Sign in

You're signed outSign in or to get full access.

UC

UNIVERSAL CORP /VA/ (UVV)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 was softer due to earlier shipment timing: revenue $702.3M vs $770.9M in Q4 FY2024 and operating income $42.8M vs $68.2M YoY, with diluted EPS $0.37 (adjusted $0.80) impacted by a $14.1M pension settlement charge .
  • Full-year FY2025 remained strong: revenue $2.95B (+7% YoY) and operating income $232.8M (+5% YoY), driven by higher tobacco prices and improving Ingredients segment profitability .
  • Management guided to larger FY2026 crops ex-China (flue-cured +~20%, burley +~30%) and expects interest expense to decline with normalized Brazil buying and strong cash collections; FY2026 capex targeted at $45–$55M vs $62.6M in FY2025 .
  • Capital return: dividend raised to $0.82/quarter (annualized $3.28) in May, following $0.81 declared in November; buyback program remains authorized ($100M), with no repurchases in Q4 .
  • Stock-relevant narrative: earlier shipments and weather-reduced crops weighed on Q4; Ingredients momentum and crop normalization into FY2026 are key catalysts, alongside dividend continuity and deleveraging .

What Went Well and What Went Wrong

What Went Well

  • Ingredients segment turned positive: Q4 segment operating income $4.4M vs a $1.0M loss in Q4 FY2024; full-year Ingredients operating income $12.3M vs $3.9M, supported by new products and Lancaster expansion capabilities .
  • Strong cash generation and deleveraging: net debt $817M at March 31, 2025, down ~$180M YoY; cash $260.1M with ~$270M revolver availability .
  • Management confidence and strategic clarity: “Fiscal year 2025 was an exceptional year… improved results in both segments” and “excited about prospects… grow ingredients and strengthen our Company” .

What Went Wrong

  • Q4 volume/timing headwind: revenue -9% YoY on ~28% lower tobacco volumes due to earlier shipments in FY2025; operating income -37% YoY; adjusted operating income -41% YoY .
  • Gross margin compression: consolidated gross margin 19.8% in Q4 FY2025 vs 24.4% YoY (–460 bps), reflecting mix, weather-reduced crops, and higher inventory write-downs .
  • One-time pension charge and higher interest: $14.1M pension settlement hit Q4 and FY; interest expense elevated ($18.3M in Q4; $79.6M FY), offsetting higher operating income .

Financial Results

Quarterly progression (oldest → newest)

MetricQ2 FY2025Q3 FY2025Q4 FY2025
Revenue ($USD Millions)$710.8 $937.2 $702.3
Operating Income ($USD Millions)$70.7 $100.7 $42.8
Diluted EPS ($USD)$1.10 $2.27 $0.37
Adjusted Diluted EPS ($USD)N/AN/A$0.80

Notes: Q2 and Q3 are preliminary updates; adjusted EPS provided for Q4 only .

YoY comparison for Q4

MetricQ4 FY2024Q4 FY2025
Revenue ($USD Millions)$770.9 $702.3
Operating Income ($USD Millions)$68.2 $42.8
Gross Margin (%)24.4% 19.8%
Diluted EPS ($USD)$1.61 $0.37
Adjusted Diluted EPS ($USD)$1.79 $0.80

Segment breakdown (Q4)

MetricQ4 FY2024Q4 FY2025
Tobacco Revenue ($USD Millions)$696.3 $612.6
Tobacco Segment Operating Income ($USD Millions)$73.5 $45.8
Ingredients Revenue ($USD Millions)$74.6 $89.7
Ingredients Segment Operating Income ($USD Millions)-$1.0 $4.4

KPIs and selected line items

KPIQ4 FY2025 (or FY-end)
SG&A ($USD Millions, Q4)$73.2
Interest Expense ($USD Millions, Q4)$18.3
Cash and Equivalents ($USD Millions, FY-end)$260.1
Net Debt ($USD Millions, FY-end)$816.6
Net Debt / Net Capitalization (%)36%
Accounts Receivable ($USD Millions, FY-end)$625.9
Uncommitted Tobacco Inventory (Company, Q4)~20%
Worldwide Flue/Burley Uncommitted Stocks (kilos)22M (up 11M vs Dec 31)

Non-GAAP reconciliation highlights (Q4)

