Pyxus International Inc.

08/05/2026 | Press release | Distributed by Public on 08/05/2026 05:01

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Readers are cautioned that the statements contained in this report regarding expectations of our performance or other matters that may affect our business, results of operations, or financial condition are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements, which are based on current expectations of future events, may be identified by the use of words such as "guidance", "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets," and other words of similar meaning. These statements also may be identified by the fact that they do not relate strictly to historical or current facts. If underlying assumptions prove inaccurate, or if known or unknown risks or uncertainties materialize, actual results could vary materially from those anticipated, estimated, or projected. These risks and uncertainties include those discussed in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the year ended March 31, 2026, and in our other filings with the U.S. Securities and Exchange Commission. These risks and uncertainties include: our reliance on a small number of significant customers; continued vertical integration by our customers; global shifts in sourcing customer requirements, including as a result of the imposition of, and changes to, tariffs and other changes in international trade policies; variation in our financial results due to growing conditions, customer indications and other factors; loss of confidence in us by our customers, farmers and other suppliers; migration of suppliers who have historically grown tobacco and from whom we have purchased tobacco toward growing other crops; risks related to our advancement of inputs to tobacco suppliers to be settled upon the suppliers delivering us unprocessed tobacco at the end of the growing season; risks that the tobacco we purchase directly from suppliers will not meet our customers' quality and quantity requirements; weather and other environmental conditions that can affect the quantity and marketability of our inventory; the impact of increased competition on our earnings; continued high inflation that may adversely affect our profitability and the demand for our leaf tobacco products; risks related to our capital structure, including risks related to our significant debt and our ability to continue to finance our non-U.S. local operations with uncommitted short-term operating credit lines at the local level, our ability to continue to access capital markets to obtain long-term and short-term financing, and our substantial debt which may adversely affect us by limiting future sources of financing, interfering with our ability to pay interest and principal on our indebtedness, and subjecting us to additional risks; potential failure of foreign banks in which our subsidiaries maintain deposits or the failure by such banks to transfer funds or honor withdrawals; the risk that, because our ability to generate cash depends on many factors beyond our control, we may be unable to generate the significant amount of cash required to service our indebtedness; our ability to refinance our current credit facilities at the same availability or at similar or reduced interest rates, including due to volatility and disruption of global credit markets; failure to achieve our stated goals, which may adversely affect our liquidity; developments with respect to our liquidity needs and sources of liquidity; failure by counterparties to derivative transactions to perform their obligations; international business risks, including unsettled political conditions, uncertainty in the enforcement of legal obligations, including the collection of accounts receivable, fraud risks, expropriation, import and export restrictions, exchange controls, inflationary economies, currency risks, risks related to the restrictions on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries and impacts of international sanctions on our ability to sell or source tobacco in certain regions; risks and uncertainties related to geopolitical conflicts, including the armed conflicts in the Middle East and disruptions in shipping in that area; risks related to our operations in jurisdictions that pose a high risk of potential violations of the Foreign Corrupt Practices Act; exposure to foreign tax regimes in which the rules are not clear, are not consistently applied and are subject to sudden change; fluctuations in foreign currency exchange and interest rates; disruption, failure or security breaches of our information technology systems and other cybersecurity risks; regulations regarding environmental matters that may substantially increase our costs and expose us to potential liability; changing sustainability regulatory requirements and expectations; exposure to product liability claims, regulatory action, and litigation in the event such products are alleged to have caused injury, harm, or death; certain shareholders have the ability to exercise controlling influence on various corporate matters; reductions in demand for cigarettes and other consumer tobacco products; legislative and regulatory initiatives that may reduce consumption of consumer tobacco products and demand for our services and increase regulatory burdens on us or our customers; government actions that significantly affect the sourcing of tobacco, including governmental actions to identify and assess crop diversification initiatives and alternatives to leaf tobacco growing in countries whose economies depend upon tobacco production; and governmental investigations into our business activities, including, but not limited to, leaf tobacco industry buying and other payment practices.
We do not undertake to update any forward-looking statements that we may make from time to time except to the extent required by law.
Overview
Pyxus is a global agricultural company with businesses having more than 150 years of experience delivering value-added products and services to businesses and customers. The Company is a trusted provider of responsibly sourced, independently verified, sustainable, and traceable products and ingredients.
