Universal Corp quarterly tobacco operating income plummeted 86 per cent on the absence of carryover shipments from Africa and higher leaf prices in South America, the company said.

Flue-cured and burley operations posted a USD 2.8 million (EUR 2.1 million) operating loss for the three months ended 30 June that was offset by a 10 per cent rise in other tobacco operations to USD 9.2 million. Unadjusted tobacco operating profit fell to USD 6.4 million from USD 44.2 million. However a tax settlement in Brazil created a USD 81.6 million windfall that more than doubled consolidated operating income to USD 86.5 million from USD 42.8 million in the year-ago quarter. Sales declined to USD 433.5 million from USD 461.4 million.
“As we indicated last quarter, sales volumes in the first quarter of fiscal year 2014 were substantially lower than in the first quarter of the prior year due to the unusually low level of carryover shipments, which reduced our operating results for the quarter ended June 30,” said Chief Executive Officer George Freeman. “As the larger South American and African current year crop shipments ramp up in the second and third quarters, our sales volumes will increase,” he said.
Volume shipped this fiscal year will not match the previous 12 month period, Universal reiterated.
Rain in the US damaged burley yields, which will exacerbate the undersupply situation, Universal said. Volatile green tobacco prices in Brazil have “disrupted markets and pressured margins”, the company said. “We still expect fiscal year 2014 to be a solid year.”