ItemAmount
Pension Settlement Charge (pre-tax)$14.1M
Adjusted Operating Income$42.8M (Q4) vs $72.95M prior year Q4
Adjusted Net Income$20.2M (Q4) vs $44.8M prior year Q4
Adjusted Diluted EPS$0.80 (Q4) vs $1.79 prior year Q4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per quarterStarting Aug 2025$0.81 (Nov 2024) $0.82 (Aug 4 payment; announced May 21, 2025) Raised
CapEx ($USD Millions)FY2026N/A$45–$55 New framework (lower vs FY2025 actual $62.6)
Interest ExpenseFY2026N/AExpected down with normalized Brazil buying and cash collections Lower (qualitative)
Tobacco Crop Production (ex-China)FY2026 growing seasonN/AFlue-cured +~20%, Burley +~30% YoY Increase
Share RepurchaseOngoing$100M authorization (Nov 2024) No repurchases in Q4; program remains available Maintained
SG&AFY2026No guidanceNo guidance; investment for capabilities while seeking efficiencies Maintained (no guidance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 FY2025)Current Period (Q4 FY2025)Trend
Supply chain/logisticsExpect heavier 2H shipments; some container/logistics cost pressure (Red Sea) but managed proactively Earlier shipments shifted volume into Q2/Q3; Q4 lighter; strong cash collections Timing normalization; logistics manageable
Tariffs/macroN/A in Q1; Q2 focused on investigation and NYSE notice Modest Q4 sales pulled forward on anticipated tariffs; diversifying supply; avoiding high-tariff purchases Monitoring; mitigation via inventory and alt sourcing
Regulatory/legal (Mozambique)Internal investigation disclosed; delayed filings Investigation complete; no material impact expected; controls strengthened Resolved; remediation ongoing
Product performance (Ingredients)Q1: new products ramping; Lancaster expansion certs ongoing Q4: higher sales volumes; beverage category strength; value-added focus Improving mix and margins
Regional trends (Africa/Brazil)Q1: mild La Niña expected to produce bigger crops; Africa yields better Weather-reduced crops in Brazil/US impacted; FY2026 crops seen larger ex-China From undersupply to balanced
R&D/execution (Lancaster)Ramp-up and certifications progressing; meaningful impact expected FY2026 Expansion completed; platform delivering customized products Build → monetize
Capital allocationElevated debt in Q1 with early buying; expect deleveraging Net debt down ~$180M YoY; capex guide; dividend raised; buyback optionality Deleveraging; consistent dividends

Management Commentary

  • “Fiscal year 2025 was an exceptional year… increased revenue and operating income… improved volumes and quality of burley tobacco crops in Africa… Ingredients benefited from higher sales volumes… and the completion of the expansion project at our Lancaster, Pennsylvania facility.” .
  • “We foresee continued strong demand for tobacco and larger tobacco crops shifting global markets to more balanced tobacco supply positions… continue our progress with Universal Ingredients… excited about our prospects for the year ahead…” .
  • CFO: “Q4 revenue was $702.3M… lower volumes due to timing shifts… adjusted net income $20.2M or $0.80 per share… net debt $817M, $180M lower YoY.” .
  • Sustainability: “Sustainability is good for our business… approval of our net-zero target by the SBTi is a testament to our ability to drive positive business results while making a positive commitment to stewardship.” .

Q&A Highlights

  • SG&A: No forward guidance; FY2025 SG&A $305M with moving pieces (FX, investigation fees, commissions); expect investments for capability with efficiency focus .
  • Tobacco volumes/margins: As crops normalize and prices decline, placement depends on customer duration strategies; expect some volume increase but avoid speculative buying; uncommitted inventory ~20% at 3/31 .
  • Tariffs: Modest pull-forward in Q4; diversified sourcing and inventory strategies to mitigate; not buying at punitive tariff levels .
  • Capital allocation: No Q4 buybacks; prioritizing strategic investments; aim to reduce interest expense in FY2026; capex $45–$55M .
  • Nicotine pouches: Demand dynamics uncertain; UVV participates in nicotine supply where cost-effective; leaf demand remains strong; residual leaf post-extraction generally waste .

Estimates Context

  • Consensus Estimates: S&P Global consensus for Q4 FY2025 EPS and Revenue was unavailable for comparison; actual revenue reported was $702.3M and diluted EPS $0.37 (adjusted $0.80) . Values retrieved from S&P Global.*
  • Implication: Lack of coverage reduces the ability to frame beats/misses; given timing-driven volume shifts and one-time pension charge, near-term estimate revisions may reflect higher FY2026 volumes with lower pricing and reduced interest expense .

Key Takeaways for Investors

  • Q4 softness was primarily timing-related; the full-year trajectory remains positive with higher prices and stabilized operations; watch FY2026 volume placement as crops normalize .
  • Ingredients is inflecting with Lancaster capabilities and value-added mix; expect margin progression as scale spreads platform costs .
  • Balance sheet is strengthening: net debt down ~$180M YoY; expect lower interest expense as Brazil buying normalizes and cash collections remain strong .
  • Dividend durability: 55th consecutive annual increase to $0.82/quarter underpins total return; buyback optionality exists but is secondary to strategic investment .
  • Monitor tariff developments: company has mitigation levers (inventory, alt sourcing); current impact modest but could shift mix and timing .
  • Non-GAAP adjustments matter: $14.1M pension settlement distorted GAAP EPS; adjusted EPS ($0.80) better captures core performance amid timing headwinds .
  • FY2026 setup: larger crops, low uncommitted inventory, and customer duration decisions will drive volumes, pricing, and margins; early signs point to balanced markets vs recent undersupply .

References: .