Good afternoon, ladies and gentlemen, and welcome to the Universal Corporation third quarter fiscal year 2024 earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, February 7th, 2024. I would now like to turn the conference over to Jennifer Rowe, Assistant Treasurer at Universal Corporation. Please go ahead. Thank you for joining us. 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 taped replay. It will remain on the website through February 7th, 2024. 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, 2023. Such risks and uncertainties include, but are not limited to: impacts of pandemics, customer and 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 sources. Finally, some of the information I have for you today is based on the 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. Universal Corporation again delivered strong financial and operational performance in the third quarter of fiscal year 2024. Operating income and net income for the quarter were up 13% and 28% respectively, relative to the third quarter of fiscal year 2023, which helped increase our operating income and net income for the nine months of fiscal year 2024 by 20% and 13%, respectively, compared to the same period last fiscal year. Our tobacco business continued to perform very well, driven by a favorable product mix and strong demand from our customers. Improved margins, larger crops in Africa, and strong tobacco shipments in line with our expectations benefited our results in the nine months and quarter ended December 31, 2023, compared to the same periods last fiscal year. We continue to be encouraged by the solid progress the team is making to expand our ingredients business. The investments we have made to build out the research and development and corporate sales teams are starting to gain momentum and have positioned us for future growth. Some financial highlights for the nine months and quarter ended December 31, 2023. Net income for the nine months was $79.3 million, or $3.17 per diluted share, and was $53.2 million, or $2.12 per diluted share for the quarter ended December 31, 2023. Excluding certain non-recurring items detailed in today's press release, net income increased by $12.6 million, and diluted earnings per share increased by $0.49 for the nine months, and net income and diluted earnings per share increased by $12.1 million or $0.49 per share, respectively, for the quarter ended December 31, 2023, compared to the same period last fiscal year. Operating income of $153.8 million for the nine months ended December 31, 2023, increased by $25.1 million, and operating income for the quarter of $87.5 million increased by $9.9 million. Selling, general, and administrative expenses were up $21 million in the nine months on higher compensation costs and up $10.6 million in the quarter ended December 31, 2023, largely on higher compensation costs and unfavorable foreign currency comparison compared to the same period last fiscal year. Some highlights for our segments. Operating income for the tobacco operations segment increased by $29.9 million to $148.9 million for the nine months, and by $10.5 million to $87.6 million for the quarter ended December 31, 2023, compared to the nine months and quarter ended December 31, 2022. Tobacco operations segment operating income was up largely on higher prices and a more favorable product mix, partially offset by lower tobacco sales volume. In the nine months and quarter ended December 31, 2023, African crops were larger and carryover crop shipments from South America were significantly lower compared to the same period in fiscal year 2023. Operating income for the ingredients operation segment was $5 million and $2.2 million, respectively, for the nine months and quarter ended December 31, 2023. In the quarter ended December 31, 2023, operating income for our ingredients operation segment was in line with results for the same quarter in the prior fiscal year, as incremental revenue and margins from the sale of new products offset the effects of market challenges for our core products and higher expenses resulting from the investments that we're making to position the segment for future growth. Operating income for the segment for the nine months ended December 31, 2023, was lower as compared to the same period in the prior year, mainly as a result of lower operating income in the first quarter of the current fiscal year. Results for the first quarter of fiscal year 2024 were negatively impacted by customer inventory recalibrations. As we enter our last quarter of fiscal year 2024, global leaf supply for all types of leaf tobacco continues to be tight. As of December 31, 2023, our uncommitted tobacco inventory was at a low level of 8%. While we expect global leaf tobacco supply to remain tight in fiscal year 2025, in part due to El Niño weather conditions, we believe the strength of our diverse global footprint will help us satisfy our customers' leaf tobacco needs. With our ingredients business, we are pleased with the progress we are making on the expansion of our processing capabilities at our ingredients facility in Lancaster, Pennsylvania. We expect those resources to be fully operational in the third quarter of fiscal year 2025 and positively contributing to our earnings as soon as fiscal year 2026. Another important achievement in fiscal year 2024 has been the progress we made to advance Universal's global sustainability agenda. These include the December publication of our 2023 sustainability report and our recently announced participation in a solar project that we believe will help us meet our target to reduce operational greenhouse gas emissions by 30% by 2030. We are pleased with our sustainability advances, and we continue to seek opportunities to further promote sustainability in our business. We are proud of our performance thus far in fiscal year 2024. We believe our strategy of maximizing opportunities in our tobacco businesses by capitalizing on our industry-leading market position in the primary exporting regions and our robust sustainability practices, while at the same time investing for growth in our ingredients business, continues to serve us well. Demand for leaf tobacco and our relationships with our long-standing and diverse customer base remain strong, and our position in the tobacco business can offer us opportunities in the future. We continue to make measured and thoughtful progress on our ingredients platform, and we are excited about the opportunities for our business. We believe that we are on the right path for a successful future. At this time, we are available to take your questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your telephone keypad. