Good day, and thank you for standing by. Welcome to Universal Corporation Fiscal Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Candace Formacek, Vice President and Treasurer. Thank you. Please go ahead.

Thank you, Meika, and thank you all for joining us this evening. 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 our website through August 26, 2021. 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. This is of particular note during the current ongoing COVID-19 pandemic, when the length and severity of the crisis and resultant economic and business impacts are so difficult to predict. 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, 2020, as well as our Form 10-K for the year ended March 31, 2021 which we expect to file with the SEC later this week. Such risks and uncertainties include, but are not limited to, the ongoing COVID-19 pandemic, 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 sources. Finally, some of the information I…

Thank you. [Operator Instructions] Your first question comes from the line of Ann Gurkin from Davenport & Co. Your line is now open.

Good evening to everybody.

Hey, Ann.

Hey, Ann.

That was a very impressive gross margin number for the year. You talked about the tobacco carryover and wrapper. Is there anything else in that 19.5%?

No. Insightful mix and certainly we have been looking very hard at cost efficiency. And you have seen over the last couple of years, some restructuring that we have done and we're looking at that constantly, so that helped as well.

And as we go forward into fiscal 2022, how should I think about that number?

It all depends on the mix, right? The mix was really positive as compared to the prior year. So it all depends on what that mix looks like going forward. The wrapper demand is still there. So it looks positive.

Okay. Can you help me at all with fiscal 2022 components revenues? How should I think about interest expense, which was much higher than I was looking for in fiscal 2021 SG&A expense, CapEx, any of those factors?

Well, there's a couple of things that we've pointed out. Certainly, CapEx would be that 35 and 45. The reason the interest was up certainly was because we took on an extra $150 million related to the acquisition that we made this year. There was also some additional in there that we had pointed out and we'll be pointing out in the 10-K that will be filed later this week. I think it was about $1.8 million. So there's a couple of things in there. With regard to the tobacco business going forward, it looks good, but it's really early on. So we'll have to see how it all works itself out for fiscal year 2022.

Okay. The $1.8 million is a one-time fiscal 2021 impact, or does that continue within that component?

That was a one-time fiscal year 2021 impact.

Okay. That helps. Okay. Great. And then last quarter I asked about – you all talked about working on synergies among the acquired businesses. Do you have any more detail to give any kind of synergy number among your recent acquisitions?

What we told you last time around really is what we're trying to determinate is there any overlap there that we can use the marketing groups of the two companies to help each other out that we will continue to do that, and we'll continue to be very focused on integration, which is still ongoing. So there's no real numbers to that just yet, but all looks positive there as well.

Okay. Sorry, George.

I was just going to say – I'm going to say it looks positive, somebody said it.

Great. Candace, do you have a worldwide uncommitted inventory number?

Yes, I do. The number is as of March 31, it's 94 million kilos, which is down 11 million from the 12/31/2020 number.

Okay. And then any update on how you review or how you're thinking about share repurchase over the next couple of years?

Well, we have the $150 million out there. And if pricing is right and all that, we will take a hard look at it, but we're more focused on investing in the Tobacco business and looking at other opportunities on the ingredients platforms. So that's the priority at the moment.

And, of course, maintaining that dividend.

100%, George.

I thought you had reached your kind of ideal or target mix for non-tobacco businesses. Are you still looking to add to that platform?

Yes. The pipeline is still active, Ann. Again, we put out in 2018 that the capital allocation strategy. We certainly wanted to – the target there was for our EBITDA and really fiscal 2022 – 10% and 20%. I think we have reached that with these two. So we certainly have taken a step back and we have taken on two fairly large company. So again, we're taking a pause, but if the right company comes along, certainly we'll look at it.

Okay. All right. And then just longer term strategy, I keep hearing customers fill up more things. A big one of your is saying that – they say cigarette sales could end in a decade, maybe in Japan, they look to convert smokers from combustible to non-combustible. So how do you position your global leaf assets business capacity? Was that kind of overreaching strategy vision from one of your larger customers? How do you address that?

I think the way to look at first of all is that Universal Leaf supports a multi-category market that we support combustible cigarettes. We support heat-not-burn or vaping segments. We support mass market cigars, cigarillos, the premium cigars, shisha and the smokeless product as well. And we play a role in all these categories. So we are well positioned with raw material and services for all these segments. And I think if you look at what has happened, cigarette sales have been declining since 2012. And if you look at the way we positioned throughout all these years, we have been pretty consistent on our yearly sales volumes. And as long as we continue performing, delivering a quality product at a competitive price, we believe that we'll be continue gaining market share, and that is a big part of executing our strategy.

That's great. That's very helpful. Thank you all very much.

Thanks, Ann.

Thanks, Ann.

Your next question comes from the line of Lesa Sroufe from Lesa Sroufe & Co. Your line is now open.

Thank you. I just have a couple of questions. First of all, could you address – there's been talk of drought in certain countries in the Southern American hemisphere and how it is or may affect business? Are you looking at that for the supply? And then I have a couple more questions. The next question is basically on – you'd mentioned that the availability of containers and it sounds like shipping costs have risen. And I'm wondering if in terms of your pricing power, has your pricing power improved?

Let me answer the first question. Weather condition is always a challenge in any agriculture venture there. And it's not different with tobacco. Tobacco is a very resilient plant. What we have seen especially here in U.S. now that month – and May has been one of the driest in history. But the American farmer is a very professional and experienced farmer, and they have been transplanting according to the time using irrigation. And for these next weekend, the time is right. We should get some rains in the tobacco areas. Overall, we don't see right now extreme weather conditions affecting our operations. Tobacco in Brazil has been harvest. It is being marketed from farmers to companies like ourselves. And in Africa, we just started operating on the buying two, three weeks ago. And it's so far is going according to our plan. The second question related to the rising shipping costs impacting our business. We are closely monitoring this situation. What is important to say here is that majority of our business it is FOB, meaning that all the disruption on the logistics side and availability or lack of availability of containers and vessels, the costs related to that is normally in that case absorbed by our customers. But it's also important to say here that our logistics department at Universal Leaf and the sales departments, they have been very proactive coordinating with customers those activities accelerating shipments in some areas that we understand that could face some of these bottlenecks and at the same time, offering solutions from areas where there is more concentrated problem. Like in Asia, we understand that some of these costs have been rising from 100% up to 400% depending the specific country or origin. And in that case, companies like Universal Leaf, we can delay shipments from some of these origins because we can offer solutions from other origins that have not been impacted like Brazil, like the U.S. or like Africa. So this is the way we are positioning ourselves and with a close coordination with our customers.

That's good to know. And then also I wanted to ask you, I know you have one large main competitor in your business, in the tobacco leaf business. And – well the company won't be named, I know that they're maybe highly leveraged and have had some financial problems. Have you seen any change in the competitive landscape because you are financially strong or are you picking up market share? Could you tell me a little bit about that?

Well, we do believe that we are picking up market share. I don't want to comment on our competitions, financial situation, but we would like to believe it's because of the quality of our products and services we deliver.

Okay. Thank you.

[Operator Instructions] There are no further questions at this time. I will hand it over back to Ms. Candace Formacek for any closing remarks.

Thank you, Meika, and thank you all for joining us this evening. And we will look forward to speaking with you in another quarter. Good-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.