Universal Q4 2025 Earnings Report

Universal EPS Results

• Actual EPS: $0.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Universal Revenue Results

• Actual Revenue: $702.28 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Universal Announcement Details

• Quarter: Q4 2025
• Date: 5/29/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 29, 2025
• Conference Call Time: 5:00PM ET

Universal (NYSE:UVV) processes and supplies leaf tobacco and plant-based ingredients worldwide. The company operates through two segments, Tobacco Operations; and Ingredients Operations. It is involved in the procuring, financing, processing, packing, storing, and shipping leaf tobacco for sale to manufacturers of consumer tobacco products. The company contracts, purchases, processes, and sells flue-cured, burley, and oriental tobaccos that are primarily used in the manufacture of cigarettes; and dark air-cured tobaccos principally used in the manufacture of cigars, natural wrapped cigars and cigarillos, smokeless, and pipe tobacco products. It also provides value-added services, including blending, chemical, and physical testing of tobacco; service cutting for various manufacturers; manufacturing reconstituted leaf tobacco; just-in-time inventory management services; electronic nicotine delivery systems; and smoke testing services for customers. In addition, the company offers testing services for crop protection agents and tobacco constituents in seed, leaf, and finished products, including e-cigarette liquids and vapors; and analytical services that include chemical compound testing in finished tobacco products and mainstream smoke. Further, it provides a various value-added manufacturing processes to produce specialty vegetable and fruit-based ingredients, as well as botanical extracts and flavorings for human and pet food markets; and recycles waste materials from tobacco production. Universal Corporation was founded in 1886 and is headquartered in Richmond, Virginia.

Universal Q4 2025 Earnings Call Transcript

Key Takeaways

• Universal delivered a strong FY25 with revenue up to $2.95 billion (+7%) and operating income of $232.8 million (+5%), net debt reduced by $180 million, and declared its 55th consecutive dividend increase to $0.82 per share.
• In Q4, revenue fell to $702.3 million (from $770.9 million) and operating income dropped to $42.8 million (from $68.2 million) due mainly to timing shifts in tobacco shipments.
• Ingredients segment turned profitable with operating income rising to $12.3 million vs. $3.9 million last year, supported by the completion of a major Lancaster, PA expansion and a shift toward organic growth.
• For FY26, Universal anticipates global flue-cured tobacco up ~20% and burley up ~30%, likely moving the market from undersupply to balanced or slight oversupply, though customer inventory decisions remain uncertain.
• The company completed its Mozambique investigation with no material financial impact and has implemented enhanced controls and processes to strengthen governance.

Presentation

[Operator]

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Corporation Fourth Quarter Fiscal Year twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session with instructions for participation provided at that time.

[Operator]

Thank you. I would now like to turn the call over to Wuxiang Ma, Vice President and Treasurer. Please go ahead.

[Wushuang Ma, VP & Treasurer at Universal]

Good evening and thank you for joining us. President Wigner, our Chairman, President and CEO and Johan Kroner, our Chief Financial Officer are here with me today. Our agenda is for President Johan to provide an update on our fourth quarter and full year fiscal twenty twenty five operating and financial results, and share some strategic thoughts about the company. We will then open up the call for questions. During the course of this call, we will be making forward looking statements that are based on our current knowledge and some assumptions about the future.

[Wushuang Ma, VP & Treasurer at Universal]

These are representative as of today only. Actual results, performance and achievements could differ materially from the anticipated results, prospects, performance or achievements expressed or implied by such forward looking statements, and we assume no obligation to update any forward looking statements, except as required by law. For information on some of the risks and uncertainties related to these forward looking statements, please refer to the reports we filed with the SEC and under cautionary statements regarding forward looking statements in our current earnings press release. Finally, some of the information we have for you today may be based on unaudited allocations and may be subject to reclassification. Our comments today may also include certain non GAAP financial measures.

[Wushuang Ma, VP & Treasurer at Universal]

For details regarding these measures, including a reconciliation of these non GAAP measures to the most comparable GAAP measures, please refer to our current earnings press release and other public materials. This call is being webcast live and will be available for replay on our website through 08/28/2025. Other than the replay, we have not authorized and disclaim responsibility for any recording, replay or distribution of any transcription of this call. This call is being copyrighted and may now be used without our permission. I would like to now to turn the call over to President.

