that has been so closely scrutinized, how did the ideals of a poor tobacco farmer from Meadow Farm, Virginia, take root, thrive within an adverse environment, and become one of the world’s largest independent tobacco merchants? This year, Universal Leaf Tobacco Company celebrates 90 years of business, implementing the management style developed by founder, J.P. (Jaquelin Plummer) Taylor. His recipe for success consisted of three positive ingredients: producing a quality product, providing excellent service, and customer satisfaction. In Taylor’s day, business deals were sealed with trust and a handshake.
While formal contracts have replaced the “handshake” over the years, the company still supports a culture of trust and integrity.
In building strong, long-term relationships, loyalty is a consistent trait that runs through Universal’s history, providing a nurturing approach toward employees and among international cultures where production has been established.
For the employees of Universal, there is strength in knowing that their colleagues will stand with them in difficult times. This trust and support carries over to the programs and initiatives provided to communities around the globe where Universal has a base of operation.
These principles, set forth by Universal’s management team, and implemented by its global employee network, resulted in a strong, profitable fiscal 2008.
Universal Leaf Tobacco Company reported improvements in every sector of its operations during fiscal 2008, which ended March 31. Despite smaller crops, revenues for fiscal year 2008 increased by 7%, to $2.1 bn. Net income for the fiscal year, which includes results from discontinued operations, was $119.2 mn, or $3.70 per diluted share, compared to $44.4 mn, or $1.13 per diluted share, last year.
Results from the most recent quarter, which ended on June 30, 2008, demonstrate Universal’s continued financial success for fiscal 2009. According to a report published by Reuters Fundamentals, Universal Corporation’s revenues increased 12% to $506.3 mn; net income increased by 13% to 21.1 mn. Revenues reflect an increase income from the company’s flue-cured and burley operations in North America and other Regions. Net income also reflects higher shipments, the absence of write-downs and restructuring charges, and a lower tax rate.
At the end of fiscal 2008, Allen B. King retired as Chief Executive Officer, and subsequently retired as Chairman at the beginning of August. George C. Freeman, III, took King’s place at his retirement, becoming Chairman in August.
A veteran employee with 34 years of service, Hart Roper, Chief Financial Officer, retired the end of August and has been replaced by David Moore, who has over 30 years service with Universal. Moore, along with Keith Brewer, Chief Operating Officer and 31-year employee, provide the deep knowledge and experience with the industry to ensure the seamless transition of the management team.
Cost Trimming Continuation
Continuing to work through selling off some of the non-tobacco operations and reducing costs by trimming operations in Canada, Malawi, and Zambia, has improved cash flow and decreased debt levels.
Inventories of both flue-cured and burley tobacco have been greatly reduced. While burley crops are expected to be larger, supply will not allow any significant inventory increase.
Farmer leaf production costs, and therefore the prices paid for green tobacco are increasing with the price of most agricultural products, so higher costs remain a factor in most of the major producing areas of the world. The weakened dollar continues to exacerbate this trend, but Universal is working to ensure that customers get their needed tobacco and shareholders will receive strong results.
Other cost-cutting initiatives in fiscal 2008, and continuing in 2009 include eliminating corporate aviation and starting the search for a relocation of the Richmond headquarters to a smaller, more cost-effective facility.
Operating within a global industry that rarely is recognized for good works, Universal continues to “maximize the positive;” its long-standing corporate tradition of nurturing relationships, whether domestic or international customers. Success in this area must be based on trust, and Universal values integrity as the key trait leading to trust.
Universal Leaf works in partnership with the communities in areas where it maintains operational facilities. Tobacco agronomic research, new technologies, equipment and practices are designed to improve variety development, plant selection and seed production. In addition to programs initiated in-house, Universal also supports other programs in providing education, sustainable business practices, and systems to assist in the socio-economic development of communities to restore healthy agriculture and bring about self-sufficiency for long-term sustainability.
Universal Leaf Tabacos, located in city of Santa Cruz, Brazil, sponsors the Universal Leaf Citizenship Project. Launched in 2003, it is a social management system aimed at the establishment of a community network for the development of initiatives to improve life quality and social support for needy communities. The program plans social activities based on priorities defined by the association of residents. Already, the program has benefited 700 families of Bairro Menino Deus, in Santa Cruz do Su, RS. Activities include the construction of a 740 square-meter gym, where social projects are developed according to the needs and interests of the community. In 2006, this program was awarded the “Top Cidaldania” Prize given by the Human Resources Brazilian Association to social programs that are considered potential examples to be followed by other communities.
In Malawi, Universal Leaf Africa is working with a cooperative of small growers (average farm space is 1 hectare) of tobacco and maize. Clinics have been built to test for AIDS and school have been built to educate children in the coop.
Mozambique, a country that literally wraps around Malawi, is home to a Universal facility that processes burley tobacco. In the remote province of Tete, farmers nominally work the soil without fertilizer, irrigation, or ploughs. Universal provides consultants to work with farmers to teach better agronomic practices, which has resulted in higher farmer return, and a more prosperous economic environment. Today, Mozambique Leaf Tobacco Company is the biggest leaf buyer in the country. Fair prices paid for tobacco have enabled the community to support new entrepreneurs. Additional family income is used to open small clothing and craft shops, many of which are owned and managed by women.
Elimination of Child Labor
Emphasizing the strong stance against child labor, originally established by J.P. Taylor, Universal is active in helping to provide schools, stressing the importance of education.
Universal does not employ child labor in any of its facilities worldwide, and seeks to build awareness of this issue’s importance.
As a board member of Elimination of Child Labor in Tobacco Growing Foundation (ECLT), a foundation that addresses the challenges of child labor in tobacco growing areas, Universal is an active participant.
Maximizing the positive pervades Universal’s global operations. In an environment that is focused on cost-cutting strategies and finding more ways to be efficient, Universal has uncovered an opportunity to provide additional services to manufacturers. In a recent article published by the Richmond Times-Dispatch, Clay G. Frazier, Managing Director, North America Region, explains the US division of Universal provides important components to manufacturer blends. The flavor of US flue-cured tobacco and the limited options for flavor flue-cured in the world market supports a stable and consistent US production level.
Recycling is a component of today’s operation within Universal and more opportunities are on the horizon. In the same Richmond Times-Dispatch article, W. Keith Brewer, Executive Vice President and Chief Operating Officer, elaborates on Universal: “European plants, where stems and fine particles generated while processing are converted to paper-like product. This product can then be used for tobacco consumer products, reducing the amount of leaf grown and minimizing the solid waste generated by the industry”.
For Universal Leaf Tobacco, today’s best business practices encompass much more than selling tobacco to manufacturers of cigarettes and cigars. If J.P. Taylor were around today, he would most likely approve of Universal’s success in building his company by extending the business hand shake into a global relationship of helping partners by working hand-in-hand.