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press the star followed by the number two. If in case you're using a speakerphone, please keep the handset before pressing any keys. One moment, please, for your first question. Your first question comes from the lineup. Ann Gurkin from Davenport, your line is open. Good evening, everybody. Congratulations on good numbers. Thank you. Thank you, Ann. Also a big congratulations on your progress versus your sustainability goals. That is well done. A lot of kudos to you all for achieving those goals and maybe even achieving them ahead of time. Thank you. I wanted to start, if I may, with the ingredients segment. I have a number of questions. So operating profit of $2.2 million, you just talked about highlights, sales of new products, but also sales of core products or existing products at lower margin, and also some additional costs for investing for future growth. Can you break out those additional, that cost component? Kind of what's an underlying operating profit number, like, without the, the investment cost in it for the ingredient segment? And as you well know, we, you know, don't break out individual pieces. However, what we can tell you is that, you know, you're now seeing a fairly complete R&D and commercial group cost structure. So we only have seen a glimmer of the benefits of these investments, and we expect it will take until 2026, as Jennifer said, till we see positive earnings from these. So, you know, as we told you previously, we're making some significant investments in the R&D area as well as in the commercial group. So, you know, but those investments, it will take a little bit of time for those to really show earnings. On top of that, of course, as Jennifer pointed out, the facility in Lancaster won't come online until later this year. And at that point in time, we will be able to actually produce that product. So again, it will take a little bit of time for us to get there. So we had a couple of weak quarters early on. There is still some weakness in the core products, but we are seeing some of those benefits from these commercial folks that we have hired, and especially the R&D that we pointed out, where, you know, there are some new products that we have put out there, which will be more sticky, which add value, which you margin up. So all that looks positive, but it's gonna take a little bit of time for us to truly see the benefit of all these investments. Okay, so the sequential slowdown from Q2 to Q3, maybe it's partially seasonal, but partially reflecting a step up in these investments. Is that kind of fair to think about it? Yeah. Yeah, that is fair. That level of investment should continue Q4, fiscal 2025. So we'll think about the margin kind of in the low single-digit range going forward, because the level of investments in the mix of business, or how do I think about margin progression? I had expected it to continue to strengthen through fiscal 2024 and then into 2025. But should I change that thought process? Well, as I pointed out, again, the platform, commercial group, the R&D group is pretty much built out. So those costs are now baked in and, you know, you might have a person here or a person there, but at the end of the day, those costs are in, and they're gonna be around for a while. So the question there becomes: How much more can you sell? At the moment, the capacity is limited. Yes, we still have capacity on core products, but in order to sell these new products that we are going out selling with the R&D group, with the help of the R&D group, you know, you need to get that factory online, and that's not gonna happen for a little bit. That's why we're saying it is gonna take a little bit of time. You know, again, we had a weak, very weak first quarter where we took some inventory write-downs because raw material prices were coming down faster than anticipated. We had—we're sitting on a little bit of inventory there, so. But in total, raw material prices are coming down, so from a revenue, you know, similar to tobacco, when green prices on tobacco come down, you just pass that on. So we'll see where we end up with the margins. The margin percentages are holding up really nicely at the moment, and we only think that's gonna be better in the future, you know, again, because of the R&D, the stickiness of the new products that we're developing and all those things that come with this new investment we're making. What I think should be a high single-digit operating margin target for this ingredient segment business, I should think about that, hitting that target more in fiscal 2026? I'm not gonna give you an exact number, but we should see improvement in the future. Great. Because, again, that's otherwise, we wouldn't make these investments. These are sizable investments, and we need to see, you know, good returns on those investments. The pace of investments, is it taking a little bit longer for the investments in Lancaster? You brought CapEx down a little bit. Is that a reflection of maybe the timeline for investing in the ingredients business, or is there anything else to read into that? No, there was a bit of a delay getting some of the approvals, and when the facility comes online, you know, we have to do trial runs, and we have to do some other things. So, you know, it's taking a little bit longer than anticipated. We're working as fast as