[Preston Wigner, Chairman, President & CEO at Universal]

Thank you, Woosh. Good evening. Thank you for taking the time to join us today. I am new to the CEO role, but not new to Universal, having joined the company over twenty years ago. Over the last twenty years, I've seen many stages of our company's evolution, complete with both triumphs and challenges.

[Preston Wigner, Chairman, President & CEO at Universal]

Our ability to adapt to change and to turn challenges into opportunities has helped shape Universal into the company that we are today. I'm honored to lead such a strong company and excited about the opportunities ahead of us. Our fiscal year twenty twenty five was a good example of how our teams around the world adapted to change and executed our strategies. We had an exceptional fiscal year with revenue and operating income 75% higher respectively versus our strong fiscal year twenty twenty four. We navigated weather impacted tobacco crops in certain origins and historically high green tobacco prices, while at the same time, we continued the development of Universal Ingredients, our plant based ingredients business.

[Preston Wigner, Chairman, President & CEO at Universal]

We were also pleased to have declared our fifty fifth annual dividend increase. Our quarterly dividend of $0.82 per share equates to an annualized rate of $3.28 per common share. This reflects our ongoing commitment to returning value to the shareholders through consistent performance and operational excellence. As we will discuss today, fiscal year twenty twenty six is well underway, and it will present new challenges and changes for us. If we can continue to execute our business strategy, I believe we can once again navigate those changes and challenges and pursue the resulting opportunities and continue to strengthen our company for the future.

[Preston Wigner, Chairman, President & CEO at Universal]

Our business strategy focuses on three pillars: maximizing and optimizing our tobacco operations segment, growing our ingredients operations segment and strengthening our organization. First, in our tobacco operations segment, we continuously look for opportunities to increase our sales volumes and market share, expand services across our customers' supply chain, participate in the evolution of next generation products and pursue efficiencies in our operations. Universal provides unparalleled access to tobacco that is supported by our farmer relationships, agronomy expertise and sustainability practices and backed by our investment grade credit rating and access to financing. We are capable of handling all varieties of tobacco, commercializing all stock positions and sourcing and supplying from all major leaf tobacco exporting regions. Reliability, service and predictability are all the hallmarks of our tobacco business.

[Preston Wigner, Chairman, President & CEO at Universal]

As our customers look to optimize their capital allocation and seek supply chain efficiencies or to expand their next generation product business, we believe that we have an ability to play an increasingly important role in supporting them while generating additional earnings. I believe that our geographic diversity, local expertise developed through decades of hand in hand work with farmers and suppliers and global relationships with multinational customers are the keys to our ability to continue to generate stable cash flow and deliver unique value proposition for our shareholders. Turning to our Ingredients Operations segment. We intend to seek opportunities to grow Universal Ingredients, both organically and through measured acquisitions, to provide our customers with a solution based portfolio of value added product offerings. Since we set our strategy in 2018 to build a plant based food and beverage ingredients business, we took a proactive but deliberate approach in recruiting a management team, making acquisitions and setting and executing commercial strategies.

[Preston Wigner, Chairman, President & CEO at Universal]

We paced ourselves as we integrated the three acquisitions to form a coherent platform, and we made key investments in expanding platform capabilities and capacity. As a result, operating income grew in fiscal year twenty twenty five despite broader headwinds in the consumer products market, and the platform has given us a firm foothold in a very deep multi segment market. We strive to leverage our strong reputation for quality and service as well as our long standing relationships with customers to be a premier player in this space. The third pillar of our strategy is strengthening our organization. As a corporation, we will pursue strategies and initiatives designed to support and strengthen our operations for the future.

[Preston Wigner, Chairman, President & CEO at Universal]

These strategies and initiatives will focus on areas such as efficient financial management, effective human capital management, optimal utilization of technology and operational synergies between our business segments. Ultimately, our goal is to position Universal for long term success and value creation, and I look forward to sharing more about these initiatives in the quarters to come. I cannot talk about our strategy without talking about our strong regional and local management teams around the world. While our operations span five continents and over 30 countries, the coordination between our executive management and our regional and local management teams makes our decision making quite nimble. We are not afraid to make the right calls, like when we and our South America management team decided to accelerate green tobacco buying in Brazil last year.

[Preston Wigner, Chairman, President & CEO at Universal]

That decision temporarily increased the level of debt on our balance sheet, but established a favorable cost position and secured the green tobacco needed to supply our customers in a very tight weather impacted market. These types of decisions and the ability to execute on them are key to our success. I'd like now to hand it over to Johan to provide details of our financial and operational performance, after which I will have a high level outlook for fiscal year twenty twenty six and share a few additional thoughts.

[Johan Kroner, Senior VP & CFO at Universal]

Thank you, Preston. Good evening, everyone. As Preston mentioned, Universal just delivered exceptional results for the full year of fiscal year twenty twenty five. Within the fiscal year, we saw accelerated timing for tobacco shipments to some customers, which shifted some sales volume from the fourth quarter to earlier in the year. The results for our fourth quarter therefore reflected the effect of such timing shifts.

[Johan Kroner, Senior VP & CFO at Universal]

For the fourth quarter of fiscal year twenty twenty five, sales and other operating revenue were $702,300,000 as compared to $770,900,000 for the same quarter in fiscal year twenty twenty four. The decrease in revenue was mainly due to lower tobacco sales volumes as a result of the timing shift I just mentioned. Operating income for the quarter was $42,800,000 as compared to $68,200,000 for the same quarter in fiscal year twenty twenty four. The lower operating income was also mainly due to lower tobacco sales volumes. Selling, general and administrative expenses were $9,500,000 lower during the quarter as compared to the same quarter in fiscal year twenty twenty four, mainly due to lower compensation costs, a better currency comparison, but partially offset by higher legal and professional fees associated with the Mozambique investment investigation.

[Johan Kroner, Senior VP & CFO at Universal]

Net income attributable to Universal Corporation was $9,300,000 or $0.37 per share on a fully diluted basis as compared to $40,300,000 or $1.61 per share for the same quarter in fiscal year twenty twenty four. During the quarter ended on 03/31/2025, Universal completed a pension risk transfer transaction, which resulted in a one time pretax pension settlement charge of approximately 14,000,000 Adjusted net income, which excludes certain nonrecurring items, was $20,200,000 or $0.80 per share for the fourth quarter of fiscal year twenty twenty five as compared to 44,800,000.0 or $1.79 per share for the same quarter in fiscal year twenty twenty four. Segment operating income for the tobacco operations segment was $45,800,000 for the quarter as compared to $73,500,000 for the same quarter of fiscal year twenty twenty four. The lower segment operating income was driven mainly by lower sales volumes, partially offset by better pricing. Segment operating income for the Ingredients Operations segment was $4,400,000 for the quarter as compared to a $1,000,000 loss for the same quarter of fiscal year twenty twenty four.

[Johan Kroner, Senior VP & CFO at Universal]

The higher segment operating income was driven mainly by higher sales volumes. For the full year of fiscal year twenty twenty five, sales and operating revenue were $2,950,000,000 as compared to $2,750,000,000 for fiscal year twenty twenty four. The increase in revenue was mainly due to higher tobacco sales prices, partially offset by lower volumes. Operating income for fiscal year twenty twenty five was $232,800,000 as compared to $222,000,000 for fiscal year twenty twenty four. The increase was mainly driven by higher sales revenue, partially offset by higher green tobacco purchase prices.

[Johan Kroner, Senior VP & CFO at Universal]

SG and A expenses were $305,300,000 during fiscal year twenty twenty five as compared to $310,600,000 for fiscal year twenty twenty four. The lower SG and A expenses were mainly the result of lower compensation costs and better recoveries on farmer advances, partially offset by higher legal and professional fees associated with the Mozambique investment investigation and higher sales commissions. Net income attributable to Universal Corporation was $95,000,000 for fiscal year twenty twenty five or $3.78 per share on a fully diluted basis as compared to $119,600,000 or $4.78 per share for fiscal year twenty twenty four. Net income was lower mainly as a result of higher operating income being offset by higher interest expenses, the aforementioned pension settlement charge and restructuring and impairment charges related to the consolidation and restructuring of our European sheet operations. Adjusted net income, which excludes certain nonrecurring items, was $116,300,000 or $4.63 per share on a fully diluted basis for fiscal year twenty twenty five as compared to $127,100,000 or $5.08 per share for fiscal year twenty twenty four.

