investments. Our results are beginning to show the impact of these initiatives with approximately 95 percent of targeted actions taken and over $35 million of anticipated end-state recurring annualized savings on track.
“As previously reported in connection with the restructuring program we decided to exit green leaf sourcing in the Kenyan market and in implementing such initiative discovered improper accounting issues at our Kenyan operation. As a result, we promptly engaged a third party investigator who determined that improper accounting occurred at our Kenyan entity resulting in approximately $50.8 million of discrepancies, mainly in inventory and accounts receivable that stretches back to at least 2008.
“We have now restated our financial results for fiscal years 2012 through 2015 and for the first quarter of fiscal year 2016. Those we believe are responsible no longer work for the company and we are working with investigators to hold such individuals accountable, while working with our global insurers to seek remedies where available. Additionally, the investigation assessed other country operations and concluded that no similar issues to those discovered in Kenya exist elsewhere within the company’s global footprint. As a result of these findings, we have enhanced our global control environment to best position our operations to prevent this type of problem in the future.
“Global crop production volumes are decreasing as a result of El Nino and lower prices paid to our suppliers in many markets over the last two crops. Supply is moving towards manufacturers’ requirements and we anticipate this next year may result in improved supply and demand balance with further opportunities to reduce uncommitted inventory levels.
“Our commitment to sustainability, good agricultural practices and improvement in family farm income are central to both our short-term and long-term planning. Our customers’ focus on sustainable, efficient supply chain management provides opportunity to grow and enhance our results that should improve shareholder value.”