Universal Corporation Sidoti Small-Cap Virtual Conference

Thank you, Daniel. Welcome, everybody. Thank you for joining Universal Corporation today. As Daniel said, I'm Preston Wigner. I'm Chairman, President, and CEO of Universal, and I'm excited to be with you today to tell you about the Universal story. We are having some technical issues. Daniel is controlling our slides, so thank you, Daniel. If you could go to the company overview slide for us. I'm seeing the title page.

My apologies. No problem. Next slide, please.

That's perfect. Universal is a global business-to-business agriproducts company. We've been supplying products, innovative solutions for well over 100 years. Our global diverse footprint covers five continents, over 30 countries, and serves as a key strength and competitive advantage for our company. Our roots are in tobacco. We're the world's leading global leaf supplier. Our tobacco business produced strong and consistent cash flows for decades. It's the backbone of the company. We're dedicated to proactively growing our company. Our strong tobacco business provides us many opportunities with our broad global customer base. We've created and are growing our new plant-based ingredients business, Universal Ingredients. We don't talk about our business without talking about sustainability. Our commitment to sustainability is also a strength and competitive advantage for the company, especially with our tobacco business.

We see sustainability as good for business, and it's good stewardship with the farmers, communities, and the operations we support around the world. Next slide. In simple terms, Universal is the global consumer products customers. We link farmers and suppliers to the global marketplace by sourcing their raw materials. By processing and delivering those raw materials, we link our customers to the agriproducts they need around the world to meet their requirements. Next slide, which is our business strategy. Our business is guided and driven by our three-pillar corporate growth strategy: maximizing and optimizing our tobacco business, growing our ingredients business, and strengthening the company for the future.

Through our maximizing and optimizing tobacco pillar, our focus is to increase our sales volume and market share, expand the services we perform, and pursue value chain opportunities with our customers, participate in our customers' next-generation product supply chain, and pursue operational efficiencies to optimize our global footprint. Through our growing ingredients pillar, our focus is to grow organically by leveraging our platform resources and increasing development of value-add product solutions using our broad product portfolio. We also target growth through acquisitions in the future to build scale and increase margins with value-added products. In strengthening for the future, we seek opportunities to improve and strengthen our company for the next 100 years.

Areas of focus include creative and efficient financial management to support the company, enhancing human resources and human capital management as strategic business drivers for our business, utilizing technology, including AI, to gain efficiencies and effectiveness, and to pursue opportunities over time to connect our tobacco and ingredients businesses. Next slide, please. Next slide, I'll talk about our tobacco business. I'll explain the strength and drivers of our company by starting with our global tobacco business. As I said, we're the world's leading global leaf tobacco supplier. We buy the vast majority of our raw tobacco directly from contracted farmers. This gives us a unique, solid relationship with our global grower base. The global market for leaf tobacco, excluding China, consists of three competitor segments: global leaf suppliers, local and regional suppliers, and vertically integrated customers. Roughly a third of the world's leaf tobacco is purchased by each segment.

For the global leaf suppliers, there are only two, us and another U.S. company. We operate in similar markets, but we're the largest, and we believe we're the best at what we do. That belief stems from the quality and depth of our programs and operations and our global footprint, as well as the stronger balance sheet, which allows us to take advantage of opportunities while creating. They don't have a diversity of business or the sustainability programs that we do. They may be cheaper, but often much less value for the customers, and they often have no operational support. No factories, agronomy teams, and no sustainability programs or resources. Sustainability is very important to our largest customers, and that importance is growing with the other customers around the world. For our vertically integrated customers, some of them do have vertically integrated operations in certain origins.

We believe we have more efficient operations, and we can increase volume to their benefit. That contracted tobacco is purchased on a run of crop, meaning you buy everything that the farmer produces, not just the specific leaf qualities and positions that our customers need. Our vertically integrated customers, they have to buy that whole plant, and they buy leaf tobacco that they don't really need. Our value to them in being able to move up that value chain and take over some of those positions they have, is that we've got the benefit of scale with our operations and all of those leaf positions we can disappear to our vast portfolio of customers, which should be more efficient to those customers that are vertically integrated.

The advantages we have compared to the different competitor segments in the industry position us well to capitalize on those long-term trends in the industry and execute our maximizing and optimizing pillar of our strategy. Next slide, please. The strength of our business is the global robust tobacco business we have that we have built over more than 100 years, provides us with strengths and creates barriers to entry. Across that commercial flow of our business, we highlight today four key strengths, sourcing, agronomy, processing, and logistics. For sourcing from our farmers, that global reach we have and diverse footprint provides us all the styles of tobacco our customers need, and we are in all the major tobacco markets. Our backbone is the strong local management teams around the world. Their deep knowledge and commitment to on-the-ground programs provide us consistency and agility across market cycles.

Our broad customer base supports our global footprint, providing a home for what we buy on a run of crop basis to meet our customers' unique needs. Our agronomy teams support our farmers because farmer success is our success. They provide farmer production support, on-farm good agricultural practices, farmer yield improvements, and competitive business returns for our farmers. This support has strengthened our long-standing farmer relationships. They also support farmer compliance and sustainability through on-farm education and monitoring, which includes agricultural and sustainability monitoring. Our teams conducted almost 2 million field visits this last fiscal year. Our processing facilities provide scale and capabilities that distinguish us from our competitors. Our large efficient factories help us meet customer demanding specs, and they are located in the strategic major tobacco markets in our footprint.

They also support our ability to provide packed leaf by-products and tobacco sheet, and through partner facilities, we provide liquid nicotine processing for the next-generation product markets. Finally, logistics as a key support for us and supports that vital link between the farmers and the customers. Our expertise in logistics and infrastructure enables us to connect hundreds of thousands of farmers in remote areas around the world with that global market, and to deliver goods efficiently to customers to meet their production needs. Our operational strengths support our long-standing large customer relationships, and they create those barriers to entry that protect our leading market position. On the next slide, Daniel, I will talk about our ingredients business, which is the other side of our company. We are proud of the progress we have made with the creation of Universal Ingredients. Next slide, please. In 2018, we had a strategy.

A few short years later, we acquired three companies and began integrating them, and now we are focused on growing that business. Our ingredients growth strategy complements our mature tobacco business. We saw adjacent markets and industries that could leverage our core agricultural processing capabilities and experience. We identified plant-based ingredients as the strategic direction for us to pursue. We began a thoughtful and intentional process of acquiring three companies to build a solid base for our ingredients platform, which includes concentrate, not from concentrate, fruit juices, purees, essences, and dry products through FruitSmart; dehydrated vegetables, herbs, and spices through our Silva International acquisition; and flavors, extracts, and nutraceuticals through Shank's Extracts. Those three companies created the solid base for Universal Ingredients. We then invested in the tools Universal Ingredients needs to grow. Commercial sales and marketing resources.

They help our go-to-market strategy with sales across the platform, targeting broader markets and raising awareness of our capabilities and solutions. With R&D and product development resource investments, we offer product concepts across different product lines, matching flavors and proactive product development to support evolving customer needs and customer trends. We have expanded and enhanced our facilities, including our $30-plus million expansion of our extracts and flavors operation, which added innovative extract, bulk blending, and aseptic packaging capabilities. Next slide, please, Daniel. By forming a business with such a broad variety of products and capabilities from our three acquisitions and our platform resource investments, we believe we offer a unique value proposition to customers in numerous large end markets. Our strategy provides Universal Ingredients with breadth of products and value-added services to support broad markets with diverse customers, and the flexibility to meet our customers' and their consumers' evolving needs.