Executive Summary

UVV delivered a clean beat on revenue and a modest EPS beat in Q2 FY26: Sales were $754.2M vs S&P Global consensus $704.3M*, and diluted EPS was $1.36 vs $1.34*, while EBITDA missed consensus ($81.3M actual vs $86.1M*) as mix, FX and higher inventory write-downs offset volume strength (consensus from S&P Global*).
Tobacco Operations grew revenue 5% YoY with earlier shipments and firm demand, but segment operating income declined on FX, higher write-downs and less favorable mix; Ingredients grew revenue 18% YoY but posted a small operating loss on higher fixed costs, product mix, CPG softness, and tariff uncertainty .
Management expects the market to shift into oversupply by year-end; uncommitted inventory remains low (13%), and UVV reiterated confidence in shipping the second-half backlog and managing oversupply dynamics where it historically executes well .
Balance sheet/liquidity: Net debt fell $52M YoY with ~$340M of revolver availability at 9/30; interest expense declined $4M YoY for the first half, and management remains focused on deleveraging as shipments convert to cash .
Dividend maintained: Board declared a $0.82/share quarterly dividend, payable Feb 2, 2026; this supports the total return profile and signals confidence in cash generation .

What Went Well and What Went Wrong

What Went Well
- Revenue and EPS outperformed expectations, driven by higher tobacco and ingredients volumes and earlier shipments; operating execution remained solid across both segments (consensus context from S&P Global*).
- Tobacco demand stayed firm despite larger crops; uncommitted leaf inventory remained low (13%), positioning UVV to navigate a likely oversupply environment with opportunity sales and service expansion .
- Liquidity improved YoY with ~$340M revolver availability and lower net debt; interest expense down $4M YoY aided bottom-line resilience .
- Quote: “We’re pleased with our performance… strong operational execution for both segments… shipments are progressing smoothly, and we are shipping tobacco earlier than last year.”
What Went Wrong
- Tobacco segment operating income fell $12M YoY despite higher revenue, pressured by unfavorable FX, higher inventory write-downs, and a less favorable mix .
- Ingredients segment posted a quarterly operating loss despite 18% revenue growth as fixed costs from the expanded facility, product mix, CPG end-market weakness, and tariff uncertainty weighed on margins .
- Consolidated gross margin contracted 160 bps YoY (18.5% vs 20.1%) on the above headwinds; Q2 operating income declined 2% despite volume growth .

Financial Results

Metric	Q2 2025	Q1 2026	Q2 2026
Revenue ($M)	$710.8	$593.8	$754.2
Operating Income ($M)	$68.7	$33.8	$67.6
Net Income Attributable to UVV ($M)	$25.9	$8.5	$34.2
Diluted EPS ($)	$1.03	$0.34	$1.36
Gross Profit Margin (%)	20.1%	19.2%	18.5%
EBITDA ($M)	$94.2*	$48.5*	$81.3*

Notes: Asterisk values retrieved from S&P Global; for Q2 2026, S&P Global actual EBITDA is shown for comparability with consensus (see Estimates). Values with asterisks are from S&P Global*.

Q2 FY26 vs Consensus (S&P Global)

Revenue: $754.2M actual vs $704.3M estimate → Beat (approx +7%) (estimate from S&P Global*).
Diluted EPS: $1.36 actual vs $1.34 estimate → Beat (estimate from S&P Global*).
EBITDA: $81.3M actual vs $86.1M estimate → Miss (mix/FX/write-downs) (actual/estimate from S&P Global*).

Segment breakdown (Q2 FY26 vs Q2 FY25)

Segment	Q2 2025 Revenue ($M)	Q2 2025 Operating Income ($M)	Q2 2026 Revenue ($M)	Q2 2026 Operating Income ($M)
Tobacco Operations	$630.2	$77.3	$659.4	$65.2
Ingredients Operations	$80.6	$1.3	$94.8	$(0.2)

KPIs and balance sheet (as of period end)

KPI	Q4 2025 (Mar 31)	Q1 2026 (Jun 30)	Q2 2026 (Sep 30)
Uncommitted Tobacco Inventory (%)	20%	~11%	~13%
Net Debt ($M)	$816.6	$1,065.5	$1,071.9
Revolver Availability ($M)	~$270	~$355	~$340
Interest Expense YoY (first half)	—	—	Down $4M YoY

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue / EPS / Margins	FY26	No formal quantitative guidance provided	No formal quantitative guidance provided; management expects tobacco to move into oversupply by year-end and remains confident in shipping second-half volumes	Maintained qualitative outlook
Segment Commentary	FY26	—	Tobacco: firm demand, earlier shipments; oversupply expected; Ingredients: revenue momentum but margin headwinds from fixed costs/mix; focus on pipeline conversion	Update/qualitative
Dividend	Next payable	Prior quarterly dividend $0.82/share (Aug press release)	Declared $0.82/share; payable Feb 2, 2026 (record date Jan 12, 2026)	Maintained

No explicit quantitative FY26 ranges (revenue, margin, opex, tax) were provided in the quarter’s materials .

