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Universal Corp. Reports Operating Results (10-Q)

November 06, 2012 | About:
10qk

10qk

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Universal Corp. (UVV) filed Quarterly Report for the period ended 2012-09-30.

Universal Corporation has a market cap of $1.16 billion; its shares were traded at around $50.34 with a P/E ratio of 10 and P/S ratio of 0.5. The dividend yield of Universal Corporation stocks is 4%. Universal Corporation had an annual average earning growth of 13.2% over the past 10 years.

Highlight of Business Operations:

We generally do not purchase material quantities of tobacco on a speculative basis. The majority of our inventories are not considered to be at risk as they are committed for sale to customers. At September 30, 2012, our uncommitted inventories were $93 million, or about 10% of total tobacco inventory, compared to $143 million, or about 21% of our March 31, 2012 inventory, and $135 million, or about 14% of our September 30, 2011 inventory. Our uncommitted inventories at September 30, 2012, were at very low levels for our business and reflect fiscal year 2012 leaf sales in our North America segment that have depleted uncommitted inventories there, as well as the smaller crops in South America and several African origins.

Segment operating income, which excludes those unusual items, was $122.7 million, an increase of 34%, for the six-month period and $78.5 million, an increase of 27%, for the quarter ended September 30, 2012, on larger volumes due in part to shipment timing. Operating results in both periods also included a $7.8 million increase in dividend income from unconsolidated subsidiaries. Revenues increased by 1% to $1.1 billion for the first half of fiscal year 2013, and by 5% to $675.2 million for the three months ended September 30, 2012, mostly as a result of higher volumes influenced by accelerated shipments in the second quarter of fiscal year 2013, sales from uncommitted inventories, and carryover shipments in the first quarter from last year's large crops.

Earnings for the Other Regions segment were $108.8 million, an increase of about 41% from last fiscal year's first half earnings of $77.4 million. The improvement was driven primarily by higher sales volumes in South America and Africa, mainly as a result of accelerated shipment timing in some origins, as well as carryover shipments, compared to slower deliveries last year. Those results were partly offset by decreased earnings in Europe on reduced volumes, the translation effects of weaker local currencies against the U.S. dollar, and the absence of last year's insurance recoveries. Selling, general, and administrative expenses for the segment were lower, mostly due to currency remeasurement and exchange gains. In addition, segment results benefited from a $7.8 million increase in dividend income from unconsolidated subsidiaries. Revenues for this segment were up by about 2% to $909.5 million, reflecting increased overall leaf volumes, offset in part by reduced average prices largely as a result of carryover shipments of lower priced African tobaccos. In the North America segment, operating income of $4.5 million decreased by $6.1 million compared with the previous year. Decreased volumes due to shipment delays in Central America and fewer old crop trading and carryover sales were partly mitigated by lower U.S. fixed factory costs. Revenues for this segment were down by 5% to $119.9 million on those volume declines.

In the second quarter of fiscal year 2013, operating income for flue-cured and burley operations increased by $16.0 million to $77.5 million, compared to the same period last fiscal year. Revenues for the group at $631.4 million were up about 5%, on higher volumes. Operating income for the Other Regions segment improved by 31% to $73.9 million compared with the prior year, due primarily to earlier shipments in Africa and South America and sales of carryover crops in Brazil. Selling, general, and administrative expenses for the segment were down slightly for the quarter. Revenues for the Other Regions segment increased by 7% to $572.0 million mainly as a result of the higher volumes mentioned above. Operating income for the North America segment of $3.6 million was down by $1.5 million, as benefits from lower fixed factory costs in the U.S. were outweighed by fewer domestic old crop sales as well as shipment delays and lower results in Central America. Those volume reductions also reduced revenues for this segment, which declined by 12% to $59.4 million.

The Other Tobacco Operations segment operating income improved by $6.1 million to $9.3 million for the six months ended September 30, 2012, compared with the same period for the previous fiscal year. Results for the dark tobacco business improved owing mainly to recovery in the Indonesian operations after weather-related crop shortages affected last fiscal year's comparable results. The oriental joint venture experienced larger volumes on earlier shipments in the first quarter of fiscal year 2013, and also benefited from lower operating expenses attributable to the effects of a stronger U.S. dollar. Segment operating income for the second quarter of fiscal year 2013 was $1.0 million, an increase of $0.5 million compared with the prior year, as dark tobacco volume improvements were partly offset by volume reductions due to shipment timing in the oriental joint venture. Revenues for this segment increased for the second quarter of fiscal year 2013 by 15%, to $43.8 million, mostly related to the higher sales for the Indonesian market. Revenues were also up $6.9 million to $107.2 million for the first half fiscal year 2013, primarily attributable to the timing of shipments of oriental tobaccos into the United States.

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