[Johan Kroner, Senior VP & CFO at Universal]

Segment operating income for the tobacco operations segment was $240,200,000 for fiscal year twenty twenty five as compared to $222,400,000 for fiscal year twenty twenty four. The higher segment operating income was driven mainly by higher sales prices, partially offset by lower volumes. Segment operating income for the Ingredients Operations segment was $12,300,000 for fiscal year twenty twenty five as compared to $3,900,000 for fiscal year twenty twenty four. The higher operating income was mainly driven by higher sales volumes. Strong cash flow generated by this financial performance supported our effort to delever.

[Johan Kroner, Senior VP & CFO at Universal]

Effective revenue collection efforts and a more normalized green tobacco buying pattern in Brazil for the crop currently being purchased also improved our working capital usage. As of 03/31/2025, our net debt, which is defined as the sum of notes payable overdrafts and long term obligations including current portion plus customer advances and deposits less cash and cash equivalents was $817,000,000 1 hundred and 80 million dollars lower than March thirty one of last year. Additionally, as of 03/31/2025, our accounts receivable balance was over $100,000,000 higher than at the end of fiscal year twenty twenty four. We remain focused on prudently and efficiently managing our working capital to maintain a conservative leverage level and solidify our investment grade credit ratings. I will now hand it back to Preston to discuss our outlook for the next fiscal year.

[Preston Wigner, Chairman, President & CEO at Universal]

Thank you, Johan. Looking to fiscal year twenty twenty six. On the tobacco side, we see strong customer demand and industry uncommitted inventory remains at low levels. Per our estimate, excluding China, global Flukew production is expected to increase this current growing season by about 20% and burley production is expected to increase by about 30% as compared to the last growing season. If these anticipated production increases are achieved, we believe the incremental availability of tobacco will move the market from the recent undersupply position towards a more balanced or slight oversupply position.

[Preston Wigner, Chairman, President & CEO at Universal]

On the ingredient side, during fiscal year twenty twenty five, we completed our major expansion project in Lancaster, Pennsylvania, which added an industry leading combination of extraction, blending, aseptic packaging and other capabilities. We also invested in strengthening our sales, marketing and product development teams and focused on creating value across the entire platform. The platform level support enables us to deliver unique customized products to our customers. Entering fiscal year twenty twenty six, we are energized by strong customer interest in these new innovative products as we shift our focus from platform building to organic growth. I would be remiss not to highlight some of our key accomplishments in sustainability as well.

[Preston Wigner, Chairman, President & CEO at Universal]

As the largest global leaf tobacco supplier that directly contracts with over 175,000 farmers around the world, sustainability has been deeply embedded in our DNA. To us, a strategic part of our business is our commitment to setting high standards, promoting a sustainable supply chain and providing transparency about our sustainability efforts. Sustainability is good for our business and represents good stewardship in the communities in which we operate. Finally, I'll end my remarks with a note about our prior filing delays related to our investigation in Mozambique. I'm pleased that the investigation is complete and our filings have been made, and the embezzlement did not and is not expected to have any material impact on our financials.

[Preston Wigner, Chairman, President & CEO at Universal]

As an organization, we learned from the matter, and we implemented various initiatives to improve our processes and internal controls. We believe these incremental improvements will make us an even stronger and better company. Operator, please open up the call for questions.

[Operator]

Your first question comes from Ann Gurkin with Davenport and Company. Please go ahead.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Good evening, everybody. It's great to talk to y'all.

[Preston Wigner, Chairman, President & CEO at Universal]

Thank you, Hannah.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Congrats to Preston. Congrats on completing the investigation or at least filing the appropriate paperwork, and congrats on a a very excellent fiscal twenty five.

[Preston Wigner, Chairman, President & CEO at Universal]

Thanks.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

I wanted to spend a few minutes thinking about fiscal twenty six and see what you can share, beginning with s g and a. How should I think about s g and a for fiscal twenty six?

[Johan Kroner, Senior VP & CFO at Universal]

Ann, I'll take that. We can't provide forward looking guidance on our SG and A run rate, but I can help you understand some of the components of our SG and A. Fiscal year twenty twenty five full year SG and A was about three zero five, down $5,000,000 versus prior year. There were a couple of moving pieces, some one offs. There's legal and professional fees, of course, were up related to the Mozambique investigation.