Earnings Call Themes & Trends

Topic	Q4 FY25 (Q-2)	Q1 FY26 (Q-1)	Q2 FY26 (Current)	Trend
Supply/demand & oversupply	Expect FCV +20% and burley +30% (ex-China), moving toward balanced/slight oversupply; strong demand persists	Crop sizes significantly larger; moving to balanced → likely oversupply by FY-end; uncommitted 11%	Oversupply expected by year-end; uncommitted 13%; confident shipping backlog	Toward oversupply; UVV positioned to execute
Earlier shipments & mix	FY25 had timing shifts earlier in year; Q4 volumes lower	Q1 benefits from favorable mix; carryover lower YoY	Earlier shipments vs LY; tobacco revenue +5% but OI down on FX/mix/write-downs	Early shipments continue; mix headwinds
Tariffs & CPG macro	Some Q4 timing from tariff anticipation; monitoring sourcing flexibility	Tariff uncertainty pressured Ingredients demand; forward buys to mitigate	Tariff uncertainty and CPG weakness hurt Ingredients earnings	Persistent headwind; UVV mitigating
Ingredients scale/fixed costs	LT target to “margin up” with Lancaster capabilities; need to sell/scale	Higher fixed costs; building pipeline; foundational customer in place	Higher fixed costs and mix drove loss; pipeline conversion ongoing	Scaling, but profit ramp slower
FX/Write-downs	—	—	FX unfavorable; higher inventory write-downs; higher farmer advance provisions	Cost headwinds
Sustainability/energy	Sustainability embedded; progress highlighted in FY25	Emissions verification; biomass boiler in Zimbabwe	Expanded solar, clean electricity transition progress	Ongoing execution

Management Commentary

Strategic positioning: “We have historically performed well in slight oversupply market conditions… It allows us to meet customer needs while also pursuing opportunity sales.”
Tobacco outlook and shipments: “We have lots of tobacco we need to ship for the second half of the year… I’m comfortable with pricing… With that firm demand and still pretty stable pricing, I’m very comfortable.”
Ingredients strategy: “The goal is to fill [the expanded] facility and to build scale… we are converting the pipeline… as volumes grow, we will be able to cover those costs.”
Cost/FX headwinds: Q2 operating income “slightly offset by unfavorable foreign currency comparisons, higher inventory write-downs, and increased provisions for farmer advances.”
Sustainability: “We have significantly expanded our use of clean electricity… on-site installations in Italy, the Dominican Republic, and the Philippines.”

Q&A Highlights

Ingredients utilization and fixed-cost absorption: Management emphasized steady pipeline conversion and confidence that scaling volumes at Lancaster will cover added fixed costs over time; timing varies by customer/product, with CPG macro and tariffs affecting pace .
Tobacco shipments and inventory: Earlier shipments supported the quarter; uncommitted inventory fell to ~13% (from ~20% at Q4), with management confident in staying within comfort range and converting second-half shipments, subject to timing .
Interest expense and leverage: Focus remains on shipping to reduce leverage; interest expense trajectory depends on shipment timing and FX .
Global unsold leaf context: Estimated unsold flue-cured early stocks at 101M kilos as of Sep 30, up 76M kilos from Jun 30, reflecting larger crops .
SG&A modeling: Variability from FX and other moving parts; no specific run-rate guidance .

Estimates Context

Q2 FY26 results vs S&P Global consensus:
- Revenue: $754.2M actual vs $704.3M estimate → Beat (estimate from S&P Global*).
- Diluted EPS: $1.36 actual vs $1.34 estimate → Beat (estimate from S&P Global*).
- EBITDA: $81.3M actual vs $86.1M estimate → Miss (likely driven by mix, FX, and higher write-downs) (actual/estimate from S&P Global*).
Prior periods (actuals shown; consensus not disclosed in-company materials): Q1 FY26 revenue $593.8M, EPS $0.34; Q2 FY25 revenue $710.8M, EPS $1.03 .

Values marked with asterisks are retrieved from S&P Global.

Key Takeaways for Investors

Core beat on revenue/EPS driven by earlier shipments and firm tobacco demand; however, EBITDA softness reflects unfavorable FX/mix/write-downs—watch for mix normalization into the second half .
Oversupply dynamic is unfolding, but UVV historically performs well in slight oversupply; low uncommitted inventory (13%) and strong customer engagement provide shipping visibility and optionality .
Ingredients’ revenue momentum is intact, but profitability is constrained near-term by fixed costs and product mix; scaling and pipeline conversion are key to margin recovery in coming quarters .
Cash conversion/working capital release is a pivotal second-half catalyst: management aims to reduce leverage and interest expense as shipments convert, supporting dividend sustainability and optional capital returns .
FX remains a swing factor; modest headwinds in Q2 contributed to segment OI pressure—FX trajectory and hedging efficacy matter for margin delivery .
Dividend held at $0.82 per quarter (payable Feb 2, 2026), underpinning a steady total-return profile amid cyclical leaf dynamics .
Trading setup: near-term focus on shipment timing/pace, Ingredients margin inflection, and evidence of oversupply benefits (lower green prices, better factory absorption) supporting EBIT resilience into H2 .

Citations

Press release and 8-K (Q2 FY26):
Earnings call (Q2 FY26):
Prior quarter press release/call (Q1 FY26):
FY25 results and call (Q4 FY25):
Dividend press release (Q2 FY26):