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In announcing Universal Corporation’s nine-months’ results to the end of December, chairman, president, and CEO George C. Freeman, III, said the company remained committed to strengthening its market share and investing for growth in its core tobacco business.
“As we recently announced, we are expanding our leaf purchasing, processing, and grower support services in the Philippines, as part of a new leaf supply arrangement with one of our major customers [Philip Morris International Management SA], who had previously purchased and processed their own tobacco,” Freeman was quoted as saying. “This arrangement will increase the efficiency of the supply chain in that origin by providing procurement synergies and economies of scale.
“Another aspect of improving efficiencies and reducing costs in the supply chain is ensuring that our operations and footprint support and reflect global market demand for leaf. Customer demand over recent years for tobacco sourced from Tanzania has declined. As a result, we have undertaken a review of the Tanzanian leaf tobacco market and our operations there. The review is ongoing, and we have decided to substantially reduce our permanent workforce and have incurred an impairment charge on certain assets there.
“This move and the expansion of services in the Philippines are consistent with our continued focus on effective rationalization of global leaf procurement supply chains, appropriate with changes in our customers’ leaf tobacco requirements to maintain strong and stable markets into the future.
“Looking forward, we expect that our fourth quarter shipments will be strong. We are, however, continuing to monitor container and vessel availability, particularly in Brazil, which may shift some shipments into the first quarter of fiscal year 2020.”
Freeman reported net income for the nine months ended December 31 at $72.8 million, or $2.87 per diluted share, compared with $75.1 million, or $2.94 per diluted share, for the same period of the prior fiscal year.
Operating income of $100.4 million for the nine months ended December 31, which included restructuring and impairment charges of $19.4 million in Tanzania, decreased by $10.3 million compared to operating income of $110.7 million for the nine months ended December 31, 2017.