Q3 2026 Pyxus International Inc Earnings Call

February 11, 2026

Operator: Please stand by. Hello and welcome to our Q3 fiscal 2026 Earnings Conference Call. Today's call is being recorded. After our prepared remarks, we'll open the call for questions. If you would like to ask a question today, you must dial in through your phone line. You may press star one at any time to enter the question queue. I'd now like to turn the call over to Tomas Grigera, VP Corporate Treasurer.

Speaker #3: If you would like to ask a question today, you must dial in through your phone line. You may press star one at any time to enter the question queue.

Speaker #3: I'd now like to turn the call over to Tomas Griguera, VP, Corporate.

Speaker #3: Treasurer. Thank you, operator.

Tomas Grigera: Thank you, Operator. Joining me today are Pieter Sikkel, our President and CEO, and Dustin Styons, our CFO. Before we begin discussing our financial results, I would like to cover a few points. You may hear statements during the course of this call that express belief, expectation, or intention, as well as those that are not historical fact. These statements are forward-looking and involve a number of risk and uncertainties that may cause actual events and results to differ materially from the forward-looking statements. These risk and uncertainties are described in detail along with other risk and uncertainties in our filings with the SEC, including our most recent Form 10-K. We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management's expectations or any change in assumptions or circumstances on which these statements are based.

Speaker #2: Joining me today are Peter Sickle, our President and CEO, and Dustin Steins, our CFO. Before we begin discussing our financial results, I would like to cover a few points.

Speaker #2: You may hear statements during the course of this call that express belief, expectation, or intention as well as those that are not historical fact.

Speaker #2: These statements are forward-looking and involve a number of risk and uncertainties that may cause actual events and results to differ materially from the forward-looking statements.

Tomas Grigera: These risk and uncertainties are described in detail along with other risk and uncertainties in our filings with the SEC, including our most recent Form 10-K. We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management's expectations or any change in assumptions or circumstances on which these statements are based.

Speaker #2: These risk and uncertainties are described in detail along with other risk and uncertainties in our filings with the SEC. Including our most recent Form 10-K.

Speaker #2: We do not undertake to update any forward-looking statements made on this conference call to reflect any change in management's expectations or any change in assumptions or circumstances on which these statements are based.

Speaker #2: Included in our call today may be discussion of non-GAAP financial measures, including earnings before interest, taxes depreciation, and amortization, commonly referred to as EBITDA and adjusted EBITDA, free cash flow adjusted for changes in working capital, and adjusted free cash flow metrics.

Tomas Grigera: Included in our call today may be discussion of non-GAAP financial measures, including earnings before interest, taxes, depreciation, and amortization, commonly referred to as EBITDA and adjusted EBITDA, free cash flow adjusted for changes in working capital, and adjusted free cash flow metrics, which are not measures of results of operations under generally accepted accounting principles in the United States and should not be considered as an alternative to U.S. GAAP measurements. Reconciliations of and other disclosures regarding these non-GAAP financial measures are included in the appendix accompanying this presentation, which is available on our website at www.pyxus.com. Any replay, rebroadcast, transcript, or other reproduction of this conference call other than the replay as provided by Pyxus International has not been authorized and is strictly prohibited. Investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its contents.

Speaker #2: Which are not measures of results of operations under generally accepted accounting principles in the United States and should not be considered as an alternative to US GAAP measurements.

Tomas Grigera: Reconciliations of and other disclosures regarding these non-GAAP financial measures are included in the appendix accompanying this presentation, which is available on our website at www.pyxus.com. Any replay, rebroadcast, transcript, or other reproduction of this conference call other than the replay as provided by Pyxus International has not been authorized and is strictly prohibited. Investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its contents.

Speaker #2: Reconciliations of and other disclosures regarding these non-GAAP financial measures are included in the appendix accompanying this presentation, which is available on our website at www.pyxus.com.

Speaker #2: Any replay, rebroadcast transcript, or other reproduction of this conference call, other than the replay as provided by Pyxus International, has not been authorized and is strictly prohibited.

Speaker #2: Investors should be aware that any unauthorized reproduction of this conference call may not be an accurate reflection of its contents. Now I'll hand the call over to

Tomas Grigera: Now I'll hand the call over to Peter.

Speaker #2: Peter. Good morning, everyone, and

Pieter Sikkel: Good morning, everyone, and thank you again for joining our call. We're pleased to report strong third quarter results with Adjusted EBITDA equal to last year's record third quarter, underscoring our consistent execution and positioning the business to close fiscal 2026 as one of our strongest years on record. Since the beginning of the fiscal year, we've shared the expectation of larger crops in key markets, a change from undersupply conditions experienced in recent years. As anticipated, procurement increased this year compared to prior year, while our customer shipping indications have remained consistent with expectations. Larger crops in both South America and Africa drove a temporary increase in working capital through the third quarter. Shipments from South America awaited towards the back half of the year, and higher crop volumes from the region drove improved results in the quarter. Africa primarily ships to customers in the fourth quarter.

Speaker #3: thank you again for joining our call. We're pleased to report strong third quarter results with adjusted EBITDA equal to last year's record third quarter.

Speaker #3: Underscoring our consistent execution and positioning, the business to close fiscal 2026 as one of our strongest years on record. Since the beginning of the fiscal year, we've shared the expectation of larger crops in key markets.

