Universal proftis climb despite drop in sales
Universal Corp., one of the world's biggest tobacco companies, on Tuesday posted an 8 percent rise in first-quarter profits to $29.5 million despite a drop in sales and operating profits from its tobacco business.
Universal, which also sells lumber and building products in the Netherlands and Belgium, reported quarterly net earnings of $29.5 million, or 93 cents per share, including a one-time gain of $2.6 million, or eight cents per share, from the sale of the company's interest in a tobacco joint venture.
A year earlier, Universal posted net profits of $27.1 million, or 78 cents per share. Wall Street analysts had expected the company to post profits of 76 cents per share, according to earnings forecast tracking firm First Call/Thomson Financial.
Shares of Universal traded up 7/16 to 21-3/4 in afternoon activity on the New York Stock Exchange.
Revenues fell to $783 million from $879 million, due mainly to the smaller flue-cured tobacco crop in the United States and lower tobacco prices in Brazil caused by lower currency values.
Excluding the one-time gain, operating earnings for tobacco were down, the company said.
One factor in the drop was the reduction of the U.S. flue-cured crop in response to increased U.S. stabilization inventories and lower demand by manufacturers. Volumes of Brazilian tobacco shipped were also down from year-ago levels, despite the large Brazilian crop, because of benefits from shipment timing last year, the company said.
Universal said shipments of African tobacco and dark tobaccos were higher in the quarter, reflecting shipments that customers delayed from fiscal year 1999, and earnings from the company's Oriental tobacco joint venture improved significantly due to similar shipment timing changes.
Despite the adverse effect of the stronger U.S. dollar, the company's Netherlands-based lumber products distribution business reported increased revenues and operating income on the translation of results from Dutch guilders.
``We expect that uncommitted flue-cured and burley tobacco inventories in the hands of the trade and the U.S. stabilization cooperatives will continue to increase during the year from the current levels, which we estimate at about 270 thousand tons,'' Henry Harrell, chairman and chief executive officer of Universal, said in a release.
``However, we expect that inventory levels will begin to moderate during fiscal year 2001 as crops are further reduced,'' he said. ``Although we will be affected by this period of market imbalance, we believe that Universal will continue to show strong performance, underlining the fundamental strength of our strategy, and we look forward to the market recovery we foresee.''
Universal said it continues its share repurchase programs, which have been in progress since May 6, 1998, and to date it has repurchased 4.5 million shares of common stock at a total price of about $143 million. The programs provide for repurchases of up to $200 million. Currently, about 31 million common shares are outstanding.