[Johan Kroner, Senior VP & CFO at Universal]

And so we had some costs associated with value added tax settlement in 2024. So there's always these moving pieces. Other variances may be related to some specific aspects of our operations. For example, we had higher recoveries of farmer advances during fiscal year twenty twenty five due to strong market demand and pricing and some higher commissions due to a shift in customer mix. Please also keep in mind that foreign currency comparisons could also impact SG and A.

[Johan Kroner, Senior VP & CFO at Universal]

Overall, as we look to strengthen and grow the corporation, we may invest in additional SG and A to build capabilities, while at the same time we seek opportunities to drive efficiencies and reduce costs.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

So are you going to have ongoing legal expenses that continue in fiscal twenty twenty six for the Mozambique situation?

[Johan Kroner, Senior VP & CFO at Universal]

Not with regard to the Mozambique investigation. No. That investigation has been completed.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

That's completed. Okay. Great. Okay. Okay.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

And then switching to tobacco, very strong margins, nice business in fiscal twenty twenty five. I guess in talking to tobacco companies, customers, looks like demand is strong. They're talking about lower expecting lower tobacco costs moving forward. So that raises the question of their expectations, their inventory levels versus the likely move towards a more balanced tobacco lease global supply given the forecast. So how should I think about margins and the ability to price and ability to drive growth into tobacco segment in fiscal twenty six versus fiscal twenty five?

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah. That's you've touched on the key issue. And as we as we go from from undersupply into a balanced market with larger crops and and prices expected to come down. I think we're aligned with our customers in that viewpoint as well. But as those as those crops grow, you we're trying to think through, and, of course, we we coordinate with our customers to find out what their indications are, and we try to do that as far in advance as we can so we know what we need to be growing with our farmers.

[Preston Wigner, Chairman, President & CEO at Universal]

But, you know, an open question is what are they gonna do with their durations? Our customer is going to build them back up. Our customer is going to continue with where they are and allocate resources in other areas of their company, which is for capital allocation strategy, is on the minds of some of our customers. So it's it's still too early in the season to tell, but we know that there is still strong demand this year as we go into this market even though we have really big crops coming in. We think the lower prices will help, and, we'll be able to meet our customers' demands.

[Preston Wigner, Chairman, President & CEO at Universal]

It's just at this time, it's a little difficult to know what the scope and extent of those demands are going to be until we really have a better understanding from all of our customers of how they're gonna manage those durations. You know, some of them those durations got very low. So we benefited last year. And even though it was a historically high green price crop in in lots of origins and short crops in some places like Brazil, We were we were able to help them and source the tobacco that they needed, because they paid high prices for those. And and this year, they're expecting better pricing, and we we would expect better pricing as well.

[Preston Wigner, Chairman, President & CEO at Universal]

But we really have to have a better understanding of what their real needs are gonna be throughout the whole crop season in all of these areas, starting with Brazil and then into into Africa and then around the world.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Right. Do you anticipate growing volumes for the tobacco business in fiscal twenty six?

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah. Again, it's gonna for me, it's gonna depend on what they're gonna do with those durations. That would be the the variable for me. You know, they had we had a slight decrease in volume last year even though really strong demand. You know?

[Preston Wigner, Chairman, President & CEO at Universal]

And even though, you know, a place like Brazil is gonna have a much larger crop, doesn't mean automatically that everybody's going to be buying 20% more. We're just gonna have to see. Some of them are are certainly going to increase durations, and some, I think, are gonna live with the tighter durations and rely on around us to give them opportunities, especially maybe later in the crop year where in the crop season where they might be able to come in if there's excess tobacco that we can buy on the market and, and help them where last year in undersupply in tight markets, we couldn't all the time.

[Johan Kroner, Senior VP & CFO at Universal]

If if I may add, Preston, all things being equal and, you know, crops are larger, we're going to buy our share. But we do not buy on a spec speculative basis. Yep. So again, this is where the the customer angle comes in. But under normal circumstances, we we buy our share, and and, you know, we have the contracts with our farmers.

[Johan Kroner, Senior VP & CFO at Universal]

If the farmers grow more, that's what we're buying, but we will end up with some some additional tobacco. You know, it's cheaper, so that will help us a little bit. But, you know, we do expect, you know, volumes to go up a little bit and but we have to be able to place, and and that's where the big question is at the moment.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

And what are Universal's uncommitted inventory levels right now? Tobacco inventory?

