Universal Corporation · NYSE:UVV
Universal — Investor Presentation (August 2018)
47 slides from Universal's investor presentation, Aug 31, 2018
Slide 1: Fiscal Year 2019 Investor Presentation
Fiscal Year 2019 Investor Presentation Exhibit 99.1
Slide 2: Forward looking information
Forward looking information This presentation includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers that any statements contained herein regarding earnings and expectations for its performance are forward-lookin
Slide 3: Table of Contents
Table of Contents Investment highlights 4 Focus on creating shareholder value 7 Performance update16 Business and industry overview22 Appendix43
Slide 4: Investment Highlights
Investment Highlights Universal 100 YEARS : <
Slide 5: Universal Corporation Quick Facts
Universal Corporation Quick Facts Founded1918 Stock ExchangeNYSE TickerUVV Revenues (as of 3/31/18)$2.0 billion Dividend Yield5.06%* Stock Price Recent Stock Price (08/30/18)$59.30 52 wk High$71.60 52 wk Low$45.95 Common Shares Outstanding25.0 million 47 years of consecutive annual common stock divi
Slide 6: Investment Highlights
Investment Highlights The leading global leaf tobacco supplier Full service provider with long standing supplier and customer relationships Diversified sources of compliant leaf tobacco from a strong, sustainable supplier base Industry-leading customers Defensible market position given strong barrie
Slide 7: Focus on Creating Shareholder Value
Focus on Creating Shareholder Value
Slide 8: Capital Allocation Strategy
Capital Allocation Strategy We implemented a new capital allocation strategy in May 2018 with the objective of returning more value to our shareholders The Company’s capital allocation strategy focuses on four strategic priorities: Strengthening and investing for growth in Universal’s core tobacco b
Slide 9: Strengthening and Investing for Growth in Our Core Tobacco Business
Priority 1 Strengthening and Investing for Growth in Our Core Tobacco Business We see opportunities in our core tobacco business to: Increase the services we provide our customers; Provide further supply chain efficiencies; and Expand our market share
Slide 10: Increasing Our Strong Dividend
Priority 2 Increasing Our Strong Dividend We announced a 36% increase in our annual dividend in May 2018 We are proud of our 47-year history of dividend increases, and we intend to continue that tradition We are focused on sustainable shareholder value
Slide 11: Exploring Growth Opportunities in Adjacent Industries and Markets
Priority 3 Exploring Growth Opportunities in Adjacent Industries and Markets that Utilize Our Assets and Capabilities We look for opportunities outside of our core tobacco business that leverage our strengths and position us for long-term success We consider adjacencies to be industries and markets
Slide 12: Returning Excess Capital to Shareholders
Priority 4 Returning Excess Capital to Shareholders When there are no other investment alternatives to create shareholder value, we will return excess funds to shareholders This excess capital may be returned to shareholders through share repurchases
Slide 13: Sustainable Shareholder Value
Sustainable Shareholder Value Demonstrated ability to generate free cash flow Low capital investment required to maintain 'core' business Healthy balance sheet allowing for flexibility Continued commitment to 47-year tradition of increasing dividend paid Sustainable dividend payout
Slide 14: Dividend History
Dividend History 47 consecutive years of increases in common stock dividend 36% dividend increase 2018
Slide 15: Business Opportunities
Business Opportunities Continue to increase market share Provide supply chain efficiencies which help reduce costs Expand services provided to our customers Continue to work closely with our customers on meeting their needs for their next generation products Explore growth opportunities in adjacent
Slide 16: Performance Update
Performance Update Universal 100 YEARS : <
Slide 17: First Quarter FY 2019 Highlights
Highlights Revenues increased by $95.1 million, or 33%, on higher total volumes and processing revenues and a more favorable product mix. Operating income improved $2.0 million, or 31% Net income up $9.6 million compared to the prior fiscal year Our first quarter results benefited from higher carryo
