Release Date: June 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pyxus International Inc (PYYX, Financial) reported a 6.1% increase in full-year sales, reaching $2 billion.
- The company achieved a significant improvement in its gross profit margin, rising to 15.4% from 13.6% in the previous fiscal year.
- Operating income saw a substantial increase of 46.3%, amounting to $137.2 million.
- Full-year adjusted EBITDA was $193.9 million, exceeding initial guidance and reflecting a 22.1% increase from the prior year.
- The company successfully repurchased $122.5 million of debt at a discount, reducing long-term debt by $142.9 million.
Negative Points
- Despite the positive financial performance, Pyxus International Inc (PYYX) faces challenges due to reduced crop sizes in South America, leading to higher costs.
- The company anticipates margin pressure from the El Nino weather pattern later in the year.
- SG&A expenses increased by 6.2%, primarily due to higher performance-based compensation.
- The company’s leverage ratio, although improved, remains relatively high at 4.8x.
- There are concerns about the impact of extreme weather events on operations, particularly in regions like Southern Brazil.
Q & A Highlights
Highlights of Pyxus International Inc (PYYX) Earnings Call
Q: Could you give us insight into the supply and demand equation and pricing dynamics for the year going forward?
A: Demand is currently stronger than supply across all varieties and geographies. Reduced crop sizes in South America are exacerbating the situation, leading to inflationary costs for purchasing. Pricing increases are expected as we move forward, with demand continuing strong through fiscal year '25 and into fiscal year '26. - Peter Sikkel, President, CEO & Director
Q: Are there gains taxes to be paid on the debt buyback?
A: Yes, but they are minimal due to an exchange that elevated the base. The tax savings related to the long-term debt buyback are about $12.9 million. The buyback will deleverage the company by almost 25% on long-term debt. - Flavia Landsberg, Executive VP & CFO
Q: How did you fund the debt buyback?
A: The debt buyback was not funded by drawing on other lines. Seasonal lines are used to buy inventory, which increased by $156 million, while seasonal lines went up by $112 million. - Flavia Landsberg, Executive VP & CFO
Q: What were the customary fees and expenses related to the debt buyback?
A: The fees were relatively minimal, including basic transaction costs and paying interest up-to-date. There were no extraordinary fees or brokerage fees. - Peter Sikkel, President, CEO & Director
Q: Can you add color on the year-over-year inventory growth?
A: The increase is due to early acquisition of tobacco at higher costs in Brazil and committed inventory that missed the end of the quarter but has since been shipped to customers. - Peter Sikkel, President, CEO & Director
Q: Have you engaged an investment banker to help refinance your capital structure?
A: The Board and management are focused on the future and will engage appropriate advisers at the right time to help improve our capital structure. - Peter Sikkel, President, CEO & Director
Q: With improved credit profile, are you focusing on lowering your cost of debt?
A: Yes, we see opportunities to lower our cost on both long-term debt and seasonal lines due to our improved credit profile. - Flavia Landsberg, Executive VP & CFO
Q: Can you provide more details on the impact of recent extreme weather in Southern Brazil?
A: Our teams have maintained business continuity and provided relief to affected colleagues, farmers, and communities. We remain committed to supporting the region through this challenging time. - Peter Sikkel, President, CEO & Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