[Wushuang Ma, VP & Treasurer at Universal]

We're currently at 20% as of 03/31/2025.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

And worldwide uncommitted lease inventories?

[Wushuang Ma, VP & Treasurer at Universal]

So the estimated unsold, flue cured, burley stock was 22,000,000 kilos as of March 31, which is up 11,000,000 from December 31.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Okay. And how does The US crop look right now, tobacco crop?

[Johan Kroner, Senior VP & CFO at Universal]

Too early, Anne.

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah. It's little too early.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Too early. Okay. Okay. Switching to ingredients, nice to see the improvement in the operating profit versus $20.24 for the ingredient segment. How do I think about the profit outlook for the ingredient segment?

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

And are you still targeting Ingredients the profit for the Ingredients segment to total 10% to 12% of EBITDA? Is that still a long term target for that segment?

[Johan Kroner, Senior VP & CFO at Universal]

Well, we put that target out a while back. And so we hit it and then we moved You know? Again, we we have made some significant investments, and that's where we need to deliver. And that's what we have been saying the the the the the entire time that, you know, by putting in these additional capabilities and all these things that we can do. Now the sales guys need to do their thing.

[Johan Kroner, Senior VP & CFO at Universal]

We ramped up the commercial department. We ramped up the R and D. There is a lot of cost associated with that in the numbers, which you can see in 2025 and before. So you're going to

[Johan Kroner, Senior VP & CFO at Universal]

see the fruits of this

[Johan Kroner, Senior VP & CFO at Universal]

going forward. We just now we just need to sell it. And we need to margin up. Some of these things, we don't like to be in the commodity business. We like to be in the specialized stuff.

[Johan Kroner, Senior VP & CFO at Universal]

And that's why we did what we did and we made the significant investment in Lancaster, Pennsylvania.

[Preston Wigner, Chairman, President & CEO at Universal]

Yes. We were certainly pleased for the year with increased sales, increased volumes for the platform ending the quarter on a strong note. And and our goal is to grow that's our that's our strategy, grow ingredients. And and we expect to do that. We need to to leverage as much as we can with our platform resources, get as much value from those resources that we can.

[Preston Wigner, Chairman, President & CEO at Universal]

It's it's been paying off this year, and and and that's our goal for next year and in the continuing years.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Can you quantify the the increased sales due to anticipated tariffs? I'm assuming some business shifted into q four.

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah. There was some, I'd say there was some modest modest, activity in the fourth quarter in anticipation of tariffs. And, you know, tariffs, it depends on what time of day you wanna check the news to know what's going on with tariffs. But but we we would expect with those types of challenges, you know, we'll have opportunities, and and we're working through those. We've seen tariffs in the past.

[Preston Wigner, Chairman, President & CEO at Universal]

It's really gonna be focused on what the tariffs really are. And and are there other areas that we can also source products from to mitigate maybe additional cost with tariffs, and have have a more diversified supply base to, to mitigate any impacts like that.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

So about 10% of the sales in q four would have been due to timing of tariffs purchases?

[Preston Wigner, Chairman, President & CEO at Universal]

No. Not that high. No.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Not that high?

[Preston Wigner, Chairman, President & CEO at Universal]

No. No.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Okay. Okay. And then, can you talk about tariffs? What is caught up in tariffs for y'all? What both on the tobacco side and the ingredient side?

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Is there anything?

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah. I guess it it sort of depends on what

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

As of today at

[Preston Wigner, Chairman, President & CEO at Universal]

Tariff. Yeah. What tariffs are. And if we're thinking of of tariffs with China, you know, that's that's gonna impact how much, if anything, the Chinese are going to buy in The US. For us, you know, that's that's not a large part of our business.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

No.

[Preston Wigner, Chairman, President & CEO at Universal]

We handle some processing for them. So for the Chinese side, you know, that's really for The US, you know, maybe volumes go down in The US, it gives us opportunities in other areas where they're gonna shift their needs because they do have requirements. And, and we worked very hard last year to meet those requirements in tough markets, and we'll do the same this year as well. I think on the ingredient side, it's for the Chinese sourcing we have, which is really our dehydrated, vegetable company, Silva International.

