Influential investor Seth Klarman (Trades, Portfolio), founder of the $28.5 billion Baupost Group, has exited his position in tobacco company Alliance One International Inc. (AOI, Financial) he reported in a filing dated Oct. 31, according to GuruFocus Real Time Picks.
Klarman had held 638,364 shares of the company at last count in the second quarter, a 6.6% stake. Because it is a greater than 5% holding, it is unknown whether he sold it in the third quarter or in October. It previously occupied a 0.26% space in his concentrated portfolio of only 32 stocks, valued at $5.95 billion in total.
Alliance One International’s share price had slumped about 33% since a stock split at the end of June, closing at $15.64 on Monday after an 11.3% drop for the day.
The company grows tobacco for cigarette manufacturers and formed in 2005 as the result of a merger. In the past five years, its revenue grew at a rate of 2.2% on average annually, while EBITDA dropped at 6.7% and book value also declined at a 3.4% rate.
The company last week announced it would not report a quarterly 10-Q for the third quarter by deadline because of discrepancies in the accounts of some of its Kenyan subsidiaries it discovered while downsizing. The issue could have started in 2008 or earlier and cost an estimated $40 million in total, though it did not yet know definitively, the company said in a statement.
AOI Alliance One Tobacco, the Kenya subsidiary, has not historically contributed significantly to the company’s financial results, with operating income in the range of a $2.5 million loss to $2.4 million gain over the last five years.
In the second quarter, sales and other operating revenues increased 5.9% to $263.8 million due to increased customer demand in Asia and the timing of South American shipments. The company’s net loss totaled $22.9 million for the quarter, or $2.58 per basic share, from a net loss of $18.6 million or $212 per basic share a year earlier.
“Global markets are still in oversupply with some regions beginning to tighten. Market prices paid in U.S. dollars for suppliers’ green tobacco have again been generally lower this year, and conditions highlighted since the end of fiscal year 2014 when global oversupply was building have continued. We anticipate that oversupply will further correct through the current crop cycle,” Pieter Sikkel, president and CEO of the company said in a statement.
Alliance One International was Klarman’s only stock from the consumer defensive sector. Thirty-nine percent of his holdings are in energy, and technology and healthcare stocks are another 21% each. At third quarter-end his largest holdings were Cheniere Energy Inc. (LNG, Financial), Viasat Inc. (VSAT, Financial) and Pioneer Natural Resources Co. (PXD, Financial).
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