Speaker #3: The change from undersupply conditions experienced in recent years. As anticipated, procurement increased this year, compared to prior year, while our customers' shipping indications have remained consistent with expectations.

Pieter Sikkel: As anticipated, procurement increased this year compared to prior year, while our customer shipping indications have remained consistent with expectations. Larger crops in both South America and Africa drove a temporary increase in working capital through the third quarter. Shipments from South America awaited towards the back half of the year, and higher crop volumes from the region drove improved results in the quarter. Africa primarily ships to customers in the fourth quarter.

Speaker #3: Larger crops in both South America and Africa drove a temporary increase in working capital through the third quarter. Shipments from South America awaited towards the back half of the year, and higher crop volumes from the region drove improved results in the quarter.

Speaker #3: Africa primarily ships to customers in the fourth quarter. Larger crops in the region required incremental working capital deployment in quarter three, positioning the business for materially higher revenue and profitability in quarter four.

Pieter Sikkel: Larger crops in the region required incremental working capital deployment in Q3, positioning the business for materially higher revenue and profitability in Q4. We continue to successfully capture scale-related opportunities and efficiencies in a large crop environment through expanded third-party processing with improved fixed cost absorption. As a result, third-party processing contributed approximately $7 million of Q3 margins and $28.8 million year to date, highlighting the strength and value of our processing expertise and flexible global platform. We continue to progress with strategic initiatives such as the centralization and automation of our processing and receiving capabilities in South America to drive longer-term efficiencies and operational innovation while reducing the cost structure of the business. This year's Q3 results reflect a more normalized geographical and product mix and was largely driven by a higher proportion of byproduct sales and stronger third-party processing activity.

Speaker #3: We continue to successfully capture scale-related opportunities and efficiencies in a large crop environment through expanded third-party processing with improved fixed cost absorption. As a result, third-party processing contributed approximately $7 million of third quarter margins and $28.8 million year to date.

Speaker #3: Highlighting the strength and value of our processing expertise and flexible global platform. We continue to progress with strategic initiatives, such as the centralization and automation of our processing and receiving capabilities in South America, to drive longer-term efficiencies and operational innovation while reducing the cost structure of the business.

Pieter Sikkel: We continue to progress with strategic initiatives such as the centralization and automation of our processing and receiving capabilities in South America to drive longer-term efficiencies and operational innovation while reducing the cost structure of the business. This year's Q3 results reflect a more normalized geographical and product mix and was largely driven by a higher proportion of byproduct sales and stronger third-party processing activity.

Speaker #3: This year's third quarter results reflect a more normalized geographical and product mix. And was largely driven by a higher proportion of byproduct sales and stronger third-party processing activity.

Speaker #3: With fourth quarter shipments now underway, our year-to-date performance on margins firmly positions us to deliver strong full-year results. During the quarter, we were proud to release our fiscal year 2025 sustainability report.

Pieter Sikkel: With fourth quarter shipments now underway, our year-to-date performance on margins firmly positions us to deliver strong full-year results. During the quarter, we were proud to release our fiscal year 2025 sustainability report, highlighting the achievement of our 2030 operational waste reduction targets ahead of schedule and our continued reduction of greenhouse gas emissions. In total, our global operations recycled 30,000 metric tons of waste last year and decreased Scope 1 and 2 emissions by approximately 7,800 metric tons, which equates to the same amount of emissions generated by 1,815 gasoline-powered cars over the course of one year. The report underscores sustainability as a strategic lever that enhances our long-term competitiveness, mitigates business risk, and strengthens our ability to attract and retain talent across our diverse global footprint.

Speaker #3: Highlighting the achievement of our 2030 operational waste reduction targets ahead of schedule and our continued reduction of greenhouse gas emissions. In total, our global operations recycled 30,000 metric tons of waste last year, and decreased scope one and two emissions by approximately 7,800 metric tons, which equates to the same amount of emissions generated by 1,815 gasoline-powered cars over the course of one year.

Pieter Sikkel: In total, our global operations recycled 30,000 metric tons of waste last year and decreased Scope 1 and 2 emissions by approximately 7,800 metric tons, which equates to the same amount of emissions generated by 1,815 gasoline-powered cars over the course of one year. The report underscores sustainability as a strategic lever that enhances our long-term competitiveness, mitigates business risk, and strengthens our ability to attract and retain talent across our diverse global footprint.

Speaker #3: The report underscores sustainability as a strategic lever that enhances our long-term competitiveness, mitigates business risk, and strengthens our ability to attract and retain talent across our diverse global footprint.

Speaker #3: With the report's release, we also announced a refreshed sustainability strategy that sharpens our focus on areas where we can drive the biggest impact, while further integrating sustainability into our value creation framework.

Pieter Sikkel: With the report's release, we also announced a refreshed sustainability strategy that sharpens our focus on areas where we can drive the biggest impact while further integrating sustainability into our value creation framework. With that, I'll turn the call over to Dustin for the financials.

Speaker #3: With that, I'll turn the call over to Dustin for the financials.

Speaker #2: Thank you, Peter. Our third quarter results demonstrate solid earnings quality and reflect the cadence of larger crops we've been discussing. The additional volumes purchased earlier in the year are on schedule to ship in the fourth quarter.

