Alliance One International’s CEO and president, Pieter Sikkel, said on Monday that the company’s fiscal year 2015 volume and sales were impacted by global oversupply as a result of customers modifying their inventory positions in response to reduced consumer demand in some markets during the past 36 months.
Global oversupply appeared now to be moving back towards equilibrium with reduced crop sizes planned and market pricing to suppliers that reflected the oversupply imbalance.
Later in his presentation of the company’s fourth-quarter and full-year results, Sikkel said it would likely take another crop cycle to achieve equilibrium or undersupply in certain qualities, though the market had begun to tighten in certain origins. “We will continue to monitor our customers’ requirements as we further strengthen our operations, improve our global footprint and move further up the supply chain to meet our customers’ evolving sourcing parameters and simplification strategies,” he said.
“Partial vertical integration strategies by some manufactures are beginning to reverse as the efficiency benefits and costs savings of further leveraging compliant leaf merchants’ capabilities are presenting opportunities for growth.
“We will continue to focus on enhancing best agricultural practices globally and further improving sustainability programs essential to our company and customers.”
Sikkel said he was “really pleased” with the performance the company’s global team had achieved through fiscal year 2015 under challenging trading conditions.
“Important to full year results, our fourth quarter sales improved 19.9 percent to $738.1 million versus last year and was the second best quarter in the company’s history,” he said.
“Adjusted EBITDA improved 188.5 percent to $59.3 million or 8.0 percent of sales.
“For the year, sales decreased 12.3 percent to $2,065.9 million, while adjusted EBITDA improved 9.8 percent to $173.2 million and was 8.4 percent of sales with improved total debt less cash divided by adjusted EBITDA of 5.36x.”
Sikkel reported that phase one of Alliance’s restructuring and efficiency improvement program that was started in March was on track to deliver between $30.0 million and $35.0 million of recurring annualized savings with 75.0 percent to 80.0 percent of the actions targeted enacted by the end of September 2015.
“In addition to reducing our cost structure, we plan to further optimize our global footprint including rationalizing certain markets that are neither meeting internal performance expectations nor part of our customers’ future planning, while improving core markets where we have invested,” he said.
“Our internal forecasts anticipate improved sales and adjusted EBITDA for next fiscal year compared to fiscal 2015, and consistent with trends over the last several years, we are forecasting increased sales and profit levels in the second half of fiscal year 2016 versus the first half of the year.
“Additionally, following four years of significant investment in our operations, we are targeting approximately $19.7 million of capital expenditures in fiscal year 2016, principally for maintenance purposes.”