Universal
Leaf
Tobacco
Company,
Inc.
Company Profile and History
Universal
Corporation
headquartered
in
Richmond,
Virginia,
was
founded
in
1918.
Universal
through
its
subsidiaries
and
affiliates,
is
the
world's
leading
leaf
tobacco
merchant
and
processor.
Most
of
the
Company's
revenues
are
derived
from
sales
of
processed
tobacco
and
from
fees
and
commissions
for
specific
services.
Universal
conducts
its
business
in
more
than
30
countries
and
employees
over
24
000
permanent
and
seasonal
workers.
In
the
wake
of
World
War
I,
the
landscape
of
the
tobacco
business
was
changing
rapidly.
The
break-up
in
1911
of
the
American
Tobacco
Company
under
the
terms
of
the
Sherman
Antitrust
Act
of
1890
created
a
number
of
smaller
tobacco
companies.
In
addition,
the
popularity
of
cigarettes
among
the
armed
forces
and
the
growth
of
cigarette
smoking
among
women
fuelled
demand
for
tobacco.
Against
the
background
of
the
evolving
post-war
marketplace,
Jacquelin
P.
Taylor,
founder
of
the
J.P.
Taylor
Company
of
Virginia,
set
out
to
build
the
largest
leaf
tobacco
dealer
organization
in
the
world.
In
1918,
he
orchestrated
the
combination
of
six
leaf
dealers
into
one
company.
Universal
Leaf
Tobacco
Company
was
born.
When
Gordon
L.
Crenshaw
became
President
of
Universal
in
1966,
he
made
diversification
a
priority.
Several
smaller
acquisitions
were
made
between
1966
and
1980,
but
Universal's
first
attempts
at
diversification
did
not
produce
the
return
on
investment
that
was
expected.
Several
major
changes
took
place
at
Universal
in
1987.
Henry
H.
Harrell
was
appointed
President,
and
the
holding
company,
Universal
Corporation,
was
created.
Harrell,
who
became
Universal's
Chairman
and
Chief
Executive
Officer,
refocused
the
company
on
its
core
businesses.
He
emphasized
strong
local
management
in
Universal's
operations
throughout
the
world.
All
regional
tobacco
managing
directors
became
active
participants
in
the
development
and
implementation
of
Universal's
global
strategy.
Mozambique
Leaf
tobacco
(MLT),
which
has
more
than
120,000
outgrowers,
was
started
by
Universal’s
regional
headquarters
(Universal
Leaf
Africa)
as
an
agronomy-based
company
in
1996,
assisting
Mozambican
nationals
in
the
growing
of
burley
tobacco.
Concessions
for
land
were
easily
available
through
both
national
and
provincial
agricultural
directorates,
which
enabled
the
company
to
set
up
its
base
in
the
Province
of
Tete.
The
company
identifies
and
assists
prospective
and
regular
growers
with
agricultural
inputs
and
technical
backup
in
the
form
of
field
and
leaf
technicians.
MLT
has
a
long-standing
partnership
with
a
local
Mozambican/Portuguese
company,
Joao
Ferreria
Dos
Santos,
which
has
been
an
established
agricultural
entity
for
well
over
a
hundred
years
within
the
northern
provinces
of
the
country.
The
partnership
was
originally
set
up
in
the
early
nineties
and
has
grown
into
a
meaningful
tobacco
producing
operation
that
is
key
to
achieving
the
volumes
that
are
required.
In
2003,
MLT
initiated
the
construction
of
a
processing
facility
in
Tete
City.
The
facility
has
an
installed
capacity
of
50,000
tons
per
year
(6-8
months
of
operation).
President
Armando
Guebuza
inaugurated
the
processing
plant,
the
first
in
the
country’s
history
in
2005.
In Country Location
Estrada
Nacional
103,
Tete,
Mozambique;
Telephone:
+252
27
000
Services and Products
The
largest
portion
of
the
company's
business
involves
the
procurement,
processing,
packing,
and
supply
of
flue-cured
and
burley
tobacco
to
manufacturers
of
consumer
tobacco
products.
In
Mozambique
a
Universal
facility
processes
burley
tobacco.
Number of Employees
MLT
has
4,000
employees
in
Mozambique
Financial Information
Universal Leaf Statistics
Years
ended
March
31 In thousands, except per share data |
2009 | 2008 |
---|---|---|
Operations | ||
Sales and other operating revenues | $2,554,656 | $2,145,822 |
Operating income | 209,932 | 191,513 |
Income from continuing operations | 131,739 | 119,301 |
Net income | 131,739 | 119,156 |
Per Common Share | ||
Basic net income | $4.32 | $3.71 |
Net income on a diluted basis | 4.32 | 3.70 |
Dividends declared | 1.82 | 1.78 |
Indicated annual dividend rate | 1.84 | 1.80 |
Market price at year end | 29.92 | 65.53 |
At Year End | ||
Working capital | $954,044 | $1.014,734 |
Shareholders' equity | 1,029,473 | 1,115,631 |
MLT Statistics
In September 2009 MTL announced that it would export 43,000 tonnes of tobacco by the end of 2009 compared with 39,000 tonnes in 2008. In 2008 MLT produced US$154 million worth of tobacco for export.