Executive Summary
The Company's first quarter 2027 financial results were consistent with expectations following a strong finish to the prior fiscal year. The current quarter was impacted by lower average costs and sales prices for leaf tobacco in South America and Africa, and slightly lower leaf volumes sold mainly due to the timing of North America shipments, resulting in reduced consolidated sales and other operating revenues by $71.0 million, or 14.0%, compared to the same period a year ago. Total gross profit was similarly impacted over this same period, declining $4.2 million, or 6.4%, but the regional mix of sales, primarily from Europe, resulted in gross profit as a percent of sales increasing to 14.0% during the three months ended June 30, 2026 from 12.9% during the three months ended June 30, 2025, and contributed to little change in leaf gross profit per kilo over the same period.
Tobacco crop production remains elevated again this season across the Southern Hemisphere origins in which we operate, resulting in lower leaf purchase prices in our key sourcing locations. Two consecutive seasons of large crops have allowed us to slow our green tobacco purchases and be more deliberate in our buying approach this season, ensuring that we source lower cost, quality tobacco that meets our customers' requirements. At June 30, 2026, total tobacco inventories, comprised of unprocessed and processed tobacco, decreased by $24.6 million, or 2.3%, when compared to June 30, 2025. Unprocessed tobacco decreased $120.3 million, or 23.4%, to $393.5 million as of June 30, 2026 from $513.9 million as of June 30, 2025, mainly due to lower purchase prices and the slower timing of our green tobacco purchases in Africa and South America. Processed tobacco increased $95.7 million, or 16.6%, to $671.6 million as of June 30, 2026 from $575.9 million as of June 30, 2025, primarily due to higher levels of carry-over inventory from the prior year crop.
Weather Patterns and Crop Conditions
As an agricultural company, our results are inherently subject to major weather patterns, including recurring El Niño and La Niña cycles, which can affect crop size, quality, and the timing of harvesting and purchasing activities in the origins in which we operate. The current El Niño cycle is forecasted to reach its peak effects between the Company's third and fourth quarters of fiscal year 2027 and has been characterized by certain meteorological sources as a "Super" El Niño, with an intensity expected to exceed that of a typical cycle. Historically, our origins in Africa and South America tend to be adversely affected by an El Niño cycle that typically occurs when crops are still in the fields growing, while the crop seasons in Asia, Europe, and North America have largely remained unaffected by past cycles. We are actively monitoring this recent weather development, and while the ultimate impact, if any, on growing conditions and crop volumes cannot be predicted with certainty, we maintain geographically diversified sourcing and continue to assess its potential effect on availability, quality, and cost of leaf tobacco.
Results of Operations
Three Months Ended June 30, 2026 and 2025
Three Months Ended June 30,
Change
(in millions, except per kilo amounts) 2026 2025 $ %
Consolidated:
Sales and other operating revenues $ 437.8 $ 508.8 (71.0) (14.0)
Cost of goods and services sold 376.4 443.2 (66.8) (15.1)
Gross profit 61.4 65.6 (4.2) (6.4)
Gross profit as a percent of sales 14.0 % 12.9 %
Selling, general, and administrative expenses $ 43.9 $ 40.4 3.5 8.7
Other expense, net 1.3 4.2 (2.9) (69.0)
Restructuring and asset impairment charges 0.6 0.1 0.5 500.0
Operating income* 15.7 21.0 (5.3) (25.2)
Interest expense, net 29.8 29.8 - -
Loss before income taxes and other items* (14.2) (8.8) (5.4) (61.4)
Income tax (benefit) expense (5.7) 5.2 (10.9) (209.6)
Income (loss) from unconsolidated affiliates, net 1.4 (1.3) 2.7 207.7
Net income attributable to noncontrolling interests 0.2 0.6 (0.4) (66.7)
Net loss attributable to Pyxus International, Inc.* $ (7.3) $ (15.8) 8.5 53.8
Leaf:
Product revenues $ 393.0 $ 458.2 (65.2) (14.2)
Tobacco costs 316.9 375.7 (58.8) (15.7)
Transportation, storage, and other period costs 22.6 25.1 (2.5) (10.0)
Total product cost of goods sold 339.5 400.8 (61.3) (15.3)
Product gross profit 53.5 57.4 (3.9) (6.8)
Product gross profit as a percent of sales 13.6 % 12.5 %
Kilos sold 63.5 66.9 (3.4) (5.1)
Average price per kilo $ 6.19 $ 6.85 (0.66) (9.6)
Average cost per kilo 5.35 5.99 (0.64) (10.7)
Average gross profit per kilo 0.84 0.86 (0.02) (2.3)
Processing and other revenues $ 42.8 $ 50.2 (7.4) (14.7)
Processing and other costs of services sold 36.2 42.6 (6.4) (15.0)
Processing and other gross profit 6.6 7.6 (1.0) (13.2)
Processing and other gross profit as a percent of sales 15.4 % 15.1 %
All Other:
Sales and other operating revenues $ 2.0 $ 0.4 1.6 400.0
Cost of goods and services sold 0.7 (0.2) 0.9 450.0
Gross profit 1.3 0.6 0.7 116.7
Gross profit as a percent of sales 65.0 % 150.0 %
* Amounts may not equal column totals due to rounding.
