Universal Corp.’s net income during the first quarter to the end of June was $0.7 million, down from $58.3 million during the first quarter of last year.
Net income during the first quarter of last year included a gain of $81.6 million before tax ($53.1 million after tax) resulting from a favorable outcome of litigation by the company’s operating subsidiary in Brazil and related to previous years’ excise tax credits. Excluding that non-recurring gain, first quarter net income this year was down by $4.5 million.
Revenues for the first quarter of fiscal year 2015 of $271.5 million were down by 37.4 percent on a combination of lower volumes due to the later receipt of shipment instructions from customers and lower average prices.
“Our first quarter of fiscal year 2015 has been heavily influenced by lower volumes that are a result of typical oversupply market patterns, including a slow start in Brazil and later timing of customer orders and current crop shipments,” said George C. Freeman, III, chairman, president, and CEO. “In recent years, we have completed most of our shipments by the end of our fiscal year, reducing first quarter volumes from carryover crop shipments. Given this shift and the oversupply conditions, our reduced volumes in the first fiscal quarter were expected this year. A predominance of our shipments should occur in the second half of the fiscal year.
“Overall, customer orders are in line with our expectations, and based upon the current backlog of shipments, we anticipate that volumes for fiscal year 2015 will not be materially different from those of last year, barring any unexpected logistical challenges.
“Due to the current season’s production oversupply, we continue to take a measured approach to the remainder of fiscal year 2015. Markets have been developing slowly in some origins as customers have been monitoring market conditions while evaluating their leaf needs and inventory durations, and shipping has been progressing at a slower pace than normal.
“At the same time, we have been very deliberate in our purchases, making reductions where possible, and we are working to minimize uncommitted inventories, which at the end of June 2014 were within our normal range.
“We are not seeing the market pricing volatility that depressed margins in South America last year, and green leaf prices have declined this year in most origins. “Although it is very early, the current production outlook for next year’s crops indicates that leaf production will also decline, consistent with market correction patterns.”