Universal Corporation (NYSE:UVV) Q3 2016 Earnings Conference Call - Final Transcript

Feb 03, 2016 • 05:00 pm ET

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Universal Corporation (NYSE:UVV) Q3 2016 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And we'll pause for just a moment. Your first question is from Ann Gurkin from Davenport.

Analyst
Ann Gurkin

Hello everyone.

Executive
Candace Formacek

Hi, Ann.

Analyst
Ann Gurkin

Fine, congratulations on the impressive margin improvement. That was nice to see. Lots of hard work there.

Executive
George Freeman

Thanks.

Analyst
Ann Gurkin

And I also like to comment on the release about potentially looking to a back for balance of fiscal 2017 and then your updated tobacco production numbers. But I wanted to drill down on Brazil and ask as you look out to 2016 and 2017, are you getting to a level where capacity utilization is at risk in your cost, your processing costs are going up and as markets because of the estimated smaller crop sizes thus [Indecipherable].

Executive
George Freeman

Well, again, this year is an exception. I'm not sure, we expect Brazil will come back somewhat in 2016 especially if the currency stays where it is.

Executive
Candace Formacek

And also the [Indecipherable] was a partial factor in that which is affecting the volume weights, yes.

Analyst
Ann Gurkin

And with these lowered crop outlooks are you seeing any changes in process intentions from customers anything you can share with us?

Executive
George Freeman

No, not yet. It's pretty now really we're just sort of kicking off the current season, so it's hard to discern any trends so far.

Analyst
Ann Gurkin

And do you think your inventories will be pretty lean so I was curious of that, incented them to step up interest any more but, okay. And then my other question is can you quantify at all or help me better understand the -- how to think about the change in the PMI processing, or toll business to processing and how should we quantify that at all?

Executive
Candace Formacek

Ann, unfortunately we haven't quantified that and I know that's a little bit tougher. What we've tried to do, this is really sort of the first quarter that you are seeing a shift in that. It has if you look at the changes in the overall revenue there is a significant portion that's related to processing revenues, that timing is the way we would have recorded that previously under the new system and with those particular tobaccos we're going to be seeing those shipment patterns more towards the first quarter of 2017, so there will be some variations in your comparisons from the third and probably also fourth quarter although I don't know exactly how that will span out for the rest of the business.

Analyst
Ann Gurkin

Okay. I mean have you all done any additional processing agreements that you can tell me about?

Executive
Candace Formacek

We don't typically announce that, if we do there's something major that changes will certainly consider that.

Analyst
Ann Gurkin

Okay, great. And then finally, the oriental business is that still trending back to more normalized levels, or is any change in that progression?

Executive
Candace Formacek

I wouldn't say for the industry of all. We have seen some improvements, I think noted in the quarter. They tend to have some plans there are currency issues that are offsetting that and it's also with the regions that they are