Market Share
MTL
is
the
largest
producer,
buyer
and
exporter
of
tobacco
in
Mozambique.
In
2008
the
province
of
Tete
earned
revenues
of
US$
227.7
million
from
the
export
of
14
products.
Tobacco
exported
by
MLT
accounted
for
revenues
of
around
US$
90
million.
Business Objective
“To
being
the
premier
leaf
tobacco
merchant
in
the
world”
Business Model
The
Company
follows
several
key
operating
principles:
Strategic alliance:
Universal fosters strategic alliances with its major customers to the benefit of all parties. These alliances with major manufacturers are, in its opinion, especially appropriate to the leaf tobacco industry where volume at an appropriate price is a key factor in long-term profitability. Universal works to secure adequate factory volumes in all markets where it operates, but the Company balances that objective with the cost of sourcing incremental volumes in markets where it provides financing to farmers. Alliances permit the optimization of inventory levels to reduce risk of loss during market downturns by enabling the Company to target its tobacco purchases against customer purchase indications.
Strong local management:
Universal operates with strong local management in major leaf tobacco markets. The Company believes that by having strong local management it can better identify and adjust to changes in market conditions to ensure that the Company continues to deliver the high quality, competitively priced products its customers expect.
Diversified sources:
Universal strives to maintain diversified sources of leaf tobacco to minimize reliance on any one growing or sourcing area so long as customers are willing to support such diversity. Although proportions vary with relative crop sizes, historically, South America has provided between 25 and 35 percent of the aggregate volume of flue-cured and burley tobacco that Universal handles, and North America and Africa each have provided between 20 and 30 percent of that aggregate volume.
Low-cost quality producer:
Universal’s goal is to be the low-cost producer of quality products and services for its customers. The Company focuses on producing a quality product in a cost-effective manner. Universal sponsors programs in good agricultural practices, reduction of non-tobacco related materials, and social responsibility, among other programs.
Financial strength:
Universal believes that its financial strength is important, because it enables the Company to fund its business efficiently, make investments in its business when an appropriate opportunity is identified, and affords the Company financial flexibility in meeting the needs of its customers. The Company continually works to improve its credit worthiness.”
Ownership of Business
MLT
is
a
wholly
owned
subsidiary
of
Universal
leaf
Benefits Offered and Relations with Government
The
government’s
decision
to
promote
domestic
tobacco-processing
by
stipulating
that
growers’
use
of
the
most
favourable
land
would
be
subject
to
the
condition
that
they
constructed
processing
plants
led
tobacco
giant
AllianceOne
International
to
close
down
its
operations
and
withdraw
from
the
country.
MLT
was
awarded
Alliance
One
International’s
concession,
and
opened
the
first
Greenleaf
processing
plant
in
the
country
in
May
2005.
Alliance
One
was
formed
out
of
a
merger
between
the
US-based
companies
Dimon
and
Stancom,
both
of
whom
held
concessions
in
the
Mozambican
provinces
of
Niassa,
Tete
and
Manica.
Although
some
analysts
at
the
time
described
the
government
decision
to
switch
the
concession
from
Dimon
to
MLT
"strange",
others
pointed
out
that
it
made
sense
that
the
government
wanted
tobacco
processing
to
take
place
in
Mozambique.
Only
MLT
responded
to
the
government’s
request
to
build
a
processing
plant-its
reward
was
Dimon’s
Chifunde
concession
which
the
government
unilaterally
withdrew
from
AllianceOne.
The
organization
of
the
tobacco
subsector
is
similar
to
that
of
cotton
(since
2002),
insofar
as
tobacco
companies
obtain
closed
concessions
for
up
to
ten
years
and
conclude
“out-growing”
contracts
with
farmers
and/or
their
associations
located
in
the
area
concerned.
Until
the
establishment
of
MLT’s
processing
unit
in
2005,
all
domestic
production
was
exported
in
the
form
of
raw
tobacco
leaf
to
Malawi
and
Zimbabwe
for
processing
and
export.
Tobacco
manufacturing
is
subject
to
the
maximum
level
of
tariff
protection
of
20
percent,
well
above
the
overall
average
of
10,1
percent.
The
Ministry
of
Agriculture
set
minimum
purchasing
prices
for
growers
of
tobacco.
Product Development
MLT
has
exploited
other
growing
areas
in
the
province
of
Manica
in
order
to
expand
into
other
burley
types
and
flue-cured
production,
which
is
at
an
early
stage
of
development,
and
intentions
are
to
expand
these
areas
into
viable
projects.