AOI planning ‘comprehensive global restructuring’
In announcing yesterday its third quarter results to the end of December, Alliance One International’s CEO and president, Pieter Sikkel, said that the company was planning a comprehensive global restructuring program to position it better for the future.
The restructuring program would start during the fourth quarter and be completed over18 months.
‘As part of the plan we will look to further improve efficiencies in our operations around the world, continue to reduce our cost structure and optimize our global footprint,’ said Sikkel. ‘Improvements to our global footprint will include rationalizing certain markets that are not meeting performance metrics and do not represent strong future opportunities, while maximizing core markets where investments have been made over the past four years.
‘We are starting to see crop production volumes decrease in line with manufacturers’ requirements for global crops that should better balance supply with demand in the future. We will continue to monitor industry conditions that have impacted some of our customers’ volumes, as we execute on plans to make our operations more efficient, provide additional value-added services and reduce sourcing complexity…’
During the third quarter, AOI’s total sales and other operating revenues decreased by 25.3 percent to $488.9 million, primarily due to a 21.9 percent decrease in full service volumes.
Reduced volumes were said to have been due mainly to the delayed timing of shipments from Africa and North America, the deconsolidation of a Brazilian subsidiary following completion of a joint venture in March 2014, less favorable weather conditions in some sourcing markets and the impact of tobacco oversupply in the global market.
‘As a result of the oversupply, prices paid to tobacco suppliers in Brazil and Africa were lower this year, which reduced our average sale prices and tobacco costs on a per kilo basis,’ AOI said in a note posted on its website. ‘Also reducing average sale prices and tobacco costs per kilo was the impact of product and customer mix in Asia and Africa.
‘Processing revenue and cost of services increases were mainly related to a larger US flue cured crop this year that led to increased customer requirements.
‘Primarily the result of lower volumes, gross profit decreased 16.8 percent to $69.7 million.
‘As a result of customer and product mix in Africa and Asia, as well as lower conversion costs in North America due to the larger US flue cured crop this year, our gross profit as a percentage of sales improved from 12.8 percent to 14.3 percent.