[Preston Wigner, Chairman, President & CEO at Universal]

That's gonna depend on the level of tariffs where they end up. And as we saw, the customers were buying forward a little bit, and we're working on additional areas of supply in case the tariffs go up. If the tariffs come down, we're in we're in good shape. We also carry, as part of our strategy, a little longer inventories at Silva with our products. So we've got some breathing room with that as we navigate the changes.

[Preston Wigner, Chairman, President & CEO at Universal]

If tariffs apply to other origins, that's really going to impact, purchases that our US customers have from our operations around the world. And, and we're, you know, keenly aware of of our commitment to our customers to help them any way we can. And and we'll work with them. If if there are unexpected tariffs and origins that they typically would buy from, we work with them and and and help them in other origins as best we can. So it's it's it's just a tough one to to predict, you know, even today.

[Preston Wigner, Chairman, President & CEO at Universal]

You know, it's tariffs are off, tariffs are on, tariffs are stayed. We're just gonna wait and see. But we've we've dealt with these types of challenges in the past, whether they're tariffs and other things. And and we always make a plan, and and we will we will produce results despite the challenges. Always an opportunity with every challenge.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

So are you buying product from China that has the 45% tariff on it, or did you build enough inventory to not have to buy that at that moment? I know the tariffs dropped now. I'm at 30%, but where are you in that cycle? Sorry.

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah. I'd I'd say I I don't think we're buying anything at that level. It would just be too difficult to to move. I think we bought some some strategic times to avoid the tariffs or to have minimal tariffs, And, that plus our inventory, we're we're fine. But we'll have to see how long the tariffs last also.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

And then you talk about recent increases in raw material prices for certain traditional products. What does that mean? I'm sorry. I don't know what that is.

[Preston Wigner, Chairman, President & CEO at Universal]

So for our ingredients business, for example, there's been historically low prices for apples, which impact FruitSmart, our operation in Washington on the, fruit processing company, and on, vanilla or shanks, is one of their core products. Those sales have been good. It's just it's just historically low levels, which impacts our our dollar margins on that business. So, we've got good sales. We've we've got good margin percentages.

[Preston Wigner, Chairman, President & CEO at Universal]

But, of course, if your raw material prices are low, it's impacting your, absolute dollar margins.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

So can you grow margin on the ingredients business in fiscal twenty six versus '25?

[Johan Kroner, Senior VP & CFO at Universal]

No. That's what and that's again why I said that, you know, we need we need to margin up on these things. So that's where we, you know, our goal is to to improve the the margins on that business, and and that's why we we did what we did in Lancaster, Pennsylvania by, you know, creating something that that that is a differentiator for us and and and for the market.

[Preston Wigner, Chairman, President & CEO at Universal]

Right. And, you know, and add on to that. You know, the big part of our strategy in growing ingredients is to grow volume and grow scale. We've got a platform investments in product development and in sales and in marketing. And and the more we scale up, you know, the more we we spread those costs across our across our units, and we become even more competitive.

[Preston Wigner, Chairman, President & CEO at Universal]

And then we've got better pricing and better margins as well. We get the return that we need for those investments.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Have you invested in the Salesforce to support growth to fill that platform?

[Preston Wigner, Chairman, President & CEO at Universal]

Yes.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Great. Great. And then can I just ask two more things? One about, the 100,000,000 share repurchase program and you didn't buy any stock back in the quarter. What are your thoughts on, on using that program?

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

You ended the year with, I think, $260,000,000 in cash and you've done a lot of work on reducing working capital needs or managing working capital. How should I think about that opportunity to buy back stock?

[Johan Kroner, Senior VP & CFO at Universal]

Well, according to the capital allocation strategy and, you know, we have some some other things that are are are more prioritized at the moment. So we we we it's out there. If if the the timing is right, we would use it. But right now, you know, we would like to deliver more and we want to do some other things, make some investments, strategic investments if the opportunity arises. So, you know, all those things, are before we start buying back stock big time.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Okay. And how do I think about interest expense for '26 versus '25?

[Johan Kroner, Senior VP & CFO at Universal]

Yes. Interest expense, we have to work on clearly because of the pricing last year, the early buying in Brazil that was elevated. Working capital was up. This year, it's certainly better in Brazil. It's a more normal buying season, it appears.

[Johan Kroner, Senior VP & CFO at Universal]

So that will help. We settled quite a bit of cash at the end of the year. So all of that the goal is to bring interest expense down.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Great. And then CapEx for fiscal twenty twenty six, it looks like it was $62,000,000 in 2025. What's 2026?

