Good afternoon. Thank you for attending today's Universal Corporation 3rd quarter fiscal year 2023 earnings call. My name is Megan, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to Candace Formacek, Vice President and Treasurer. Candace, please go ahead. Thank you, Megan, and thank you all for joining us today. George Freeman, our Chairman, President, and CEO, Airton Hentschke, our Chief Operating Officer, and Johan Kroner, our Chief Financial Officer, are here with me today and will join me in answering questions after these brief remarks. This call is being webcast live and will be available on our website and on telephone tape replay. It will remain on our website through May 8, 2023. Other than the replay, we have not authorized and disclaim responsibility for any recording, replay, or distribution of any transcription of this call. This call is copyrighted and may not be used without our permission. Before I begin to discuss our results, I caution you that we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future and are representative as of today only. Actual results could differ materially from projected or estimated results, and we assume no obligation to update any forward-looking statements. For information on some of the factors that can affect our estimates, I urge you to read our 10-K for the year ended March 31, 2022, as well as our form 10-Q for the quarter ended December 31, 2022. Such risks and uncertainties include, but are not limited to, the ongoing COVID-19 pandemic, Sorry, customer-mandated timing of shipments, weather conditions, political and economic environment, government regulation and taxation, changes in exchange rates and interest rates, industry consolidation and evolution, and changes in market structure or resources. Finally, some of the information I have for you today is based on unaudited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may include non-GAAP financial measures. For details on these measures, including reconciliations to the most comparable GAAP measures, please refer to our current earnings press release. We are extremely pleased with our results, driven by strong tobacco shipments in the 9 months and quarter ended December 31, 2022, compared to the same periods in fiscal year 2022. Tobacco shipments are generally moving smoothly, we are not seeing logistical constraints that we saw in the prior fiscal year. Our ingredients operations segment also continued to positively contribute to and diversify our results in the 9 months and quarter ended December 31, 2022. There continues to be significant demand for leaf tobacco, with all types of leaf tobacco currently in an undersupplied position. Short burley tobacco crops in Africa, largely due to weather conditions, have contributed to the lower leaf tobacco supply. As of December 31, 2022, our uncommitted inventory levels stood at less than 7% of our tobacco inventory, an exceptionally low level. Although it is still early, we are forecasting larger crops in several key tobacco origins in fiscal year 2024. In our ingredients operations segment, we recently have been experiencing some softening of demand for some of our ingredients products, which we believe is temporary and largely due to customers adjusting their inventory levels. Some of our ingredients customers have been carrying higher inventory levels because of supply chain uncertainties. Increased costs, particularly Selling, General and Administrative expenses, including costs related to the expansion of sales and product development resources and deferred compensation costs from acquisitions, reduced our results for our ingredients operations segment in the quarter and nine months ended December 31, 2022. We remain excited about the long-term outlook for our ingredients businesses and continue to make significant capital investments to enhance and increase the capabilities of our plant-based ingredients platform. We are ahead of achieving some of the earlier identified operational synergies across the platform and making considerable progress on our vision for the segment. As announced on February 1, 2023, we have appointed a new director with extensive experience in the ingredients and value-added supplier space to our corporate board of directors to assist us as we continue to promote and expand this business. Turning to the results, net income for the 9 months ended December 31, 2022 was $70.3 million or $2.82 per diluted share, compared with $60.8 million or $2.44 per diluted share for the 9 months ended December 31, 2021. Excluding certain non-recurring items detailed in today's earnings release, net income and diluted earnings per share increased by $1.1 million and $0.04 respectively for the nine months ended December 31, 2022 compared to the nine months ended December 31, 2021. Adjusted operating income, also detailed in today's earnings release of $128.7 million, increased by $12.2 million for the nine months ended December 31, 2022 compared to adjusted operating income of $116.5 million for the nine months ended December 31, 2021. Net income for the quarter ended December 31, 2022 was $41.7 million or $1.67 per diluted share, compared with $34.9 million or $1.40 per diluted share for the quarter ended December 31, 2021. Excluding certain nonrecurring items detailed in today's earnings release, net income and diluted earnings per share decreased by $3.1 million and $0.13, respectively, for the quarter ended December 31, 2022, compared to the quarter ended December 31, 2021. Adjusted operating income, also detailed in today's earnings release, of $77.5 million increased by $2.7 million for the third quarter of fiscal year 2023, compared to adjusted operating income of $74.9 million for the third quarter of fiscal year 2022. Consolidated revenues increased by $419.2 million to $1.9 billion for the 9 months ended December 31, 2022, compared to the same period in fiscal year 2022, on higher tobacco sales volumes and prices, as well as the addition of the business acquired in October 2021 in the ingredients operations segment. For the quarter ended December 31, 2022, consolidated revenues were $795 million, an increase of $142.4 million compared to $652.6 million for the quarter ended December 31, 2021, on higher tobacco sales volumes and prices. Turning to the segment detail. Tobacco operations. Operating income for the tobacco operations segment increased by $13.4 million to $119 million and by $7.3 million to $77.1 million respectively for the nine months and quarter ended December 31, 2022, compared to the same periods in the prior fiscal year. Tobacco operations segment results improved primarily due to large shipments of both carryover and current crop tobacco. While sales volumes were higher in the tobacco operations segment in the nine month and quarter ended December 31, 2022, compared to the same periods in the prior fiscal year, margins were lower due to sales mix and sales of tobaccos that were written down in prior quarters. Tobacco shipments from Brazil of both carryover and current crops were up significantly in the 9 months and quarter ended December 31, 2022, compared to the same periods in the previous fiscal year. In Africa, despite some lower burley tobacco crop sizes, tobacco sales volumes were up due to earlier shipment timing in the 9 months and quarter ended December 31, 2022, compared to the same periods in fiscal year 2022. Results for our Oriental Tobacco Joint Venture were down in the 9 months and quarter ended December 31, 2022, compared to the same periods in the prior fiscal year on lower sales volumes and unfavorable foreign currency comparisons. Selling, General, and Administrative expenses for the tobacco operations segment were higher in the 9 months ended December 31, 2022, compared to the 9 months ended December 31, 2021, primarily due to unfavorable foreign currency comparisons, higher provisions to suppliers, and higher compensation costs. For the quarter ended December 31, 2022, Selling, General, and Administrative expenses for the tobacco operations segment were higher compared to the quarter ended December 31, 2021, largely due to higher compensation costs and larger provisions to suppliers, in part due to lower crop yields, partially offset by favorable foreign exchange comparisons. Moving to the ingredients operations. Operating income for the ingredients operations segment was $9.9 million for the nine months ended December 31, 2022, compared to $10.6 million for the nine months ended December 31, 2021, as benefits from increased sales, better margins, and the inclusion of the October 2021 purchase of Shank's Extracts, LLC were offset by increased costs, mainly higher selling, general, and administrative expenses. Operating income for the segment was $0.8 million for the quarter ended December 31, 2022, compared to $3.5 million for the quarter ended December 31, 2021 on lower sales, particularly lower sales of extracts and higher costs. Selling, general, and administrative expenses for the segment increased in the 9 months and quarter ended December 31, 2022, compared to the same periods in the prior fiscal year, largely on higher compensation costs, including final deferred compensation costs from acquisitions, as well as costs related to the expansion of sales and product development capabilities of our plant-based ingredients platform. In other items, we successfully refinanced and expanded our bank credit facility in the quarter ended December 31, 2022, positioning us to meet our future financial needs. In line with our previous expectations, we also reduced our outstanding borrowings considerably in the 3 months ended December 31, 2022, as we moved beyond our peak working capital requirements for fiscal year 2023. Our fiscal year 2022 sustainability report was published in December 2022 and is available on our website, www.universalcorp.com. Sustainability is an essential pillar of our business at Universal. We are committed to disclosing our operational activities as well as our sustainability performance in a consistent and transparent manner. We are excited about our sustainability achievements and the new and updated information and disclosures contained in our 2022 sustainability report. At this time, we're available to take your questions. Megan, I'll turn it back to you. