RICHMOND, Va., May 22, 2024 /PRNewswire/ -- George C. Freeman, III, Chairman, President, and Chief Executive Officer of Universal Corporation (NYSE:UVV), stated, "Universal Corporation had a positive finish to a strong fiscal year 2024 with notable financial and operational performance in both the fiscal year and quarter ended March 31, 2024. Fiscal year 2024 was an exceptional year for our tobacco business, as a favorable product mix, strong customer demand, and the sale of larger crops in Africa, compared to fiscal year 2023, drove our strong operating results. Fiscal year 2024 was also a significant building year for our ingredients business. We made important progress with our state-of-the-art expansion project, and we continued to invest in Universal Ingredients' commercial sales team and research and development function. We also made advances in fiscal year 2024 towards our sustainability goals by entering agreements that move us closer to our operational emissions targets and by making continued progress towards our social supply chain targets. "Turning to current tobacco market conditions, while we expect leaf tobacco supply and demand to return to a more balanced position over time, we are currently seeing very tight tobacco supply and elevated green tobacco prices. We continue to leverage our diverse global footprint and financial flexibility to manage these conditions and to execute our tobacco strategies. For example, during the fourth quarter of fiscal year 2024 and into the first quarter of fiscal year 2025, we accelerated buying in Brazil to ensure access to the tobacco we need for our customers. This accelerated buying, combined with higher green tobacco prices, resulted in increased use of working capital and higher debt levels at March 31, 2024. We expect most of the net impact on working capital from our accelerated buying strategy to naturally unwind over the next two years. In addition, we remain committed to supporting our tobacco business while efficiently managing working capital and reducing leverage levels. "In our ingredients business, the expansion project at our Lancaster manufacturing facility is progressing as expected, and we anticipate the facility to be fully operational in the second half of fiscal year 2025. We are excited about this unique project as it will significantly expand our processing capabilities, including aseptic packaging, and enable us to considerably grow our product portfolio and supply existing and new customers with additional products. This project is expected to contribute meaningfully to the results of our Ingredients Operations segment in fiscal year 2026. "Our vision for our ingredients business is to be a provider of a complete, innovative suite of solutions and value-add products. We believe our investments in our Universal Ingredients platform's commercial sales team and research and development function support our vision and will deliver value over time. During fiscal year 2024, we entered several new partnerships to supply innovative products that capitalize on our newly developed capabilities and portfolio across our three ingredients companies. Those new customer relationships and new product sales benefited our ingredients business by helping offset lower revenues from sales in fiscal year 2024 due to inventory recalibrations by existing customers and lower sales prices due to lower raw material prices. Earnings in fiscal year 2024, however, were below expectations due to higher costs related to our infrastructure investments, lower new crop raw material prices, inventory write-downs, and customer inventory recalibrations. We expect our new product sales to increase and contribute to our future earnings. "Going into fiscal year 2025, we remain steadfast in executing our strategy of maximizing tobacco opportunities while growing the ingredients business. We believe our leading market position, global footprint, and proven sustainability practices will continue to enable us to generate stable cash flow from our tobacco business. Universal Ingredients is also well positioned with its fully built platform to deliver high-quality, innovative products that drive top line growth, margin expansion, and earnings stability." FINANCIAL HIGHLIGHTS Fiscal Year Ended March 31, Change (in millions of dollars, except per share data) 2024 2023 $ % Consolidated Results Sales and other operating revenue $ 2,748.6 $ 2,569.8 $ 178.7 7 % Cost of goods sold 2,212.5 2,111.5 100.9 5 % Gross profit margin 19.50 % 17.83 % --- 167 bps Selling, general and administrative expenses 310.6 277.2 33.4 12 % Restructuring and impairment costs 3.5 — 3.5 100 % Operating income (as reported) 222.0 181.1 40.9 23 % Adjusted operating income (Non-GAAP)* 230.3 181.1 49.2 27 % Diluted earnings per share (as reported) 4.78 4.97 (0.19) (4) % Adjusted diluted earnings per share (Non-GAAP)* 5.08 3.77 1.31 35 % Segment Results Tobacco operations sales and other operating revenues $ 2,438.8 $ 2,258.3 $ 180.5 8 % Tobacco operations operating income 222.4 172.9 49.5 29 % Ingredients operations sales and other operating revenues 309.8 311.6 (1.8) (1) % Ingredients operations operating income 3.9 10.6 (6.6) (63) %      *See Reconciliation of Certain Non-GAAP Financial Measures in Other Items below Net income for the fiscal year ended March 31, 2024, was $119.6 million, or $4.78 per diluted share, compared with $124.1 million, or $4.97 per diluted share, for the fiscal year ended March 31, 2023. Excluding certain non-recurring items, as detailed in Other Items below, adjusted net income increased by $33.0 million and adjusted diluted earnings per share increased by $1.31 for the fiscal year ended March 31, 2024, compared to the fiscal year ended March 31, 2023. Operating income for fiscal year 2024 was $222.0 million, an increase of $40.9 million, compared to operating income of $181.1 million for fiscal year 2023. Adjusted operating income, detailed in Other Items below, was $230.3 million, an increase of $49.2 million for fiscal year 2024, as compared to fiscal year 2023. Net income for the quarter ended March 31, 2024, was $40.3 million, or $1.61 per diluted share, compared with $53.7 million, or $2.15 per diluted share, for the quarter ended March 31, 2023. Excluding certain non-recurring items, as detailed in Other Items below, adjusted net income and adjusted diluted earnings per share increased by $20.3 million and $0.82, respectively, for the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023. Operating income for the quarter ended March 31, 2024, was $68.2 million, an increase of $15.8 million, compared to operating income of $52.4 million for the quarter ended March 31, 2023. Adjusted operating income, detailed in Other Items below, was $73.0 million for the fourth quarter of fiscal year 2024, an increase of $20.6 million, as compared to adjusted operating income of $52.4 million for the fourth quarter of fiscal year 2023. Consolidated revenues increased by $178.7 million to $2.7 billion for fiscal year 2024, compared to fiscal year 2023. The increase was largely due to higher tobacco sales prices, which more than offset lower tobacco sales volumes, as well as an improved product mix in the Tobacco Operations segment. For the quarter ended March 31, 2024, consolidated revenues increased by $76.9 million to $770.9 million, compared to consolidated revenues of $694.0 million for the quarter ended March 31, 2023, on higher tobacco sales prices. TOBACCO OPERATIONS Revenues for the Tobacco Operations segment were $2.4 billion for fiscal year 2024, up $180.5 million compared to fiscal year 2023, on higher tobacco sales prices and a favorable product mix, partially offset by lower tobacco sales volumes. For the quarter ended March 31, 2024, revenues were $696.3 million, up $80.7 million compared to the quarter ended March 31, 2023, mainly on higher tobacco sales prices. Operating income for the Tobacco Operations segment increased by $49.5 million to $222.4 million for fiscal year 2024, compared with fiscal year 2023. Tobacco Operations segment operating income was up largely on higher tobacco sales prices and a more favorable product mix, partially offset by lower tobacco sales volumes. In fiscal year 2023, a large amount of lower margin carryover tobacco crops was shipped. Larger African crops positively impacted the results for the Tobacco Operations segment in fiscal year 2024. Carryover crop shipments from South America were significantly lower in fiscal year 2024, compared to fiscal year 2023. In fiscal year 2024, our operations in Asia saw an improved product mix, compared to fiscal year 2023. Selling, general, and administrative expenses for the Tobacco Operations segment were higher in fiscal year 2024, compared to fiscal year 2023, primarily due to higher incentive compensation and benefit costs, as well as unfavorable foreign currency comparisons and costs related to a value-added tax settlement program in Brazil. Operating income for the Tobacco Operations segment increased by $19.6 million to $73.5 million for the quarter ended March 31, 2024, compared with the quarter ended March 31, 2023. Tobacco Operations segment operating income was up largely on higher prices and a more favorable product mix. Larger African crop shipments and an improved product mix in Asia, partially offset by lower sales volumes in North and South America, contributed to the increase in operating income for the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023. Selling, general, and administrative expenses for the Tobacco Operations segment were higher in the quarter ended March 31, 2024, compared to the quarter ended March 31, 2023, primarily due to higher incentive compensation and benefit costs, as well as unfavorable foreign currency comparisons and costs related to a value-added tax settlement program in Brazil. INGREDIENTS OPERATIONS Revenues for the Ingredients Operations segment of $309.8 million for fiscal year 2024, and $74.6 million for the quarter ended March 31, 2024, were down $1.8 million and $3.8 million, respectively, compared to the same periods in the prior fiscal year, as the sales of new products partially offset lower sales prices and volumes on core products. Operating income for the Ingredients Operations segment was $4.0 million for fiscal year 2024 compared to $10.6 million for fiscal year 2023. The operating loss for the Ingredients Operations segment of $1.0 million for the quarter ended March 31, 2024, was a decrease of $1.7 million, compared to operating income for the segment of $0.7 million for the quarter ended March 31, 2023. Results for the Ingredients Operations segment for fiscal year 2024 and the quarter ended March 31, 2024, were negatively impacted by higher costs related to infrastructure investments in the ingredients platform, lower new crop raw material prices, and inventory write-downs, partially offset by margins from the sale of new products. Customer inventory recalibrations mainly in the first half of the fiscal year 2024 also negatively impacted fiscal year 2024. In the fiscal year and quarter ended March 31, 2024, selling, general, and administrative expenses were higher, compared to the same periods in fiscal year 2023, due to higher compensation and other costs largely related to our investment in expanding commercial and research and development capabilities. OTHER ITEMS Cost of goods sold in the fiscal year and quarter ended March 31, 2024, increased by 5% to $2.2 billion and by 9% to $619.9 million, respectively, compared with the fiscal year and quarter ended March 31, 2023, largely due to higher green tobacco