Pyxus International OTCMKTS: PYYX reported a sharply higher fourth quarter and record full-year adjusted EBITDA for fiscal 2026, with management pointing to strong shipment volumes, disciplined cost control and improved leverage as key outcomes from a year marked by shifting tobacco leaf supply conditions.
President and CEO Pieter Sikkel said fiscal 2026 ended with an “exceptional fourth quarter,” as net sales rose 35.2% from the prior-year period and full-year adjusted EBITDA reached a record $226.7 million, up 8.8% from fiscal 2025. He said the result marked the company’s fourth consecutive year of adjusted EBITDA growth.
Pyxus, a global leaf tobacco supplier, works with small-scale and commercial farmers across 15 sourcing countries. Sikkel said the company’s model includes providing contracted farmers with financing, agronomic expertise and technical support, then processing and blending tobacco to customer specifications for major tobacco product manufacturers.
Fourth-quarter shipments drive sales increase
Chief Financial Officer Dustin Styons said fourth-quarter net sales were $678.2 million, up 35.2% year over year. The increase was driven by higher shipment volumes, with Pyxus delivering 108.3 million kilos of tobacco in the quarter, up about 40% from the prior year.
Management said the increase reflected a timing shift, as higher volumes sourced from South America and Africa moved shipments from the third quarter into the fourth quarter. For the full year, total sales were $2.4 billion, down 2.8% from fiscal 2025. Styons attributed the decline primarily to lower carryover volumes entering the year and lower cost and pricing in parts of South America.
Sikkel said full-year sales were also affected by certain fiscal 2026 sales that had been accelerated into the fourth quarter of fiscal 2025. He said core volumes were flat compared with the prior year, which management viewed as evidence of sustained underlying demand despite an oversupply environment.
Margins remain near record levels
Pyxus reported fourth-quarter gross profit of $94.4 million, up 40.4% from a year earlier. Gross margin in the quarter rose to 13.9% from 13.4% in the prior-year period. For the full year, the company delivered a gross margin of 14.4%.
Styons said full-year margin expansion was driven largely by increased third-party processing volumes, as well as product mix across markets. He added that larger crop volumes processed in the company’s facilities helped lower per-unit costs.
Sikkel said the company preserved profitability through the oversupply environment, with gross margin per kilo remaining close to historic highs and nearly matching the prior year’s record performance. He cited several factors supporting margins, including geographic and customer mix optimization, growth in third-party processing and improved cost absorption from higher volumes.
For the fourth quarter, selling, general and administrative expenses were $44.1 million, slightly below $44.9 million a year earlier. Full-year SG&A was $162.9 million, down $8.1 million from fiscal 2025. Styons said the decline was mainly due to reduced incentive accruals and continued cost management.
Operating income and adjusted EBITDA improve
Fourth-quarter operating income rose to $43.7 million from $13.7 million in the prior-year quarter. For the full year, operating income was $162.7 million, up $9.4 million from fiscal 2025.
Interest expense increased to $31.8 million in the fourth quarter from $27.4 million a year earlier, which Styons said reflected higher average working capital borrowings. Full-year interest expense was $138.7 million, up $5.6 million from the prior year.
Pyxus also reported a stronger contribution from its China Brasil Tobaccos joint venture, which benefited from larger South American crops after weather had affected the prior-year crop. The company recorded a fourth-quarter equity pickup of $5.7 million, compared with $0.7 million a year earlier. For the full year, equity pickup was $17.4 million, up $9.2 million.
Fourth-quarter adjusted EBITDA was $62.4 million, up 118.2% from the prior-year quarter. Full-year adjusted EBITDA rose to $226.7 million, above the midpoint of the company’s prior guidance range and the highest annual adjusted EBITDA in Pyxus’s history, according to management.
Cash flow supports debt reduction
Styons said Pyxus invested substantially in inventory during the first half of fiscal 2026, with inventory peaking in the second quarter at $1.14 billion. That positioned the company for its peak shipping period and led to a working capital release in the fourth quarter.
Year-end leaf inventory was $786.7 million, and Pyxus generated approximately $352.1 million in adjusted free cash flow during the fourth quarter, nearly double the amount generated in the same period last year. Styons said the improvement reflected not only working capital timing but also higher operating performance and cash management.
The company used fourth-quarter cash flow to pay down $356.6 million of short-term debt. Seasonal lines declined to $477.1 million at year-end from $833.7 million at the end of the third quarter.
Pyxus ended fiscal 2026 with net debt of $798.6 million, and its net debt-to-EBITDA leverage ratio improved to about 3.5 times. Styons said that was down from more than six times at the end of the third quarter and represented the lowest level the company had achieved in recent years.
Liquidity remained strong at year-end, according to Styons. Pyxus closed the year with $134.3 million in cash, and its $150 million asset-based revolver was undrawn.
Fiscal 2027 outlook reflects ample supply
Looking ahead, Styons said Pyxus expects continued strong demand and ample global leaf supply, which should lead to lower leaf prices. He said lower prices could modestly reduce revenue but are not expected to negatively affect margins.
For fiscal 2027, Pyxus expects:
- Revenue of $2.3 billion to $2.5 billion.
- Adjusted EBITDA of $210 million to $240 million.
- Positive adjusted free cash flow on a like-for-like basis, excluding working capital timing.
Styons said the company intends to use free cash flow to further reduce debt and is actively preparing to address upcoming maturities of outstanding long-term debt, calling it a top priority for fiscal 2027.
During the question-and-answer portion of the call, Chapin Meacham of Northeast Investors asked about uncommitted inventory levels. Sikkel said Pyxus maintains a clear focus on keeping uncommitted inventory low, particularly during changing market conditions, to preserve opportunities to purchase at lower costs in future crops. He described current levels as “very low” and said the company remains focused on profitably supplying known customer demand through disciplined global sourcing.
Asked about inventory write-downs, Styons said Pyxus’s inventory is “appropriately marked” and that any adjustments during the year were immaterial to the financial statements.
Sikkel closed the call by saying Pyxus entered fiscal 2027 positioned to manage a dynamic market, with steady customer demand and strong supply expected to support lower crop costs and improved working capital.
About Pyxus International OTCMKTS: PYYX
Pyxus International, formerly known as Alliance One International, is a global supplier and processor of leaf tobacco products. The company sources, grades, blends and sells a wide range of flue-cured, burley, oriental and dark tobacco leaf to manufacturers of cigarettes, cigars and other tobacco products. In addition to leaf sales, Pyxus provides comprehensive supply chain management and technical services, including agronomic guidance, quality assurance and warehousing solutions to its customers worldwide.
In recent years, Pyxus has expanded its portfolio beyond traditional tobacco leaf to include pharmaceutical- and specialty-grade nicotine products.
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