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from line of Ann Gurkin with Davenport & Company. Your line is now open. Thank you. Hi, everybody. Hey. Hi, Ann. I want to start with the ingredients segment and the slowdown in sales. I think, Candace, you just said it was mainly due to extracts. I wanted to walk through the different segments and see if anything else is going on. Beginning with FruitSmart, is there any kind of slowdown in the end market for the use of those derivatives and beverages? No, really where we're seeing it is Johan. Where we're seeing it really is because the uncertainty during COVID and everything, a bunch of customers just have additional inventory that they're just trying to sell off right now, and that's where the slowdown is, and we believe it's temporary. Okay, it seems to me the end market for specialty ingredients is very strong, growing strong double digits. Are you also seeing reduced inventory there? I thought the pull-through from that segment was very strong. Again, depending on what products you're talking about you're partially right, but in all the products, it's down a little bit. Again, we truly believe that it's temporary at this point in time. You know, we saw it through the quarter. There's a bit of an uptick, but we just have to see what the rest of the quarter will do and the rest of the year. Okay. How do I think about fiscal 24 for the ingredients business? That remains to be seen, Ann. It looks really positive. We're making some significant investments. We see quite a bit of upside, so we're really excited about that. We're incurring some additional costs as well in order to get that all up to speed. You know, it looks good. Margins are holding up nicely. We just have to see what the sales do throughout the year. Okay. In terms of SG&A, for the whole company, I never know how to think about that. It was about $70 million, slightly under that in this quarter. Do I take that and run that into fiscal 2024? How... Some of that seemed to have some of these compensation expenses and maybe Shank payments and different factors that maybe should flow out. I don't know. How do I think about that number for fiscal 2024? Well, as always, there is lots of variables in there. You know, exchange rates. Yeah ... comp costs are certainly up, inflationary things that are going on. You know, at the moment, we're in the ballpark. You know, we're always looking for efficiencies and things we can do. You know, on the other hand, again, like I said before on the ingredients side, we're ramping up some hiring and everything that will increase the amount a bit. You know, right now where we're at, looks about. Ann, are you- Did we lose you, Ann? Yeah. Did we lose you? Megan? Hey, it does seem that Ann has muted her line. Oh. Unmute, Ann. Ms. Gurkin, can you hear us? Is there another question? Megan, maybe we can move along if she can get back in or dial back in. We can take an extra moment for her. If you have someone else, we can. There are no further questions registered. As a reminder, it is star one on your telephone keypad. Our next question comes from the line of Chris Reynolds with Neuberger Berman. Your line is now open. Good afternoon, and congratulations on the good quarter. Thank you. Thanks. I wanted to ask you just a general question about global tobacco consumption. You know, it seems like it continues to be pressured because of trends towards smoking less and then combustibles and then sort of general economic conditions being weak. You know, that doesn't appear to be showing up in your numbers, though. I'm just wondering if you can give some commentary about sort of how you view the tobacco segment. You've always been fairly conservative with your guidance for growth, but maybe if you could just give an update on how you view global industry consumption trends this year. Yeah, Chris, it's different from market to market, of course. I mean, if you separate the U.S. and the Americas, of course, Europe and Asia, we see different dynamics in different markets. Overall, we still see a very positive consumption out there, which, our major, our major customers reported numbers. So we're very positive about the combustible side. At the same time, as we all know, there are new products and these new generation products, whether it's heat-not-burn and vaping products out there. We remain positive about the consumption of