Dustin Styons: Thank you, Peter. Our third quarter results demonstrate solid earnings quality and reflect the cadence of larger crops we've been discussing. The additional volumes purchased earlier in the year are on schedule to ship in the fourth quarter, which will convert inventory into cash and materially reduce seasonal debt. This is expected to lower leverage as we close the fiscal year. Net sales for the quarter were $655.8 million, a decrease of approximately $123 million from the prior year, driven primarily by lower average sales prices and shipment timing. Gross margin per kilo was $0.80, which is slightly below last year due to changes in product and customer mix. Gross margin percentage improved modestly to 15.2%, supported by larger crops in South America and increased third-party processing. Year-to-date sales totaled $1.7 billion, down about $245 million versus last year.

Speaker #2: Which will convert inventory into cash and materially reduce seasonal debt. This is expected to lower leverage as we close the fiscal year. Net sales for the quarter were $655.8 million.

Speaker #2: A decrease of approximately 123 million from the prior year. Driven primarily by lower average sales prices and shipment timing. Gross margin per kilo was 80 cents, which is slightly below last year due to changes in product and customer mix.

Dustin Styons: Gross margin per kilo was $0.80, which is slightly below last year due to changes in product and customer mix. Gross margin percentage improved modestly to 15.2%, supported by larger crops in South America and increased third-party processing. Year-to-date sales totaled $1.7 billion, down about $245 million versus last year.

Speaker #2: Gross margin percentage improved modestly to 15.2%, supported by larger crops in South America, an increased third-party processing. Year-to-date sales totaled $1.7 billion, down about 245 million versus last year.

Speaker #2: As expected, the impact of larger crops in South America and Africa have not yet fully offset the decline in carrier volumes experienced in quarter one and shipment timing.

Dustin Styons: As expected, the impact of larger crops in South America and Africa have not yet fully offset the decline in carrier volumes experienced in Q1 and shipment timing. Gross margin per kilo remained strong at $0.81 compared to $0.85 last year, driven by product mix as the current quarter reflects a higher portion of byproduct volumes. Gross margin percentage improved to 14.6% from 13.9%, driven by increased third-party processing. SG&A expense was $38.3 million for the quarter, an $8.2 million improvement year-over-year, largely attributable to lower incentive compensation accruals. Year-to-date, SG&A reflects a similar trend at $118.8 million. Operating income was $51.3 million for the quarter and $119 million year to date. Net interest expense for the quarter was $36.6 million, up $3.7 million, primarily resulting from the elevated seasonal funding required to support higher 2025 crop purchases.

Speaker #2: Gross margin per kilo remained strong, at 81 cents, compared to 85 cents last year, driven by product mix, as the current quarter reflects a higher portion of byproduct volumes.

Speaker #2: Gross margin percentage improved to 14.6% from 13.9%, driven by increased third-party processing. SG&A expense was 38.3 million for the quarter, an 8.2 million improvement year over year, largely attributable to lower incentive compensation accruals.

Dustin Styons: Year-to-date, SG&A reflects a similar trend at $118.8 million. Operating income was $51.3 million for the quarter and $119 million year to date. Net interest expense for the quarter was $36.6 million, up $3.7 million, primarily resulting from the elevated seasonal funding required to support higher 2025 crop purchases.

Speaker #2: Year-to-date, SG&A reflects a similar trend at 118.8 million. Operating income was $51.3 million for the quarter and $119 million year to date. Net interest expense for the quarter was $36.6 million, up 3.7 million, primarily resulting from the elevated seasonal funding required to support higher 2025 crop purchases.

Speaker #2: Our improved borrowing cost positioned us to keep year-to-date interest expense relatively flat despite increased average seasonal

Dustin Styons: Our improved borrowing cost positioned us to keep year-to-date interest expense relatively flat despite increased average seasonal line borrowings. Equity pickup from unconsolidated affiliates increased $8.1 million to $12.4 million in the quarter. This was driven primarily by strong performance from China-Brazil tobaccos, our joint venture with China Tobacco International, which benefited from the larger South American crops. Adjusted EBITDA was $80 million for the quarter, essentially consistent with the prior year, supported by lower SG&A and the increased equity pickup. Year-to-date Adjusted EBITDA of $164.2 million is also broadly in line with last year, excluding the impact of prior year carryover sales. These results, together with our steady gross margin performance, underscore the strength of our fundamentals as we enter the fourth quarter.

Speaker #2: line borrowings. Equity

Speaker #3: pickup from unconsolidated affiliates increased 8.1 million, to $12.4 million, in the quarter. This was driven primarily by strong performance from China, Brazil, Tobaccos, our joint venture with China, Tobacco International, which benefited from the larger South American crops.

Dustin Styons: Adjusted EBITDA was $80 million for the quarter, essentially consistent with the prior year, supported by lower SG&A and the increased equity pickup. Year-to-date Adjusted EBITDA of $164.2 million is also broadly in line with last year, excluding the impact of prior year carryover sales. These results, together with our steady gross margin performance, underscore the strength of our fundamentals as we enter the fourth quarter.

Speaker #3: Adjusted EBITDA was $80 million for the quarter. Essentially consistent with the prior year. Supported by lower SG&A and the increased equity pickup. Year-to-date adjusted EBITDA of $164.2 million is also broadly in line with last year, excluding the impact of prior year carryover sales.

Speaker #3: These results, together with our steady gross margin performance, underscore the strength of our fundamentals as we enter the fourth quarter. Quarter-to-date and year-to-date cash flows reflect the impact of concentrated first-half leaf purchases.

Dustin Styons: Quarter-to-date and year-to-date cash flows reflect the impact of concentrated first-half leaf purchases, with the majority of the larger African crops set to ship before the end of the fiscal year. A similar impact was reflected in our operating cycle, which increased to 184 days but is expected to improve with Q4 shipments. At the end of Q3, the latest 12-month adjusted free cash flow represented a use of cash of $186 million. This included $181 million use from the changes in working capital. The year-over-year inventory increase of $207 million was the principal change in working capital and was funded by increased seasonal borrowings. Uncommitted inventory remains low at 3.6% of processed inventory in Q3.

Speaker #3: With the majority of the larger African crops set to ship before the end of the fiscal year. A similar impact was reflected in our operating cycle, which increased to $184 days.

Speaker #3: But is expected to improve with fourth quarter shipments. At the end of the third quarter, the latest 12-month adjusted free cash flow represented a use of cash of $186 million.

Dustin Styons: This included $181 million use from the changes in working capital. The year-over-year inventory increase of $207 million was the principal change in working capital and was funded by increased seasonal borrowings. Uncommitted inventory remains low at 3.6% of processed inventory in Q3.

Speaker #3: This included $181 million use from the changes in working capital. The year-over-year inventory increase of $207 million was the principal change in working capital, and was funded by increased seasonal borrowings.

Speaker #3: Uncommitted inventory remains low, at 3.6% of processed inventory in Q3. As we move into the fourth quarter, our peak shipping period, we continue to expect significant working capital release that supports the paydown of seasonal lines and the improvement of leverage and interest coverage.

Dustin Styons: As we move into Q4, our peak shipping period, we continue to expect significant working capital release that supports the paydown of seasonal lines and the improvement of leverage and interest coverage. Liquidity remained strong, with no borrowings on our $150 million ABL and $130 million of cash to fund increased Q4 shipments and seasonal line maturities. Leverage of 6 turns and interest coverage of 1.4 turns are consistent with this year's working capital cadence and should improve at year-end. We are well positioned to support Q4 shipping and remain on track to deliver one of our strongest years on record. We reaffirm our full-year fiscal 2026 guidance, with expected results in the range of $2.4 to 2.6 billion in net sales and $215 to 235 million of Adjusted EBITDA. I'll now hand the call back to Peter.

Speaker #3: Liquidity remained strong, with no borrowings on our $150 million ABL and $130 million of cash to fund increased fourth quarter shipments and seasonal line maturities.

Speaker #3: Leverage of six turns and interest coverage of 1.4 turns are consistent with this year's working capital cadence and should improve a year-end. We are well positioned to support fourth quarter shipping and remain on track to deliver one of our strongest years on record.

Dustin Styons: We are well positioned to support Q4 shipping and remain on track to deliver one of our strongest years on record. We reaffirm our full-year fiscal 2026 guidance, with expected results in the range of $2.4 to 2.6 billion in net sales and $215 to 235 million of Adjusted EBITDA. I'll now hand the call back to Peter.

Speaker #3: We reaffirm our full-year fiscal 2026 guidance, with expected results in the range of 2.4 to 2.6 billion in net sales and $215 to $235 million of adjusted EBITDA.

Speaker #3: I'll now hand the call back to Peter.

Speaker #2: Thank you, Dustin. Our third quarter performance underscores disciplined execution, strong customer engagement, and the advantages of our global footprint in a year defined by larger crops.

Pieter Sikkel: Thank you, Dustin. Our Q3 performance underscores disciplined execution, strong customer engagement, and the advantages of our global footprint in a year defined by larger crops. We have clear visibility of Q4 shipping and remain focused on efficiently converting inventory, strengthening cash generation, and positioning ourselves to close fiscal 2026 as one of our strongest years on record. With that, operator, please open the line for questions.

Speaker #2: We have clear visibility of fourth quarter shipping and remain focused on efficiently converting inventory to strengthen cash generation and positioning ourselves to close fiscal 2026 as one of our strongest years on record.

Speaker #2: With that, operator, please open the line for

Speaker #2: questions.

Speaker #1: Thank you, Peter. Ladies and

Operator: Thank you, Peter. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question today, you must dial in through your phone line. To ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure the mute function is turned off to allow the signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a moment to assemble the queue. We will take our first question from Oren Shaqued with BTIG.

Speaker #1: Gentlemen, we will now begin the question-and-answer session. If you would like to ask a question today, you must dial in through your phone line.

Speaker #1: To ask a question, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone, please make sure the mute function is turned off to allow the signal to reach our equipment.

Speaker #1: Again, press *1 to ask a question. We'll pause for just a moment to assemble the queue. We will take our first question from Oren Shaked, with—

Speaker #1: BTIG. Hey, good morning,

Oren Shaked: Hey, good morning, everyone. So I wanted to focus in on the inventory. Obviously, you guys talked quite a bit about that in the prepared remarks. The 23-day increase in the operating cycle, if I'm understanding this correctly, should largely correct in fiscal Q4 as you convert that inventory to cash. And so, first of all, just if you could please confirm that we're thinking about it correctly. And then secondarily, how should we then think about your inventory needs in fiscal year 2027, given that we are now firmly in an oversupply condition, both in terms of the cadence of the inventory needs and then also maybe on just the sheer quantum of that inventory that you will need going forward?

Speaker #4: everyone. So I wanted to focus in on the inventory. Obviously, you guys talked quite a bit about that in the prepared remarks. The 23-day increase in the operating cycle, if I'm understanding this correctly, should largely correct in fiscal Q4, as you convert that inventory to cash.

Oren Shaked: And so, first of all, just if you could please confirm that we're thinking about it correctly. And then secondarily, how should we then think about your inventory needs in fiscal year 2027, given that we are now firmly in an oversupply condition, both in terms of the cadence of the inventory needs and then also maybe on just the sheer quantum of that inventory that you will need going forward?

Speaker #4: And so first of all, just if you could please confirm that we're thinking about it correctly. And then secondarily, how should we then think about your inventory needs in fiscal year 27, given that we are now firmly in an oversupply condition, both in terms of the cadence of the inventory needs and then also maybe on just the sheer quantum of that inventory that you will need going

Speaker #4: forward? Good morning, Oren.

Dustin Styons: Good morning, Oren. I'll address the first question, and I'll allow Peter to address your second question on fiscal year 2027 purchases. You're thinking about the operating cycle correctly. As we've mentioned, the cadence of this year's shipment plans, as well as the working capital requirements and inventory requirements in order to meet the customer requirements, has shifted the cadence. And that's driving that inventory increase moving into Q3. Aligned with what we said in Q4, that inventory should sell through or will sell through in Q4, and we'll see a reduction in that operating cycle. So I think you're thinking about that the correct way.

Speaker #2: I'll address the first question, and I'll allow Peter to address your second question on 2027 crop fiscal year 27 purchases. You're thinking about the operating cycle correctly.

Speaker #2: As we've mentioned, the cadence of this year's shipment plans, as well as the working capital requirements and inventory requirements in order to meet the customer requirements, has shifted the cadence.

Speaker #2: And that's driving that inventory increase moving into quarter three. And aligned with what we said in quarter four, that inventory should sell through or will sell through in quarter four.

Dustin Styons: And that's driving that inventory increase moving into Q3. Aligned with what we said in Q4, that inventory should sell through or will sell through in Q4, and we'll see a reduction in that operating cycle. So I think you're thinking about that the correct way.

Speaker #2: And we'll see a reduction in that operating cycle. So I think you're thinking about that the correct way.

Speaker #4: Okay. Thank you, Dustin.

Oren Shaked: Okay. Thank you, Dustin.

Speaker #5: And talking about fiscal 27, I think you're really digging into a supply and demand question. Here, so when we look forward, we think about supply and demand and our demand for 27.

Pieter Sikkel: Talking about fiscal 2027, I think you're really digging into a supply and demand question here. So when we look forward, we think about supply and demand and our demand for 2027. From a demand perspective, I think we're looking at very similar levels from our customers' requirements for fiscal 2027 as 2026, as global consumption continues on a very slight downward trend. At the same time, obviously, we're focused on market share, profitability, and the volume requirements we need against the indications that we have. We're gathering those right now, and we're looking in a positive position for 2027. So for us, really, as we start to acquire that, the markets have opened in South America as anticipated. It's relatively slow. Crops are good, but the crop volumes are similar to last year in flue-cured tobaccos.

Speaker #5: From a demand perspective, I think we're looking at very similar levels from our customers' requirements for fiscal 27, as 26, as global consumption continues on a very slight downward trend.

Speaker #5: At the same time, obviously, we're focused on market share of profitability and the volume requirements we need against the indications that we have. We're gathering those right now, and we're looking in a positive position for 27.

Pieter Sikkel: We're gathering those right now, and we're looking in a positive position for 2027. So for us, really, as we start to acquire that, the markets have opened in South America as anticipated. It's relatively slow. Crops are good, but the crop volumes are similar to last year in flue-cured tobaccos.

Speaker #5: So for us, really, as we start to acquire that, the markets have opened in South America as anticipated. It's relatively slow. Crops are good.

Speaker #5: But the crop volumes are similar to last year in fluke of tobaccos. And we anticipate, as the year goes on, acquisition prices of inventory will be lower than last year.

Pieter Sikkel: And we anticipate, as the year goes on, acquisition prices of inventory will be lower than last year, with the high crop sizes that we anticipate continuing, particularly in flue-cured tobacco for next year. But that's all part of the cycle that we have. But in general, relatively stable demand, softer pricing on acquisition of tobaccos. And obviously, with our strengths in terms of conversion and trying to focus on reducing conversion costs, we look to focus on profitability for the business.

Speaker #5: With the high crop sizes that we anticipate continuing, particularly in fluke of tobacco for next year. But that's all part of the cycle that we have.

Speaker #5: But in general, relatively stable demand, softer pricing on acquisition of tobaccos, and obviously, with our strengths in terms of conversion and trying to focus on reducing conversion costs we look to focus on profitability for the business.

Speaker #4: So Peter, should we be thinking maybe with that comment on the acquisition prices going lower over the course of the year, will you be trying then to purchase tobacco later in the period in fiscal 27, all things being equal, versus the cadence of purchasing in fiscal 26?