costs. Selling, general, and administrative costs for fiscal year 2024 increased by $33.4 million to $310.6 million, compared to fiscal year 2023, primarily due to higher incentive compensation costs as well as unfavorable foreign currency comparisons and costs related to a value-added tax settlement in Brazil. Selling, general, and administrative costs for the quarter ended March 31, 2024, increased by $12.3 million to $82.7 million, compared to the same period in the prior fiscal year, largely on higher incentive compensation costs and unfavorable foreign currency comparisons as well as costs related to a value-added tax settlement program in Brazil. Interest expense for fiscal year 2024 increased by $17.0 million to $66.3 million, compared to fiscal year 2023, primarily on higher interest rates. Interest expense for the quarter ended March 31, 2024, increased by $2.1 million, compared to the quarter ended March 31, 2023, largely on higher debt balances resulting from accelerated tobacco purchases. Interest income for the quarter ended March 31, 2024, decreased by $5.2 million, compared to the quarter ended March 31, 2023, primarily on interest income associated with a favorably resolved tax judgement at a subsidiary in the quarter ended March 31, 2023. For the fiscal year and quarter ended March 31, 2024, our effective tax rate on pre-tax income was 19.0% and 17.3%, respectively. For the fiscal year and quarter ended March 31, 2023, our effective tax rate on pre-tax income was 8.3% and a benefit of 22.8%, respectively. In fiscal year 2023, one of our subsidiaries in Brazil received a favorable final judgement from the Brazilian Superior Court of Justice. The lawsuit asserted certain tax credits on exported goods should be excluded from taxable income. The Brazilian revenue authority asserted certain tax credits generated on purchased goods and services that were ultimately exported from Brazil should be included in the calculation of taxable income. The Brazilian Superior Court of Justice affirmed the tax credits are non-taxable in accordance with the historical and existing tax legislation in Brazil. The ruling resulted in recognition of $26.6 million of Brazilian tax credits due to the recalculation of federal income taxes in Brazil for years 2015 through 2022. The net income tax benefit was partially offset by a $2.4 million income tax provision for U.S. federal income taxes. The ruling resulted in a net income tax benefit of $24.2 million for the fiscal year and quarter ended March 31, 2023. The affirmative ruling also resulted in recognition of $5.0 million of interest income for the fiscal year and quarter ended March 31, 2023. Without this interest income and income tax benefit, the consolidated effective tax rate for the quarter ended March 31, 2023, would have been approximately 33.4%. In the fiscal year ended March 31, 2023, we sold our idled Tanzania operations and recognized $1.1 million of income taxes. Without this item and the favorable judgement in Brazil discussed above, the consolidated effective income tax rate for the fiscal year ended March 31, 2023, would have been approximately 25.5%. Additionally, the sale of our idled Tanzania operations resulted in a $1.8 million reduction to consolidated interest expense related to an uncertain tax position. SUSTAINABILITY  In fiscal year 2024, Universal continued making progress towards our sustainability goals. We made progress towards our operational emissions targets. We also entered into a virtual power purchase agreement, which will generate renewable electricity equal to our North American footprint beginning in 2026, and entered into an emission reduction agreement expected to provide benefits to tobacco growing areas in the Philippines, which will offset a portion of our emissions in Asia beginning in 2025. We continued monitoring our social supply chain targets, and for the second year in a row, substantially met our personal protective equipment distribution, farm labor accommodation, child labor elimination, and farm labor payment goals for our contracted tobacco growers. Reconciliation of Certain Non-GAAP Financial Measures The following tables set forth certain non-recurring items included in reported results to reconcile adjusted operating income to consolidated operating income and adjusted net income to net income attributable to Universal Corporation: Adjusted Operating Income Reconciliation Three Months Ended March 31, Fiscal Year Ended March 31, (in thousands) 2024 2023 2024 2023 As Reported: Consolidated operating income $ 68,198 $ 52,394 $ 222,009 $ 181,072 Value-added tax settlement costs(1) 4,754 — 4,754 — Restructuring and impairment costs(2) — — 3,523 — Adjusted operating income (Non-GAAP) $ 72,952 $ 52,394 $ 230,286 $ 181,072 Adjusted Net Income and Adjusted Diluted Earnings Per Share Reconciliation Three Months Ended March 31, Fiscal Year Ended March 31, (in thousands except for per share amounts) 2024 2023 2024 2023 As Reported: Net income attributable to Universal Corporation $ 40,318 $ 53,707 $ 119,598 $ 124,052 Value-added tax settlement costs(1) 4,754 — 4,754 — Restructuring and impairment costs(2) — — 3,523 — Interest expense for value-added tax settlement(1) 245 — 245 — Interest income related to a final income tax rulings(3) — (4,980) — (4,980) Interest expense reversal on uncertain tax position from sale of operations in Tanzania — — — (1,816) Total of Non-GAAP adjustments to income before income taxes 4,999 (4,980) 8,522 (6,796) Income tax benefit on final tax ruling(3) (24,256) — (24,256) Income tax expense from sale of operations in Tanzania — — — 1,132 Income tax benefit from Non-GAAP adjustments to income before income taxes(1)(4) (498) — (1,010) — Total of income tax impacts for Non-GAAP adjustments to income before income taxes (498) (24,256) (1,010) (23,124)