Pyxus International, Inc. Reports Fiscal Year 2023 First Quarter Results

Pyxus International, Inc. (OTC Pink: PYYX) (“Pyxus” or the “Company”), a global value-added agricultural company, announced results for its fiscal quarter ended June 30, 2022.

Highlights (comparisons are to the relevant prior-year period):

• Sales and other operating revenues increased $10.6 million, or 3.2%, to $343.9 million for the three months ended June 30, 2022.
• Net loss attributable to Pyxus International, Inc. increased $3.2 million, or 27.8%, to $14.7 million for the three months ended June 30, 2022 primarily due to a $7.6 million decrease in income tax benefit.
• Adjusted EBITDA* increased $2.5 million, or 17.1%, to $17.3 million for the three months ended June 30, 2022.
• Cash and cash equivalents was $165.4 million, an increase of $85.8 million, as of June 30, 2022.
• Inventories, net was $980.1 million, an increase of $126.0 million as of June 30, 2022 with more than 90% of processed tobacco inventory committed to specific customers to meet near-term forecasted demand.
• Foreign seasonal lines of credit were $545.2 million, an increase of $141.4 million as of June 30, 2022.

Pieter Sikkel, Pyxus’ President and CEO said, “We have experienced strong demand thus far in fiscal 2023. As expected, our first quarter was consistent with the prior fiscal year, with increased demand and more normalized timing of shipments from Asia, partially offset by the timing of shipments from Africa and South America.

“As of June 30, 2022, our inventory increased $126.0 million compared to the prior year primarily due to higher new crop green tobacco prices and processing costs in South America, and accelerated new crop buying activities in certain key markets. In addition, our processed tobacco inventory continues to be more than 90% committed to specific customers. The overall increase in inventory and our committed inventory levels for processed tobacco position us to meet near-term demand and we expect to see stronger shipments in subsequent quarters in fiscal 2023, consistent with historical trends. Despite higher green tobacco prices and processing costs in South America, we were able to effectively manage our working capital to meet our purchasing goals for the current crop cycle.

“Crop sizes in certain markets in Africa, Asia, and South America are below expectations due to the adverse impacts of prevailing La Nina weather patterns during the growing season, which has exacerbated supply shortages. We continue to engage with customers in transparent dialogue regarding the impacts of La Nina and inflation on our business. In response to these and other market dynamics, we accelerated buying activities in certain key markets, and continue to invest in research trials, local programs, and additional training for our global agronomy team to further support our efforts to maximize grower efficiencies and yield despite unpredictable weather patterns.

“We continue to expect fiscal 2023 sales to be between $1.75 billion and $1.95 billion and adjusted EBITDA* to be between $130 million and $160 million. Moving forward, we are committed to recovering crop sizes, and aligning volumes in future years with customer expectations, as we work to deliver stakeholder value, and together, grow a better world.”

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*Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”) is not a measure of results under generally accepted accounting principles in the United States. Adjusted EBITDA expected for fiscal 2023 is calculated in a manner consistent with Adjusted EBITDA presented for historical periods as presented in the reconciliation tables included in this press release.
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Performance Summary for Three Months Ended June 30, 2022
Sales and other operating revenues increased $10.6 million, or 3.2%, to $343.9 million for the three months ended June 30, 2022 from $333.3 million for the three months ended June 30, 2021. This increase was primarily due to a 4.3% increase in leaf volume driven by greater demand and more normalized timing of shipments from Asia. This increase was partially offset by the timing of shipments from Africa and South America.

Cost of goods and services sold increased $12.0 million, or 4.1%, to $303.2 million for the three months ended June 30, 2022 from $291.2 million for the three months ended June 30, 2021. This increase was mainly due to the increase in sales and other operating revenues.

Gross profit decreased $1.3 million, or 3.1%, to $40.8 million for the three months ended June 30, 2022 from $42.1 million for the three months ended June 30, 2021. Gross profit as a percent of sales decreased to 11.9% for the three months ended June 30, 2022 from 12.6% for the three months ended June 30, 2021. These decreases were driven by delayed shipments from Africa and South America and were partially offset by accelerated shipments from Asia.

Income tax benefit decreased $7.5 million, or 89.3%, to $0.9 million for the three months ended June 30, 2022 from $8.4 million for the three months ended June 30, 2021. The decrease was driven by the Company utilizing a different method for estimating tax expense (benefit) for the period ended June 30, 2022. Using the discrete method for the period ended June 30, 2022, the Company determined current and deferred income tax expense (benefit) as if the interim three-month period was a year-end period, which resulted in the recognition of the fiscal 2023 year-to-date benefit in the quarter.

Liquidity and Capital Resources
The Company’s liquidity requirements are affected by various factors including crop seasonality, foreign currency and interest rates, green tobacco prices, customer mix, crop size and quality. In line with our strategy, the increase in green tobacco prices and processing costs in South America required additional working capital that was primarily sourced from increased seasonal lines and more efficient cash management. The following summarizes the Company’s available credit lines and cash, including availability under foreign seasonal lines of credit: