Richmond, Virginia-based tobacco company Universal Corp. released its annual earnings report for the fiscal year ending March 31.

Chairman, President and Chief Operating Officer George C. Freeman III announced in a May 22 press release that Universal Corp. reported a net income of $104.1 million. The amount is less than the previous year’s reported $105.7 million by $1.5 million. Freeman, however, explained that the results reported were affected by certain non-recurring items which are explained later in the report.

When the “Other Items” cash amounts are excluded from consideration, Universal’s net income for the year ending 2019 increases by $11.7 million, or $0.49 earnings per share.

Universal reports an operating income of $161.2 million for the fiscal year ending March 2019.

The report immediately noted the decrease from the 2018 report listing an operating income of $170.8 million. 2019’s nearly $10 million loss is reportedly due to restructuring and impairment charges of $20.3 million, which are explained in greater detail later in the report under “Other Items.”

Consolidated revenues increased by $193.2 million to $2.2 billion. The report indicated the increase was attributed to higher sales and processing volumes.

“Fiscal year 2019 was another strong year for Universal,” Freeman said in the report. “We increased our tobacco volumes handled, earned additional business with our customers by expanding the services we provide, and have continued to improve our market share. Net income for fiscal year 2019, excluding non-recurring items, was up 12% over fiscal year 2018.”

“During fiscal year 2019, we benefitted from the recovery of African burley production, strong carryover volumes in the first half of the year, and robust demand for wrapper tobacco,” Freeman continued. “Our revenues were up about 10% on those higher volumes, compared to fiscal year 2018. Our gross margin percentage remained flat, even though our product mix was less favorable as we handled a higher percentage of byproducts this year. In addition, results in our North America segment were negatively impacted by weather damage to tobacco crops in the United States, which reduced yields, and third-party processing volumes.”

Freeman voiced Universal’s commitment to its station as the global leader of leaf tobacco supply, saying that the company believes that “opportunities exist to expand our business to help mitigate the impact of consumption declines.”

Universal Corp. is also exploring growth opportunities outside of leaf tobacco, Freeman said.

The report also looked ahead at future tobacco production.

“As we move into fiscal year 2020, we are forecasting larger flue-cured and burley tobacco global crop production than those grown in our fiscal year 2019 and believe that both flue-cured and burley tobacco may be in slight oversupply positions compared with anticipated market demand,” Freeman said. “It is still early in the fiscal year 2020 crop cycle, but we are expecting lower carryover crop volumes and reduced North American volumes.”

The report detailed “Other Regions” operations as favorable. Operating income increased by $4.8 million, ending at $151.5 million for 2019.

According to the Universal Corp. report, the increase was due to stronger sales and processing volumes that were partially offset by higher selling, general and administrative costs.

Revenues for the “Other Regions” segment were up $87.6 million compared to fiscal year 2018. This was offset, in part, by lower sales prices and a less favorable product mix.

The cost of goods increased by 10% to $1.8 billion.

Further into the report, under the heading “Other Items,” the Universal Corp. explained in detail the definition and losses attributed to the phrase as referenced at the beginning.

“Cost of goods sold increased by 10% to $1.8 billion for the fiscal year and by 12% to ($600 million) for the quarter ended March 31, 2019, both compared with the same periods in the prior fiscal year, and consistent with similar percentage changes in revenues,” the report said. “Selling, general and administrative costs for fiscal year 2019 increased by $24.0 million to $225.1 million, mainly driven by higher compensation and incentive accruals, higher customer claims and allowance costs, negative foreign currency remeasurement and exchange variances, and higher value-added tax charges, partly offset by higher net recoveries on advances to suppliers, compared with fiscal year 2018. Selling, general and administrative costs were up $1.5 million for the three months ended March 31, 2019, compared to the same period in the prior year. In both periods, selling, general and administrative costs were flat as a percentage of sales, compared to the prior fiscal year periods.”

For fiscal year 2019, Universal’s consolidated effective income tax rate on pretax earnings was 27% and 41%, respectively, compared to 30% and 42%, respectively, in 2018.

Universal Corp. said it provides the annual report to give investors important information to understand its business results and trends.

Universal Corp. hosted a conference call on May 22 to discuss the report. A recording of the call is available online at universalcorp.com. The recording will be available through Aug. 22.

Noel Oliver is a freelance writer in southern Virginia.