Sales and other operating revenues decreased $71.0 million, or 14.0%, to $437.8 million for the three months ended June 30, 2026 from $508.8 million for the three months ended June 30, 2025. This decrease was due to the impact of lower average sales prices primarily for leaf products in South America and Africa, and a decline in volumes sold mainly driven by the timing of shipments in North America. The current crop in North America was substantially shipped in the fourth quarter of fiscal year 2026, whereas comparable crop shipments in the prior year occurred during the first quarter of fiscal year 2026.
Cost of goods and services sold decreased $66.8 million, or 15.1%, to $376.4 million for the three months ended June 30, 2026 from $443.2 million for the three months ended June 30, 2025, corresponding to the reduction in sales and other operating revenues, as well as lower purchasing costs for tobacco.
Gross profit decreased $4.2 million, or 6.4%, to $61.4 million for the three months ended June 30, 2026 from $65.6 million for the three months ended June 30, 2025. This decrease was mainly due to the timing of shipments in North America and customer mix in Africa, partially offset by improved pricing in Europe. These same factors led to a slight reduction in average leaf gross profit per kilo of $0.84 for the three months ended June 30, 2026 compared to average leaf gross profit per kilo of $0.86 for the three months ended June 30, 2025.
Income tax (benefit) expense decreased $10.9 million, or 209.6%, to a benefit of $5.7 million for the three months ended June 30, 2026 from an expense of $5.2 million for the three months ended June 30, 2025. This decrease was primarily attributable to favorable foreign currency impacts recognized during the current-year period, and a decrease in the expense associated with unrecognized tax benefits. See "Note 4. Income Taxes" to the "Notes to Condensed Consolidated Financial Statements" for additional information.
Liquidity and Capital Resources
Overview
Our primary sources of liquidity are cash generated from operations, short-term borrowings under our foreign seasonal lines of credit, availability under our ABL Credit Facility, and cash collections from our securitized receivables. Our liquidity requirements are affected by various factors from our tobacco leaf business, including crop seasonality, foreign currency and interest rates, green tobacco prices, customer mix, crop size, and quality. Our leaf tobacco business is seasonal, and purchasing, processing, and selling activities have several associated peaks where cash on-hand and outstanding indebtedness may vary significantly compared to year end. The first two quarters of our fiscal year generally represent the peak of our working capital requirements.
We believe that our sources of liquidity will be sufficient to fund our anticipated operating needs for the next twelve months. During such time, our liquidity needs for operations may approach the levels of our anticipated available cash and permitted borrowings under our credit facilities. Unanticipated developments affecting our liquidity needs, including with respect to the foregoing factors, and sources of liquidity, including impacts affecting our cash flows from operations and the availability of capital resources (including an inability to renew or refinance seasonal lines of credit), may result in a deficiency in liquidity. To address a potential liquidity deficiency, we may undertake plans to minimize cash outflows, which could include exiting operations that do not generate positive cash flow. It is possible that, depending on the occurrence of events affecting our liquidity needs and sources of liquidity, such plans may not be sufficient to adequately or timely address a liquidity deficiency.
Debt Financing
We continue to finance our business with a combination of short-term and long-term credit lines, the long-term debt securities, advances from customers, and cash from operations when available. See "Note 11. Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for a summary of our short-term and long-term debt.
We continuously monitor and, as available, adjust funding sources as needed to enhance and drive various business opportunities. From time to time we may take steps to reduce our debt or otherwise improve our financial position. Such actions could include prepayments, open market debt repurchases, negotiated repurchases, other redemptions or retirements of outstanding debt, and refinancing of debt. The amount of prepayments or the amount of debt that may be repurchased, refinanced, or otherwise retired, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants, and other considerations.