Oren Shaked: So Peter, should we be thinking maybe with that comment on the acquisition prices going lower over the course of the year, will you be trying then to purchase tobacco later in the period in fiscal 27, all things being equal, versus the cadence of purchasing in fiscal 26?

Speaker #5: Look, the timing in each individual market will vary. We're certainly not expecting a rush to purchase this year. With the way the markets are at this point in time, so it may be a little bit slower than last year.

Pieter Sikkel: Look, the timing in each individual market will vary. We're certainly not expecting a rush to purchase this year with the way the markets are at this point in time. So it may be a little bit slower than last year. So far in South America, it is a little bit slower than it was last year. And we'll see how that continues as the year goes on.

Speaker #5: So far in South America, it is a little bit slower than it was last year. We'll see how that continues as the year goes on.

Speaker #4: Okay. And then maybe can you give us a framework, Peter, for given that oversupply is a new framework, a new dynamic for many of us who are covering the story, how should we think about the duration of oversupply?

Oren Shaked: Okay. And then maybe can you give us a framework, Peter, for given that oversupply is a new framework, a new dynamic for many of us who are covering the story, how should we think about the duration of oversupply? How long has it normally lasted in the past until things start to shift back to undersupply? And then maybe since we're just on this topic of supply versus demand in general, where is customer duration now versus where it has been over the last few years?

Speaker #4: How long has it normally lasted in the past until things start to shift back to undersupply? And then maybe since we're just on this topic of supply versus demand in general, where is customer duration now versus where it has been over the last few

Speaker #4: years? Yeah,

Dustin Styons: Yeah, look, these oversupply, undersupply cycles we've experienced them many times in the past. It's something we're very used to working through. Frankly, and I think I've said this before, we prefer a slight oversupply market. It's when we can acquire the product at the correct price from the farmer base, maximize our efficiencies in our facilities, and continue to work on reducing conversion costs and improving margins. And our demand and our inventory position is relative to what we purchase compared to the whole market around the globe. If pricing is correct in the coming year, I would anticipate, by the end of the year, we'll be projecting considerably reduced crop sizes in the following year. And that will start to potentially eat away at any oversupply that's sitting in the market.

Speaker #5: look, oversupply, under-supply cycles we've experienced them many times in the past. It's something we're very used to working through. Frankly, and I think I've said this before, we prefer a slight oversupply market.

Speaker #5: It's when we can acquire the product at the correct price from the farmer base, maximize our efficiencies in our facilities, and continue to work on reducing conversion costs and improving margins.

Speaker #5: And our demand and our inventory position is relative to what we purchase compared to the whole market around the globe. If pricing is correct, in the coming year, I would anticipate by the end of the year we'll be projecting considerably reduced crop sizes in the following year.

Dustin Styons: And our demand and our inventory position is relative to what we purchase compared to the whole market around the globe. If pricing is correct in the coming year, I would anticipate, by the end of the year, we'll be projecting considerably reduced crop sizes in the following year. And that will start to potentially eat away at any oversupply that's sitting in the market.

Speaker #5: And that will start to potentially eat away at any oversupply that's sitting in the market. If we look at the individual crops from our perspective, yeah, I think fluke tobaccos, we're looking at a slightly lower crop sizes in totality for this year compared to last year.

Dustin Styons: If we look at the individual crops from our perspective, yeah, I think flue-cured tobaccos, we're looking at slightly lower crop sizes in totality for this year compared to last year. Burley, actually, we're already seeing a considerable reduction coming in this year. So that, from our perspective, is probably a little bit more of a balanced situation already. Oriental tobaccos, we have some increases, but we've got strong demand for Oriental. So we believe we're in a good position. And Dark tobaccos, we're not really involved in that market to any significant degree. So we don't really focus on those.

Speaker #5: Burleigh, actually, we're already seeing a considerable reduction coming in this year. So, from our perspective, it's probably a little bit more of a balanced situation already.

Dustin Styons: Oriental tobaccos, we have some increases, but we've got strong demand for Oriental. So we believe we're in a good position. And Dark tobaccos, we're not really involved in that market to any significant degree. So we don't really focus on those.

Speaker #5: Oriental tobaccos, we have some increases, but we've got strong demand for Orientals. So we believe we're in a good position. And dark tobaccos, we're not really involved in that market to any significant degree.

Speaker #5: So we don't really focus on those.

Speaker #4: Super helpful. Last one for me. Dustin, SG&A, looks to me like it's going to end the year actually maybe even down year over year in dollars.

Oren Shaked: Super helpful. Last one for me. Dustin, SG&A looks to me like it's going to end the year actually maybe even down year over year in dollars. That's the first time we've seen that, I think, in a few years. How do we think about SG&A in fiscal 2027 and beyond? Are you now at a stable level? Should we be thinking about it increasing going forward?

Speaker #4: That's the first time we've seen that, I think, in a few years. How do we think about SG&A in fiscal '27 and beyond? Are you now at a stable level?

Speaker #4: Should we be thinking about it increasing going forward?

