Pyxus International, Inc. — Second Quarter Fiscal 2027 Earnings Summary

Financial Performance

• Second quarter sales and other operating revenues decreased 6.3% year-over-year to $534.4 million from $570.2 million; first-half revenues were $972.2 million, a 9.9% decline from $1,079.0 million.
• Gross profit as a percentage of sales was 14.8% in Q2 2027 compared to 15.4% in Q2 2026; for the first half, it was 14.4% compared to 14.2% the prior year.
• Operating income for Q2 was $40.0 million, down from $46.7 million in the prior year period; first-half operating income was $55.6 million versus $67.7 million.
• Net income attributable to Pyxus International, Inc. improved to $4.1 million in Q2 from a net loss of $0.9 million; first-half net loss narrowed to $3.1 million from a net loss of $16.7 million.
• Q2 Adjusted EBITDA was $43.0 million, down from $54.8 million in the prior year; first-half Adjusted EBITDA was $70.8 million compared to $84.2 million.
• Net debt decreased $13.6 million to $1,250.5 million at September 30, 2026, from $1,264.1 million the prior year, resulting in a net leverage ratio of 5.86x.
• Total leaf tobacco inventories decreased 6.5% to $1,030.9 million at quarter-end from $1,102.8 million the prior year.
• Uncommitted processed inventory was $42.4 million (5.4% of total processed inventory) at September 30, 2026, compared to $19.5 million (2.7%) in the prior year.
• Average operating cycle time increased to 175 days in Q2 2027 from 167 days in the prior year period.
• Net cash used in operating activities for the trailing twelve months ended September 30, 2026, was $129.2 million, compared to $314.0 million in the prior year period.

Guidance and Future Outlook

• Full-year fiscal 2027 net sales guidance remains $2.3 billion to $2.5 billion.
• Full-year Adjusted EBITDA guidance tightened to a range of $215 million to $235 million, compared to the prior range of $210 million to $240 million.
• Management expects to execute a heavily weighted second half of the fiscal year, with nearly 95% of lower-cost processed inventory committed.
• Volumes delayed from the first half due to shipping constraints and purchasing timelines are included in the second-half shipment plan.

Business Segments and Product Lines

• Leaf product revenues decreased 5.8% to $481.3 million in Q2 from $511.2 million, driven by a 15.8% decline in leaf volumes sold (77.0 million kilos vs. 91.4 million kilos).
• Leaf average price per kilo increased 11.8% to $6.25 in Q2 2027 from $5.59, while average cost per kilo rose 10.9% to $5.31 from $4.79.
• Leaf average gross profit per kilo increased 17.5% to $0.94 in Q2 2027 from $0.80.
• Processing and other revenues decreased 7.9% to $51.1 million in Q2 from $55.5 million; gross profit in this segment dropped 62.2% to $5.4 million from $14.3 million.
• "All Other" segment revenues were $2.0 million in Q2 2027, down from $3.6 million, with gross profit turning positive at $1.3 million compared to a loss of $0.3 million.
• Shipment timing in Asia, smaller crops from certain origins, and delays in current crop shipments from Africa and South America contributed to volume declines.
• Higher carry-over crop sales from Africa partially offset volume declines in the first half.

Market and Competitive Landscape

• Market dynamics extended purchasing timelines, and widespread global shipping delays shifted sales into the back half of the year.
• The company noted continued high inflation as a potential risk affecting profitability and demand for leaf tobacco products.
• Increased competition was cited as a risk that could adversely affect earnings.

Risks and Challenges

• Risks include reliance on a small number of significant customers, customer vertical integration, and global shifts in sourcing requirements due to tariffs and trade policies.
• Operational risks involve growing conditions, weather, environmental factors, and the potential for suppliers to migrate to other crops.
• Financial risks include significant debt levels, reliance on uncommitted short-term operating credit lines in foreign jurisdictions, and potential failure of foreign banks.
• Geopolitical conflicts, including armed conflicts in the Middle East and shipping disruptions, pose risks to operations and sourcing.
• Regulatory risks include changing sustainability requirements, product liability claims, and government actions affecting tobacco sourcing and consumption.
• Currency risks related to foreign exchange fluctuations and restrictions on repatriating earnings from foreign subsidiaries.

Management Commentary and Tone

• CEO Pieter Sikkel stated the company is "well-positioned to execute a heavily weighted second half" and emphasized disciplined working capital deployment.
• Management highlighted that aligning crop purchases with customer commitments strengthened their position for second-half execution.
• Sikkel noted that improved margins and strong ongoing customer demand support the tightened outlook.
• The tone reflected confidence in delivering on full-year priorities despite external delays, citing that nearly 95% of lower-cost processed inventory is committed.

Other Key Points

• The company recognized a $9.1 million gain in the current-year period on the sale of its tobacco processing facility in Araranguá, Brazil.
• There were no outstanding borrowings on the $150.0 million Asset-Based Lending (ABL) facility at the end of the quarter.
• Foreign currency volatility contributed to a favorable income tax expense in the current period compared to the prior year.
• The company will hold an earnings conference call on November 5, 2026, at 5 p.m. EST.
• The company is a global value-added agricultural company with over 150 years of experience, focusing on responsibly sourced, sustainable, and traceable products.