combustible cigarettes. Okay. Thank you. You're welcome. Thank you, Mr. Reynolds. Our next question comes from the line of Bruce Monrad with Northeast Investors. Your line is now open. Hi, everyone. Can you hear me okay? Yes. Okay, great. Thanks for hosting the call. A question that you made a reference in the script, that there was some indications that crops for fiscal year 2024 were looking very well. Can you add a little color on that? Then maybe staple onto that what that might mean in terms of pricing and I guess I'm also asking what that would mean for your inventory levels going forward and sort of on a comparison basis, 'cause I think maybe part of the reason inventories are elevated is pricing. Anyway, what's the crop outlook if there's any color to add on that, and how does that fit in, please? Certainly, Bruce. What we are seeing in the key markets, especially where we operate, we see increased crop sizes there. That's positive because we play an important role in these key markets as well, where we promote tobacco production with our farmer base out there. What we have seen in terms of cost, of course these inflationary costs and fertilizer costs from that, it's hitting this crop. We do see increase in tobacco prices, lean prices to the farmer, and that is different again in every market. We remain very positive about the demand. As you have seen there, our uncommitted inventory is in our lowest level for many, many years. It's about below 7% right now. We like to have some additional uncommitted inventory because we don't wanna lose any opportunity or any request that our customers have there. Looking into this 2003 crop cycle, we remain positive. In some areas, the crop sizes are confirmed. In some other areas, they're still developing, like Africa. In some other areas, they have not been even started the growing process, so. We remain positive about about the increased crop sizes and so Universal Leaf is well positioned for that as well. Great. And if I could maybe a little bit further. You know, big picture, stepping back we've had a couple of years of transport issues and the like, and I think I'm right in saying that your customers, your end customers can have lots of inventory, long cycle and the like. Would it be unfair to say that there's sort of clear sailing here, and do you have an indication that they would want to make up for a couple of years worth of shipping problems and the like? Is there a structural tailwind for you in terms of your customers wanting to rebuild inventories to where they might have been? Would that be fair, or how would you describe that? No, we don't see that, and each customer has its own policies on inventory, on their durations. What we have seen is that cost of transport and logistics has come substantially down. Again, the demand seems to be strong. We don't see adjustments, big adjustments in their, in their durations policy now. Okay. All right, thank you again. Appreciate it. Thank you, Mr. Monrad. Our next question is a follow-up from Ann Gurkin with Davenport & Company. Your line is now open. Hi. I got cut off somehow. I apologize. Yeah. No, we were like, "Ann? Ann?" How are you? Hello. I don't know if you all talked about the refinance bank credit facility, but have you fixed that rate, or is that a variable floating rate on that new facility? We fixed some of it, Ann. You know, based on where the current rates are and not knowing where the Fed is going with this whole thing we decided to fix some of it and just wait to see if we do more in the future. You know. Those details will be in the Q. Correct. If you want to get into that. They will- I saw that and I couldn't tell how much. I'm sorry. I couldn't read it fast enough to see how much was fixed in the Q. Yeah. It was- About. You had swaps on it. 50% of the whole sum. ... before then fixed the rate. Like, yeah. Okay. Rates should go up, interest rate expense should go up in fiscal 2024 depending on what happens. Yeah. The overall... Again, the rates are going up depending on working capital and all that, the borrowings that we require. We certainly had some of the old hedges were in place. You know, we have some positives there that might offset. Yeah, rates are up certainly and our borrowing certainly were up during the year. All right. How should I think of the margin progression for the tobacco segment in fiscal 2024 versus fiscal 2023? Margin was a little bit less than I was looking for this quarter, I think due to mix, maybe some carryover. You said you wrote down some tobacco, so I'm not sure how to think about tobacco margin over the next, say, 12-18 months for the segment. It's too early for that. you know, we just Brazil just started, and hopefully that market remains where it is, and it doesn't go into the situation where it was last year. you know, if we get the crops and everything, there certainly is a strong demand, as Airton pointed