Speaker #4: forward? I think

Dustin Styons: I think generally, we see SG&A being stabilized. As we mentioned, some of the reduction this year is primarily due to certain accruals during the quarter, especially on the back of last year. So I think where we are is stable. Obviously, a lot of that is subject to various FX dynamics across the world. But as far as incremental or structural shifts, I think we're right where we need to be.

Speaker #2: generally we see SG&A being stabilized as we mentioned. Some of the reduction this year is primarily due to certain accruals during the quarter. Especially on the back of last year.

Speaker #2: So I think where we are is stable. Obviously, a lot of that is subject to various FX dynamics across the world. But as far as incremental or structural shifts, I think we're right where we need to

Speaker #2: be. Great.

Oren Shaked: Great. Thanks, everybody. I'll pass it on.

Speaker #4: Thanks, everybody. I'll pass it on.

Speaker #5: Thank you.

Dustin Styons: Thank you.

Speaker #6: As a reminder, if you would like to ask a question, please press star one. We will take our next question from Patrick Fitzgerald with Baird.

Operator: As a reminder, if you would like to ask a question, please press star one. We will take our next question from Patrick Fitzgerald with Baird.

Speaker #7: Hi. Thanks for taking the questions. First of all, what was other expense in the quarter? It was elevated.

Patrick Fitzgerald: Hi. Thanks for taking the questions. First of all, what was other expense in the quarter that was elevated?

Speaker #2: Yes. Other expense is related to a longstanding I think we highlighted this in the release. A longstanding customs resolution that we decided to settle within the quarter.

Dustin Styons: Yes. Other expense is related to a long-standing and I think we highlighted this in the release, a long-standing customs resolution that we decided to settle within the quarter so that we could advance other strategic initiatives in that specific market. There's also some variability and changes related to FX and some other items, but the main item is what I described.

Speaker #2: So that we could advance other strategic initiatives in that specific market. There's also some variability and changes related to FX in some other items.

Speaker #2: But the main item is what I described.

Speaker #7: Okay, thanks. And then, if I'm looking at your fourth quarter results from prior years, the $61 million implied for the fourth quarter this year, by your midpoint and guidance, is really an outlier.

Patrick Fitzgerald: Okay. Thanks. And then if I'm looking at your fourth quarter results from prior years, the $61 million implied for the fourth quarter this year by your midpoint and guidance is really an outlier. Could you talk about what the shipping expectations are versus prior years to kind of hit that mark? What are some of the key things that need to happen to hit that guidance range?

Speaker #7: Could you talk about what the shipping expectations are versus prior years to kind of hit that mark? What are some of the key things that need to happen to hit that guidance range?

Speaker #5: Hi, Patrick. You're right. If you look at year to date, and our guidance, we're obviously projecting a considerably larger in any metric quarter four than we had last year.

Pieter Sikkel: Hi, Patrick. Yeah, you're right. If you look at year to date and our guidance, we're obviously projecting a considerably larger in any metric Q4 than we had last year. This is very much related to the cadence that Dustin talked about earlier with the larger African crops in particular representing a larger portion of our sales this year. You can see that reflected in the $200 million of additional inventory we've got at Q3. Obviously, we are anticipating shipping significantly higher volumes and value in Q4. So far, that has been for the first 5, 6 weeks that we've been through, that's been running according to plan. But obviously, there's still a significant amount to go, a large portion in March.

Speaker #5: And this is very much related to the cadence that Dustin talked about earlier, with the larger African crops in particular representing a larger portion of our sales this year.

Speaker #5: And you can see that reflected in the 200 million dollars of additional inventory we've got a quarter three. Obviously, we are anticipating shipping significantly higher volumes and value in quarter four.

Pieter Sikkel: Obviously, we are anticipating shipping significantly higher volumes and value in Q4. So far, that has been for the first 5, 6 weeks that we've been through, that's been running according to plan. But obviously, there's still a significant amount to go, a large portion in March.

Speaker #5: So far, that has been for the first five, six weeks that we've been through, that's been running according to plan. But obviously, there's still a significant amount to go.

Speaker #5: A large portion in March, and a large portion of that comes from the African region, which is a little bit less reliable in terms of being able to load and ship at the port.

Pieter Sikkel: And a large portion of that comes from the African region, which is a little bit less reliable in terms of being able to load and ship at the port, can sometimes be impacted by weather and so on. But so far, it's running very well. We have good visibility to it. And we are very confident where we are in the guidance.

Speaker #5: Can sometimes be impacted by weather and so on. But so far, it's running very well. We have good visibility to it. And we are very confident where we are in the guidance.

Speaker #2: Patrick, I'd also like to highlight related to that. If you look at the inventory increase and the cadence shift that we've mentioned, and specifically our uncommitted levels remaining very low.

Dustin Styons: Patrick, I'd also like to highlight, related to that, if you look at the inventory increase and the cadence shift that we've mentioned, and specifically our uncommitted levels remaining very low, gives us a lot of confidence going into Q4.

Speaker #2: Gives us a lot of confidence going into quarter four.

Speaker #7: All right. Great to hear. I wanted to ask about the unprocessed inventory level versus where it was last year. It's like up 40 million year over year.

Patrick Fitzgerald: All right. Great to hear. I wanted to ask about the unprocessed inventory level versus where it was last year. It's like up 40 million year-over-year. Is that by design? And do you expect that to remain elevated? Or maybe last year was lower than you typically run at. Any thoughts on that?