Slide 18: Outlook
Outlook We continue to expect that our volumes will be above those achieved last fiscal year We are not seeing any significant supply disruptions thus far this year Crop sizes for both flue-cured and burley tobaccos are coming in somewhat higher than previous estimates We are positioning our Company
Slide 19: Tobacco Segment Revenues & Operating Income by Fiscal Year
Tobacco Segment Revenues & Operating Income by Fiscal Year * Segment operating income includes equity in pretax earnings of unconsolidated affiliates and excludes restructuring and impairment charges and certain non-operating items as presented in our audited financial statements. Total segment oper
Slide 20: Financial Results By Fiscal Year
Financial Results By Fiscal Year In millions FY 20141 FY 20151 FY 20161 FY 20171 FY 20181 Revenues $2,542 $2,272 $2,120 $2,071 $2,034 EBITDA* $289 $212 $225 $220 $215 Operating income $246 $168 $182 $178 $171 Net income 2 $149 $115 $109 $106 $106 *Non-GAAP measure. Please see Appendix 1 Results incl
Slide 21: Strong Cash Flow Generation By Fiscal Year
Strong Cash Flow Generation By Fiscal Year * Non-GAAP measure. Please see Appendix. Free cash flow defined as EBITDA - Capex
Slide 22: Business and Industry Overview
Business and Industry Overview
Slide 23: Tobacco Operations
Tobacco Operations Africa, Brazil, and the United States produce approximately two-thirds of the flue-cured and burley tobacco grown outside China Annual production of such tobaccos handled by Universal: Africa 30-40%, Brazil 15-25%, United States 30-40% Universal conducts its business in more than
Slide 24: Diverse Product Portfolio
Flue-cured Cured leaves have a yellow to orange color and grows well in subtropical regions with light rainfall Matures from the bottom leaves up and are harvested at different times as they mature, after which they are cured using heat Used in American and English blend cigarettes Burley Cured leav
Slide 25: The Tobacco Plant
The Tobacco Plant Style and quality variation, regional variation Not a commodity product Leaves harvested at different times Tips Leaf Cutters Customer A - Flavor Lugs Sandleaves (Primings) Customer B - Filler
Slide 26: Role of the Leaf Tobacco Supplier
Role of the Leaf Tobacco Supplier Intermediary between farmers and manufacturers of tobacco products Sources leaf tobacco for customers Processes tobacco to customer specifications Does not manufacture cigarettes or other consumer tobacco products With Farmers Contracts with farmers for crops Manage
Slide 27: Why Universal is an Industry Leader
Why Universal is an Industry Leader Strategic Market Position Strong Local Management Compliant Product Diversified Sources Financial Strength
Slide 28: Universal's Strengths as a Leaf Supplier
Universal’s Strengths as a Leaf Supplier Sourcing Global reach Strong local management teams Capability to market all of the different grades and styles produced in a single crop Agronomy Continuous and substantial investment in grower base Strong commitment to delivering a quality, compliant produc
Slide 29: Universal's Strengths as a Leaf Supplier (continued)
Universal’s Strengths as a Leaf Supplier (continued) Processing State of the art processing facilities Facilities in the major tobacco producing areas Efficient operations Logistics Proven ability in managing a robust end-to-end tobacco supply chain connecting hundreds of thousands of small-scale fa
Slide 30: Sustainability and Supply Chain Integrity
Sustainability and Supply Chain Integrity A Key to Continued Success Our business is reliant on the success of our farmers and employees, the strength and resiliency of our supply chain and our ability to deliver a consistent supply of quality tobacco to our customers. Our commitment to sustainabili
Slide 31: The Universal Effect
The Universal Effect 300,000,000 Tree seedlings planted in the last 10 years Directly impacting more than 2,000,000 People in the farming areas from which we purchase tobacco 500,000 Farmers working with Universal 300+ Closed wells and boreholes dug in African growing areas for the benefit of the co
Slide 32: Main Drivers of Customer Purchases
