Good evening. My name is Raffy and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter Fiscal Year 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you Ms. Candace Formacek, Vice President and Treasurer, you may begin your conference.

Thank you Raffy. Good afternoon and thank you for joining us. George Freeman, our Chairman, President and CEO; Airton Hentschke, our Chief Operating Officer, and Johan Kroner our Chief Financial Officer are here with me today and will join me in answering questions after these brief remarks. This call is being webcast live and will be available on our website and on telephone taped replay. It will remain on our website through May 7, 2019. Other than the replay, we have not authorized and disclaimed responsibility for any recording, replay or distribution of any transcription of this call. The call is copyrighted and may not be used without our permission. Before I begin to discuss our results, I caution you that we will be making forward-looking statements that are based on our current knowledge and some assumptions about the future and are representative as of today only. Actual results could differ materially from projected or estimated results, and we assume no obligation to update any forward-looking statements. For information on some of the factors that can affect our estimates, I urge you to read our 10-K for the year ended March 31, 2018, as well as our Form 10-Q for the quarter ended December 31, 2018, which was filed with the SEC today. Such factors include, but are not limited to, customer-mandated timing of shipments, weather conditions, political and economic environment, government regulation and taxation, changes in currency, industry consolidation and evolution and changes in market structure or sources. Finally, some of the information I have for you today is based on unaudited allocations and is subject to reclassification. In an effort to provide useful information to investors, our comments today may include non-GAAP financial measures. For details on these measures, including reconciliations to the most comparable GAAP measures, please…

[Operator Instructions] Your first question comes from the line of Ann Gurkin. Your line is open.

Good evening one.

Hello Ann.

I want to start with a very exciting news you put out yesterday about your expanded service agreement in the Philippines. Congratulations on that announcement yesterday. I don't know if you could give any additional -- okay. I don't know if you could give any other details like size of the markets, length of the contracts any kind of variables you can give? And do you need to increase capacity at your processing facility in the Philippines?

No. I will note that volume is key in our business and this factory will now be running at full capacity. And again, this is a great deal for us, a great deal for our customer and shows why our number one priority in our capital allocation is investing in our core business.

If I look at your customer's recent investor presentation, it looks like they had sell somewhere in the range of 51 billion to 52 billion cigarettes in the Philippines. Is that a market number we should think about for you supplying that level of cigarette volume?

No, Ann. The cigarette market there it also uses tobacco that is imported into the Philippines. So it should not be looked at as a straight correlation there.

Okay. But the cigarettes sold in that market are a blend of flue-cured, burley and oriental. Is that fair?

It's an American blend product.

American Blend.

Yes.

Okay. Okay. And then are there opportunities for additional market share gains or business wins still over the next several years?

Yes.

Great. Great. And then listening to your customers' presentations and outlooks, they've been investing outside of combustible cigarettes. So I'd just to be interested in your viewpoint on the companies as they look to maybe diversify out of combustible or away from combustible cigarettes. How do you position Universal longer-term in that kind of changing tobacco profile landscape? I get this question a lot, so I would appreciate any comments.

Yes. Today on these different products in the market, we are playing an important role. We are supplying not just raw material, but added value materials to the heat-not-burn markets as well for the vapor markets we have in the liquid nicotine segment of that market.

Okay. So when you talk about from your Investor Day presentation back in the fall, looking for opportunities outside of your core tobacco business. Is that talking about nicotine, vaping different derivative? Is that -- how should we think about that? Or are you moving out to further adjacencies?

I view that as our core to be honest.

Okay. So then are you moving out -- what would you define as outside the core? You target non-core businesses could represent 10% to 20% of your earnings in five years.

Yes. Again, as I mentioned last time, we're still in the exploratory stage. We're continuing to develop a pipeline and beginning some outreach. But again it's got to utilize our assets, our current assets.

Okay. And then in this presentation you said, you're not considering an investment in Canada. Any -- is that statement still correct?

Yes.

Okay. Okay. And then as I think about 2020, can you help me at all with how I should think about volumes or pricing or SG&A expense? Or you should have a positive contribution from the additional business in the Philippines. Can you help me at all frame 2020 outlook fiscal 2020?

Okay. I think Ann, it probably will be better to update our view on the outlook for next year when we get into next quarter. It's still early for some of the crop seasons for next year and that's always quite important. There's nothing in particular with our SG&A. I know that's a question for you. We do -- we run in a pretty tight percentage of SG&A to sales. And so it can move around a bit certainly with currency and those sorts of things. So, nothing in particular at this time to add to that. But we should have more of an outlook next quarter.

Okay. And then Candace, do you have an updated worldwide uncommitted least inventory number?

I sure do. That's 88 million kilos. That's as of 12/31/18 which is down 11 million from the last report we gave you at 10/31.

Okay. Great. And then -- I'm sorry, I just have another question. You've seen Canopy invest -- or announce you're going to invest in building on a hemp facility in New York. And can you give us an update as to kind of where you're positioning ourselves in terms of hemp in the U.S.?

Again, we're still in the exploratory stage.

Okay. That's great. Thank you all very much.

Thank you, Ann.

Your next question comes from the line of Steve Marascia. Your line is open.

Thank you. Good afternoon, everyone.

Hello.

Given your expected cash flow during the next few quarters, are you giving any guidance about dividend increases or potential share repurchase?

No, Steve. We do not. But as you will know that in May, we did our capital allocation strategy. We increased the dividend at that point in time. So we will be looking at any future dividend increases there in the future in May.

Yes. And certainly, Steve our long history of an annual increase to the dividend is quite important to us and I know important to many of our investors. So that's always at top of mind and certainly mentioned high up on the list in our capital allocation strategy.

Okay. All right. Thank you very much.

Thank you.

Thank you.

And you have a follow-up question from Ann Gurkin. Your line is open.

Sorry, I have one more question. On the balance sheet accounts receivable unconsolidated affiliate $77 million. Can you tell me what that number is?

Yes, Ann. That's our Zimbabwe operations. We had fairly large crop last year in 2018, in Zimbabwe. So it took us a little bit longer buying it and processing it. So that's primarily it.

Is it committed though? Is that inventory that's going to move out?

Yes, certainly.

Okay, great. Great. Thank you. That helps. Thank you very much.

[Operator Instructions] There are no further questions at this time. Presenters, please continue.

Yes, thank you very much for listening and we'll talk with you next quarter. Thank you, Raffy. Goodbye.

Goodbye.

This concludes today's conference call. You may now disconnect.