Release Date: February 12, 2025
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 47% increase in third-quarter revenues to $778 million, driven by a 20% increase in average sales price and a 24% increase in volumes sold.
- The company successfully mitigated risks associated with the El Niño weather phenomena by focusing on strategic market and customer opportunities.
- Adjusted EBITDA for the third quarter was $81 million, contributing to a total of $180 million for the first nine months, leading to an increased full-year guidance of $205 million to $215 million.
- Pyxus International Inc (PYYX) has shown positive progress in operating income, pre-tax income, net income, and leverage measurements.
- The company released its annual sustainability report, highlighting a 16% reduction in indirect emissions since fiscal 2021, equivalent to more than 155 million pounds of coal burned.
Negative Points
- Gross profit as a percentage of revenues decreased from 17.5% in the third quarter of fiscal year 2024 to 15% in the third quarter of fiscal 2025, mainly due to regional mix and adverse weather effects of El Niño in South America.
- SG&A expenses increased to $47 million in the third quarter of fiscal 2025 from $42 million in the same quarter of the previous year.
- The company's e-liquid business remains relatively small and flat, indicating limited growth in this segment.
- Trade receivables increased significantly, reflecting a normal cycle of cash flow but also indicating a delay in cash collection.
- Interest coverage over the last 12 months reduced to 1.5 times compared to 1.6 times in the prior year, suggesting a slight decline in the company's ability to cover interest expenses.
Q & A Highlights
Q: Can you elaborate on the growth in your value-added businesses and whether it includes your e-liquids business?
A: No, the growth in value-added businesses is mostly from our cutback business, which typically has higher margins than our regular leaf business. The e-liquids business is relatively small and flat. - Flavia Landsberg, CFO
Q: Your trade receivables have increased significantly compared to the second quarter. What is driving this change?
A: The increase in trade receivables is due to high sales volume. We shipped and sold a lot, which is part of the normal cycle until we receive the cash. This is actually a positive indicator of our sales performance. - Flavia Landsberg, CFO
Q: How do you view your company's valuation compared to competitors, and what are your plans for capital structure to enhance stakeholder value?
A: We believe our stock is undervalued. Our strategy remains focused on refinancing debt, generating cash, growing the business, and paying off debt to improve our capital structure and stakeholder value. - Flavia Landsberg, CFO
Q: Can you provide guidance on cash flow expectations for the upcoming fiscal fourth quarter?
A: While we don't provide specific cash flow guidance, we expect positive cash flow improvements due to later Brazilian crop purchases and normalized shipments, which should enhance cash flow compared to last year. - Flavia Landsberg, CFO
Q: With improved crop sizes expected, how should we think about fiscal 2026 in terms of top-line growth and margin dynamics?
A: We anticipate significant recovery and growth in South American crop sizes, leading to better volumes and margin profiles. This, along with positive growing conditions in Africa, positions us well for fiscal 2026 with expected volume growth and improved margins. - J. Pieter Sikkel, CEO
Q: Are there any potential risks to the current strong demand growth trend?
A: We are well-positioned globally to benefit from growth opportunities in various markets, despite potential downturns in specific regions. Our focus is on maximizing efficiencies and leveraging our global footprint to meet future customer demand. - J. Pieter Sikkel, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