out. you know, we believe it looks all positive, but again, it's really early. The African crops are in the ground, and we'll have to see. Hopefully, weather will continue to cooperate there, and then some areas we don't have it even in the ground yet. we'll have to determine what volumes are out there and everything, and hopefully we can do what we need to do, and get the margins that we require. Yeah, certainly this year we had some of the mix and some of those written down inventories that we moved in the last nine months. Okay. Then worldwide uncommitted inventory number, Candace? The worldwide unsold flue-cured and burley stocks are at 47 million, at 12/31, which is down 2 million from the June rate level. Okay. With your inventory... You were just talking about your inventory level for Universal at 7%. That is low given that you usually keep a little reserve for customers. Can you walk me through kind of the thought process behind that? It just wasn't there, Ann. We fully agree with you. Airton just pointed out in one of the other questions that we prefer to have a little bit more because we certainly like to be able to offer tobacco to customers, and we have very little at the moment. You know, we're trying to get the crops up where we can, and it looks all positive certainly for the 2023 crop. Like I said, some of them are not even in the ground yet, but we're certainly working on that. If the weather cooperates and all that, then we will certainly get some additional volume that we will buy because, again, demand is strong at the moment. Okay. Then CapEx plans for fiscal 2024, do you have any range for that? No, we're giving the, for the next 12 months, we're between $70 million and $80 million. Right. again, that's because we're looking at to make some significant investment in the ingredients platform to enhance the capabilities that we have. Okay. Then the synergy number for the ingredients platform, was that $20 million? Am I remembering that correctly? No, we have not put out a synergy number. We're talking about operational synergies. Okay there, where we're, you know. Okay ... going across the platform, hiring some R&D people and some sales folks, which again, that's where you have the addition to some of the SG&A cost. you know, we need to do that to be able to do all these things that we have in mind with the platform. Okay. You haven't put out a target number? No, we have not. Okay, great. The last thing is I'm just bracing for a volatile year in the, in the tobacco landscape for your customers, with potential standards being set for reducing nicotine and maybe a menthol ban later in the year. California's law banning the sale of menthol, smokable products went into effect, beginning of 2023. I guess, how are you working with customers? How are you positioning Universal, and what is a transition to a heat-not-burn or smoke-free world and what could be a volatile, combustible environment? I would just like an update kind of on your thoughts here. I ask this from time to time, and I was just curious. Sutton, you addressed the, our outlook on combustibles earlier, but just remind me so Ann doesn't have to re-listen. Yeah, we remain positive. Right ... the combustible market overall. Of course, as stated in previous quarters that we operate also in the heat-not-burn market with our Shielco operations there in Europe. Our Mari Nic, the liquid nicotine, still continues to developing, but it's not material for us today. We do see opportunities for Universal even in all these segments. What is also very strong there is on the cigar. The cigar business. We do see increased demand for wrappers and binders for that segment of the market, which we are also working hard to increase production there. We remain positive about this market. In addition, just keep in mind, right, the U.S. is from a cigarette consumption standpoint is less than 5% of the worldwide, that's China. Very important customer certainly here in the U.S. for us, but you know, just keep that in mind when they are starting to talk about this. Still, what's going to happen with regard to legal lawsuits type of things, we just don't have insight into that. That's great. Okay, that's great. Thank you all for your time. I apologize for disconnecting. No worries. No problem. Thanks, Ann. No problem. Thanks. Thank you, Ms. Gurkin. There are currently no further questions registered, so as a reminder, it is star one on your telephone keypad. All right. There are no additional questions waiting at this time. Okay. Oh, I do apologize. Great. That's okay. Sorry, I didn't mean to jump in on you. Just was gonna say, thanks to the folks listening in, and we appreciate your time as usual. We look forward to talking to you next quarter. Bye-bye. That concludes the Universal Corporation third quarter fiscal year 2023 earnings call. Thank you for your participation. Have a wonderful rest of your day.