[Johan Kroner, Senior VP & CFO at Universal]

Yes. Currently, we're looking at between 45,000,000 and 55,000,000 Ann.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

Okay. Okay. Thank you all for the time. I appreciate it very much.

[Preston Wigner, Chairman, President & CEO at Universal]

Thank you, Anne.

[Johan Kroner, Senior VP & CFO at Universal]

Thank you.

[Preston Wigner, Chairman, President & CEO at Universal]

You don't know how much I was looking forward to talking to you today.

[Ann Gurkin, Research Analyst at Davenport & Company LLC]

You know I was. So thank you.

[Preston Wigner, Chairman, President & CEO at Universal]

Thank you, Anne. Yep.

[Operator]

Your next question comes from Chris Reynolds with Neuberger Berman. Please go ahead. Mr. Reynolds, your line is open.

[Chris Reynolds, Portifolio Manager at Neuberger Berman]

Yeah. Thank you for taking my call. I wanted to see if you can provide some general comments about nicotine pouches. Obviously, there's been explosive growth there. I'm wondering how that affects your the demand for tobacco leaf.

[Chris Reynolds, Portifolio Manager at Neuberger Berman]

It's my understanding that these products use nicotine from tobacco leaf, but I guess there's always a possibility you could use some sort of synthetic nicotine. But based on sort of what you're seeing right now, is this something that potentially increases demand for leaf tobacco? Or are these products going to reduce demand for tobacco leaf? It's hard to figure that out.

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah, Chris. I understand. It's it is hard to figure out. You know, that for our customers, this is part of this is part of their portfolio. You know, they've got their traditional products.

[Preston Wigner, Chairman, President & CEO at Universal]

They've got their next generation products. Some use tobacco pouches. Some use nicotine derived from from tobacco. You know, the way we see it, there are opportunities in nicotine. You know, it is it is a commodity at the moment, and it is being produced, you know, in a number of places around the world.

[Preston Wigner, Chairman, President & CEO at Universal]

We, of course, through AmeriNick, we further refine it here in The US. But it's it's really driven by by cost and how you can produce it at the lowest cost and where that tobacco is at the lowest cost, which, for example, is overseas and not currently really in The United States. For us, we still see strong demand for our leaf business, And and we support our customers in all of our portfolios. And part of our strategy is to participate in their next generation product categories. So if they use leaf, we wanna be in that leaf.

[Preston Wigner, Chairman, President & CEO at Universal]

And if they use nicotine in in the most efficient and effective cost effective way for us where it makes sense, we wanna participate in that too. That nicotine market is is pretty volatile, and and it's very cost sensitive. And so we keep an eye on it. We participate in it. But it's it's hard to predict where it's really going longer term and how it might change.

[Preston Wigner, Chairman, President & CEO at Universal]

And to your point, what role synthetic nicotine might play long term in the market.

[Chris Reynolds, Portifolio Manager at Neuberger Berman]

Mhmm. And and one other follow-up question. If if let's just say you have a customer that wants nicotine derived from your tobacco leaf and you do some form of processing to extract it. What happens with that tobacco leaf afterwards? Is it is it something that's just discarded, or or is is there another use for it?

[Preston Wigner, Chairman, President & CEO at Universal]

Yeah. I think in that I think in most of those processes and we don't we don't extract directly from leaves ourselves. I think in that process, you know, what's left is is not used. It's it's waste. You can't reuse.

[Chris Reynolds, Portifolio Manager at Neuberger Berman]

Okay. Okay. Well well well, thank you for for for answering those questions.

[Preston Wigner, Chairman, President & CEO at Universal]

Sure. Anytime, Chris.

[Operator]

There are no further questions at this time. I will now turn the call over to Preston Wigner for closing remarks.

[Preston Wigner, Chairman, President & CEO at Universal]

Thank you, Tiffany. Thank you all for taking the time to join us today. We look forward to connecting again during our next earnings call. Thank you.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

• Wushuang Ma, VP & Treasurer
• Preston Wigner, Chairman, President & CEO
• Johan Kroner, Senior VP & CFO

Analysts

• Ann Gurkin, Research Analyst at Davenport & Company LLC
• Chris Reynolds, Portifolio Manager at Neuberger Berman