we can. You know, everybody is screaming for product, and until we can make it, we can't sell it. So certainly, everybody is fully aware that we want to put it online as quickly as we can, but we have to be conscious of, you know, being able to make the product right and everything being in order in that facility. The increase in sales force, I think some of the opportunity was to try to cross-sell product among customers. Are you achieving that, any of that ability with your new product sales? Yes. Yes, we are. As we pointed out previously, again, with the help of the R&D group, we are using, you know, people from the different companies that we bought to go to customers with cross products, you know, a little bit of a beverage, a little bit of a dry product in there. That is, again, slightly different, but it adds value, and it's you can margin up on those things, because, again, if they buy it, you have a product that is unique. That's great. Okay, great. Switching over to tobacco, how should I think about sales volumes in fiscal 2025, given that it looks like the industry or the outlook for the global crop has tightened more, particularly in South America? How do I think about that top line or those volumes pricing fiscal 2025 for tobacco? As we stated, we continue seeing strong demand for all varieties of tobacco that we produce. And of course, the El Niño effect is there in South America and Brazil. We estimate about 20% reduction of that crop size there as a country. And in Africa, we had some rains, and the transplanting of tobacco is completed. And right now, we are seeing a dry spell right there, but hopefully in the next coming weeks, we're gonna see some rain. Tobacco is a very resilient plant. And so we see also shipments now, not just for the fiscal year 2025, but also still in the last quarter of 2024. If you look at our balance sheet, we have over $1 billion of tobacco inventory. So we are estimating and projecting to just substantially ship out some of that tobacco that we have. As we stated, we have a uncommitted inventory of 8%, which is low. And part of that tobacco, of course, always, you know, cutting time there, it's March, and part of that tobacco might fall into the next fiscal year. Okay. And then, regarding the tobacco, do you expect still that-- Or I guess I'm looking for worldwide, sorry, uncommitted leaf number. Maybe Jennifer has that? Yes, it was 14 million kilos at the end of December. Okay. Great. And then in your, I guess, investor presentation, you did talk about under the prior presentation, under other tobacco businesses, talked about opportunities to service customers, sheet tobacco, liquid nicotine, but you took out lab services in the new investor presentation. Is there anything to read into that? Is that a change in direction in terms of services offering customers? Yeah, in that case, specifically about the labs, we discontinue that service that we were providing was underperforming according to, you know, the targets that we have. But on the other areas, we continue seeing opportunities, especially in the sheet products that we have. We have projects ongoing as we speak here. And yeah, we continue seeing opportunity, not just that, but in the services side as well. We also stated in quarters before that on our dark tobacco operations, we also taking a step further into servicing, you know, the wrapper sorting and bobbinizing some of the products for the cigar industry and mass cigar industry. So we continue seeing good opportunities there, too. Are you gaining market share in terms of tobacco leaf sales? Yes. According to our database, yes, we are gaining market share. Great. Congrats. And then also on this investor presentation, there's a page talking about the increase in working capital needs in fiscal 2023, and how do I think about that in fiscal 2024 and 2025? And if that number comes down, which I think it would, what is the potential use for that freed up cash? Well, and as you all know, it all depends on the sizes of the crops, pricing of the crops, currency of those crops. So hopefully, you're right, and we certainly see that working capital coming down a little bit going forward. When that frees up, we certainly have plenty of investments on both the tobacco side as well as the ingredient side, where we can use those funds to add value and create shareholder value. Okay. And then, can you help me at all with SG&A expenses for fiscal 2025? As pointed out just now, again, I think we—this one was slightly elevated. I do have to say, you know, that 78 was slightly higher than we thought. Yep. But again, you know, foreign currency comparisons compared to last year, last year was quite low. You know, we have now some performance comp that, you know, propped that thing up a little bit. So, you know, again, going forward, we certainly will be higher than, you know, prior years just because of that R&D and those commercial costs that, that we are incurring. Okay. What is your appetite for M&A on the ingredients platform? We will certainly be looking. We continue to look. The pipeline is active, but our leverage at the moment is up. So until we bring that down a little bit more, we will remain on the sidelines unless something spectacular comes along. Okay. And then, just in terms of management structure, you announced a change for Preston's position and kind of what does his role entail? And then can you tell me who is Treasurer of Universal now? I'm sorry, I've lost track. Our new Treasurer's name is Wushuang Ma. He goes by Bush. He joined us on January 1st, and we're very happy that he has joined us. Great. And then Preston. And, Preston is now in transitioning to more of a management role. Okay. Okay, that's great. That's all I have. I appreciate your time very much. Thank you. Thanks, Ann. Thanks. Thanks, Ann. Thank you. There are no further questions at this time. I would like to turn it back to Jennifer Rowe for closing remarks. Thank you all for joining us today on our call. Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.