Main Drivers of Customer Purchases Supply / demand balance Price / value of the product Compliant leaf Global unsold stocks Inventory durations held by customers Consistent supply to protect continuity of customer blends Customer Purchases
Slide 33: High Quality Customer Base
High Quality Customer Base Over 75% of our sales are to customers with major positions in their respective markets and with whom we have long-standing relationships Six largest customers include Altria Group Inc., British American Tobacco plc, China Tobacco International, Inc., Imperial Brands plc,
Slide 34: Committed Inventory
Committed Inventory On average at least 80% of our inventory is committed for sale to customers We source tobacco to meet anticipated demand FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Slide 35: Universal's Uses of Cash
Universal’s Uses of Cash In Millions
Slide 36: Working Capital
Working Capital Universal’s working capital resource requirements are predominately short-term in nature Most working capital needs are for tobacco crop purchases Working capital needs are seasonal within each geographic region - peak working capital requirements are generally reached during the fir
Slide 37: Industry Supply and Demand
Industry Supply and Demand Company Estimates. Excludes Asian Monopolies
Slide 38: Leaf Tobacco Competitive Environment
Leaf Tobacco Competitive Environment Company Presence Global Global Others Local / regional Industry structure Worldwide network Long-term relationship business Capital investment Mature industry Barriers to entry
Slide 39: Global Cigarette Market
Global Cigarette Market The global tobacco industry produces about five and a half trillion cigarettes a year About 5% of cigarettes manufactured worldwide are consumed in the United States Universal believes that growth in world consumption of cigarettes peaked several years ago and is declining. A
Slide 40: Other Businesses
Other Businesses Sheet Tobacco (Deli-HTL and DHT GmbH & Co.) Sheet tobacco is a malleable sheet formed from a pulp of stems and other tobacco remnants Produces wrapper and binder sheet for all types of cigars, as well as cigar and cigarette filler sheets Global Laboratory Services, Inc. Physical and
Slide 41: Other Businesses (continued)
Other Businesses (continued) ULT Agronomic Center Seed variety research & development Production techniques Grower sustainability studies Integrated Pest Management (IPM) Evaluation of new agrochemical products Carolina Innovative Food Ingredients, Inc. Primary focus to derive value added liquid and
Slide 42: The Universal Effect
The Universal Effect Every step in our production process requires action Each action ripples out and impacts lives in our communities around the globe We can’t work effectively without investing in and strengthening the communities where we operate
Slide 43: Appendix
Appendix : © Universal 100 YEARS
Slide 44: Appendix: Unusual Items
Appendix The following table sets forth the unusual items included in reported results, none of which are included in segment results: In millions 2014 2015 2016 20171 2018 (Charges) and gains Gain on favorable outcome of excise tax case in Brazil $81.6 — — — — Reversal of valuation allowance on exc
Slide 45: Appendix: Net Debt and Net Capitalization
Appendix Net Debt and Net Capitalization We consider the sum of notes payable and overdrafts, long-term debt (including current portion), and customer advances and deposits, less cash and cash equivalents, and short-term investments on our balance sheet to be our net debt. We also consider our net d
Slide 46: Appendix: EBITDA
Appendix EBITDA We consider operating income plus equity in pretax earnings of unconsolidated affiliates before interest expense, amortization, depreciation and taxes to be our EBITDA In millions 2014 2015 2016 2017 2018 2017 2018 Net income(loss)1 $149 $115 $109 $106 $106 $4 $13 Minus: Net income (
Slide 47: Appendix: Free Cash Flow
Appendix Free Cash Flow Free Cash Flow defined as EBITDA less Capital Expenditures In millions 2014 2015 2016 2017 2018 2017 2018 EBITDA $289 $212 $225 $220 $215 $15 $18 Capital Expenditures $46 $58 $47 $36 $34 $6 $11 Free Cash Flow $243 $154 $178 $184 $181 $9 $7 Included in this presentation are ce