The following summarizes our total borrowing capacity at June 30, 2026 and 2025 under our short-term and long-term credit lines and letter of credit facilities and the remaining available amount after the reduction for outstanding borrowings and amounts reserved for outstanding letters of credit:
June 30, 2026 June 30, 2025
(in millions) Total Borrowing Capacity Remaining Amount Available Total Borrowing Capacity Remaining Amount Available
Senior secured credit facility:
ABL Credit Facility $ 150.0 $ 150.0 $ 150.0 $ 150.0
Foreign seasonal lines of credit 1,170.4 351.4 1,025.2 171.2
Letters of credit 10.9 2.6 12.3 3.4
Total $ 1,331.3 $ 504.0 $ 1,187.5 $ 324.6
The total borrowing capacity of our foreign seasonal lines of credit increased $145.2 million and the remaining amount available also increased by $180.2 million when compared to the prior year. Our foreign seasonal lines of credit are utilized to purchase green tobacco in our sourcing origins and provide us with purchasing flexibility. Lower green tobacco prices and the slower pace of our purchasing in the current year have resulted in an increase in the remaining amount available for borrowing under our foreign seasonal lines of credit, which are subject to limitations based on the level of receivables and inventories as collateral and by certain restrictive covenants.
Net Debt
We refer to "Net debt," a non-GAAP measure, as total debt liabilities less cash and cash equivalents. We believe this non-GAAP financial measure is useful to monitor leverage and to evaluate changes to the Company's capital structure. A limitation associated with using net debt is that it subtracts cash and cash equivalents, and therefore, may imply that management intends to use cash and cash equivalents to reduce outstanding debt and that cash held in certain jurisdictions can be applied to repay obligations owing in other jurisdictions and without reduction for applicable taxes. In addition, net debt suggests that our debt obligations are less than the most comparable GAAP measure indicates. The following summarizes the computation of net debt:
(in millions) June 30, 2026 June 30, 2025 March 31, 2026
Notes payable $ 828.6 $ 880.9 $ 477.1
Long-term debt(1)
456.0 455.1 455.8
Total debt liabilities $ 1,284.6 $ 1,336.0 $ 932.9
Less: Cash and cash equivalents 175.9 96.4 134.3
Net debt $ 1,108.7 $ 1,239.6 $ 798.6
(1) Long-term debt includes outstanding indebtedness under the ABL Credit Facility. There were no outstanding amounts under the ABL Credit Facility as of each period end shown. Weighted average borrowings outstanding under the ABL Credit Facility were $42.1 million and $57.6 million for the three months ended June 30, 2026 and 2025, respectively.
Net debt decreased as of June 30, 2026 when compared to June 30, 2025 primarily due to higher cash and cash equivalents from the collection of trade receivables, net, as well as reduced borrowings on our foreign seasonal lines of credit due to lower green tobacco prices and a slower pace of purchasing primarily at our sourcing locations in Africa and South America.
Working Capital
The following summarizes our working capital:
(in millions except for current ratio) June 30, 2026 June 30, 2025 March 31, 2026
Cash, cash equivalents, and restricted cash $ 179.5 $ 101.4 $ 137.7
Trade and other receivables, net 186.6 223.3 264.9
Inventories and advances to tobacco suppliers, net 1,192.8 1,183.5 854.3
Recoverable income taxes 14.4 11.7 2.9
Prepaid expenses and other current assets 79.7 71.1 70.8
Total current assets* $ 1,652.9 $ 1,591.0 $ 1,330.5
Notes payable $ 828.6 $ 880.9 $ 477.1
Accounts payable 114.6 124.3 146.8
Advances from customers 166.7 87.4 175.0
Accrued expenses and other current liabilities 131.5 104.2 114.8
Income taxes payable 10.8 10.4 9.1
Operating leases payable 10.1 9.6 9.9
Total current liabilities* $ 1,262.3 $ 1,216.8 $ 932.8
Current ratio 1.3 to 1 1.3 to 1 1.4 to 1
Working capital $ 390.6 $ 374.2 $ 397.7
* Amounts may not equal column totals due to rounding.
Working capital increased $16.4 million, or 4.4%, from June 30, 2025 to June 30, 2026. The improvement was driven by higher cash and cash equivalents resulting from the collection of trade and other receivables, net, and the receipt of cash advances from customers, together with lower outstanding borrowings on our foreign seasonal lines of credit. These improvements were partially offset by higher contract liabilities associated with our obligation to ship tobacco to certain customers at a future date.