Speaker #7: Is that by design? And do you expect that to remain elevated or maybe last year was lower than you typically run at? Any thoughts on

Speaker #7: that?

Speaker #2: Yes. On

Dustin Styons: Yes. On the unprocessed inventory, that's related to what we would also call green inventory. Again, very anchored to what we've been mentioning with the larger crops, particularly in Africa, that processing season is in Q3 along with other markets, but predominantly Africa. With the smaller crops last year, we did not have as much that would carry over processing into Q4, whereas this year we have had that. That's very much expected along with the crop sizes and the cadence that we see this year.

Speaker #2: the unprocessed inventory, that's related to what we would also call green inventory. Again, a very anchored to what we've been mentioning with the larger crops, particularly in Africa.

Speaker #2: That processing season is in quarter three, along with other markets, but predominantly Africa. And with the smaller crops last year, we had we did not have as much that would carry over processing into quarter four.

Speaker #2: Whereas this year we have had that, so that's very much expected, along with the crop sizes and the cadence that we see this year.

Speaker #7: Okay. Great. And then any thoughts on how much you expect to have on the seasonal credit line at the end of the year? You had 395 at the end of last year.

Patrick Fitzgerald: Okay. Great. And then any thoughts on how much you expect to have on the seasonal credit line at the end of the year? You had $395 at the end of last year. That was pretty low. Do you expect to come close to that mark, or?

Speaker #7: That was pretty low. Do you expect to come close to that mark,

Speaker #7: or? We do

Dustin Styons: We do expect. I mean, obviously, with Q4 being a significantly higher quarter this year on the sales front. And as those sales go through, yes, the inventory converting to cash and reducing the seasonal lines. So for Q4, we are expecting Q4 to be the highest sales quarter, the highest cash generation quarter. And therefore, that would translate to the lowest inventory as well as the lowest seasonal line balances.

Speaker #2: expect. I mean, obviously with quarter four, being a significantly higher quarter this year, on the sales front, and as those sales go through, yes, the inventory converting to cash and reducing the seasonal lines.

Speaker #2: So for quarter four, we are expecting quarter four to be the highest sales quarter. The highest cash generation quarter. And therefore, that would translate to the lowest inventory as well as the lowest seasonal line

Speaker #2: balances. All right.

Patrick Fitzgerald: All right. So I appreciate it. Thank you very much.

Speaker #7: So I appreciate it. Thank you very much.

Speaker #2: Thank you.

Dustin Styons: Thank you.

Speaker #6: We will take our next question from Chapin Meacham with Northeast

Operator: We will take our next question from Chapin Mechem with Northeast Investors.

Speaker #6: Investors.

Speaker #8: Oh, hi. Good morning,

Chapin Mechem: Oh, hi. Good morning, Peter and Dustin. Congrats, I guess, on what's looking to be another great year. I'm just wondering if you can comment at all on anything relating to the refinancing.

Speaker #8: Peter and Dustin. Congrats, I guess, on what's looking to be another great year. I'm just wondering if you can comment at all on anything relating to the refinancing.

Speaker #2: Good morning, Chapin. Yes. We've our focus has been executing this expected record year. On the back of multiple years of significant improvement. And as we close this year out, we believe that we're in a very strong position.

Dustin Styons: Good morning, Chapin. Yes. Our focus has been executing this expected record year on the back of multiple years of significant improvement. As we close this year out, we believe that we're in a very strong position. As we turn our focus to any capital market activity, we are feeling really good about what we need to get done.

Speaker #2: And as we turn our focus to any capital market activity, we are feeling really good about what we need to get done.

Speaker #8: Okay. So have you started the process, or? I mean, any comments on timing or that's

Chapin Mechem: Okay. So have you started the process, or? I mean, any comments on timing, or that's all you can say?

Speaker #8: all you?

Speaker #2: As far as timing. No

Dustin Styons: As far as timing, no comments on timing at this point. But it is very much top of mind. And again, the focus has been on delivering this record year on the back of multiple years of improvement, consistent improvement. And we do believe we're well positioned, so.

Speaker #2: comments on timing at this point. But it is very much top of mind. And again, the focus has been on delivering this record year on the back of multiple years of improvement.

Speaker #2: Consistent improvement. And we do believe we're well-positioned, so.

Speaker #8: Great. Thanks. And well

Chapin Mechem: Great. Thanks. And well done.

Speaker #2: Thank you. done.

Dustin Styons: Thank you.

Speaker #5: Thank you

Tomas Grigera: Thank you very much.

Speaker #5: very

Speaker #6: This concludes the Q&A portion of today's call. I will now hand the call back to Mr. Gregara for closing

Operator: This concludes the Q&A portion of today's call. I will now hand the call back to Mr. Grigera for closing remarks.

Speaker #6: remarks.

Speaker #2: Thank you,

Tomas Grigera: Thank you, operator. Thank you to everyone on the line for your interest in Pyxus. We appreciate your time and engagement today, and we look forward to keeping you updated as we execute on our commitments through the remainder of the year. This concludes our call.

Speaker #2: operator. And thank you to everyone on the line for your interest in PYXUS. We appreciate your time and engagement today. And we look forward to keeping you updated as we execute on our commitments through the remainder of the year.

Q3 2026 Pyxus International Inc Earnings Call

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