Inventories
The following summarizes inventory committed to a customer and uncommitted inventory balances for processed tobacco:
(in millions) June 30, 2026 June 30, 2025 March 31, 2026
Committed $ 611.3 $ 562.3 $ 462.2
Uncommitted 60.3 13.6 45.2
Total processed tobacco $ 671.6 $ 575.9 $ 507.4
Total processed tobacco increased by $95.7 million, or 16.6%, from June 30, 2025 to June 30, 2026. This increase is primarily from larger carry-over crop volumes in Africa. The level of uncommitted processed tobacco at June 30, 2026 is higher than the prior-year period, reflecting the current oversupply market environment, compared with more balanced supply and demand conditions a year ago. See "Note 7. Inventories, Net" to the "Notes to Condensed Consolidated Financial Statements" for additional information.
Sources and Uses of Cash
We typically finance our non-U.S. tobacco operations with committed and uncommitted short-term foreign seasonal lines of credit, normally extending for a term of 180 to 365 days, corresponding to the tobacco crop cycle in that market. For uncommitted facilities, the lenders have the right to cease making loans and demand repayment of loans. These short-term seasonal lines of credit are generally renewed at the outset of each tobacco season. We maintain various other financing arrangements to meet the cash requirements of our businesses. See "Note 11. Debt Arrangements" to the "Notes to Condensed Consolidated Financial Statements" for additional information.
We utilize capital in excess of cash flow from operations to finance accounts receivable, inventory, and advances to tobacco suppliers in foreign countries. In addition, we may periodically elect to purchase, redeem, repay, retire, or cancel indebtedness prior to stated maturity under our various foreign credit lines.
As of June 30, 2026, our cash, cash equivalents, and restricted cash was $179.5 million, of which approximately $130.9 million was held in foreign jurisdictions for working capital needs, a majority of which is subject to exchange controls and a portion of which is subject to tax consequences upon repatriation, which could limit our ability to fully repatriate these funds. Fluctuation of the U.S. dollar versus many of the currencies in which we have costs may have an impact on our working capital requirements. We will continue to monitor and hedge foreign currency costs, as needed.
The following summarizes the sources and uses of our cash flows:
Three Months Ended
June 30,
(in millions) 2026 2025
Net loss $ (7.0) $ (15.3)
Trade and other receivables 9.6 (52.4)
Inventories and advances to tobacco suppliers (339.6) (388.0)
Payables and accrued expenses (13.8) 0.4
Advances from customers (6.7) (49.8)
Other (2.2) 9.8
Net cash used in operating activities $ (359.7) $ (495.3)
Collections from beneficial interests in securitized trade receivables 58.5 41.0
Other (3.9) (3.4)
Net cash provided by investing activities $ 54.6 $ 37.6
Net proceeds from short-term borrowings 353.6 476.9
Other (5.1) (2.4)
Net cash provided by financing activities $ 348.5 $ 474.5
Effect of exchange rate changes on cash (1.5) (1.0)
Increase in cash, cash equivalents, and restricted cash $ 41.9 $ 15.8
The change in cash, cash equivalents, and restricted cash for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 increased by $26.1 million. This increase was due to higher collections of cash from customers to
satisfy outstanding trade receivables and advances from customers in exchange for our promise to deliver processed tobacco at a future date, partially offset by reduced proceeds from short-term borrowings due to lower green tobacco prices in Africa and South America.
Planned Capital Expenditures
Capital spend for fiscal year 2027 includes strategic projects to drive long-term efficiencies and cost optimization at our largest operations in Africa and South America. Capital expenditures are also planned for the routine replacement of machinery and equipment, and investments in other such assets to enhance our operational effectiveness and to support our ongoing sustainability efforts. For the three months ended June 30, 2026, we incurred approximately $4.2 million in capital expenditures, and are expecting to incur an additional $34.2 million for the remainder of the fiscal year ending March 31, 2027.
Pension and Postretirement Health and Life Insurance Benefits
The following summarizes cash contributions to pension and postretirement health and life insurance benefits:
Three Months Ended
(in millions) June 30, 2026
Contributions made during the period $ 1.2
Contributions expected for the remainder of the fiscal year 3.3
Total $ 4.5
Critical Accounting Estimates
There have been no material changes to our critical accounting estimates since March 31, 2026. For information regarding our critical accounting estimates, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2026.
Pyxus International Inc. published this content on August 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 05, 2026 at 11:08 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]