Executive Summary / Key Takeaways

• Pyxus International delivered strong financial results in fiscal year 2025, marked by significant revenue growth (22.1% to $2.48 billion) and improved profitability (Adjusted EBITDA up 7.2% to $208 million), demonstrating operational resilience despite challenging market conditions like El Niño-induced short crops.
• The company has substantially strengthened its balance sheet by retiring $143 million of senior debt since March 2024, reducing leverage to a 10-year low of 3.7x Net Debt/EBITDA and improving its interest coverage ratio to 1.6x.
• Pyxus leverages its global footprint and disciplined working capital management to navigate volatile supply conditions and meet customer demand, effectively offsetting regional crop shortages by sourcing from other geographies.
• Proprietary technology like the SENTRI track and trace platform enhances supply chain transparency, supports sustainability commitments, and provides a competitive edge by meeting evolving customer and regulatory requirements for traceability.
• Management's outlook for fiscal year 2026 anticipates continued strong market demand and a shift towards more normalized supply conditions with larger, lower-cost crops, projecting further EBITDA growth ($205M-$235M guidance) despite potential revenue normalization, with performance weighted to the second half.

A Global Harvest: Pyxus's Resilient Core in a Changing Landscape

Pyxus International, Inc. stands as a global agricultural company with a history stretching back over 150 years, primarily rooted in the leaf tobacco business. As one of only two global, publicly held leaf tobacco merchants, Pyxus occupies a significant position in the supply chain, purchasing, processing, and shipping tobacco across five continents to major manufacturers of tobacco products. This extensive global footprint, encompassing operations in key growing regions like Africa, Asia, and South America, forms the bedrock of its business model, enabling the company to source diverse tobacco varieties and serve a complex customer base worldwide.

The leaf tobacco industry is inherently competitive, driven by price, the ability to meet stringent customer specifications, and increasingly, supply chain transparency and sustainability. Pyxus competes directly with the other major global merchant, Universal Corporation (UVV), as well as vertically integrated operations of large manufacturers like British American Tobacco (BTI) and Imperial Brands (IMB), and smaller local merchants. While UVV often holds an edge in operational scale and efficiency, and manufacturers like BTI benefit from vertical integration, Pyxus differentiates itself through its long-standing grower relationships, provision of agronomic expertise, and a growing emphasis on sustainable and traceable sourcing. The company's ability to navigate supply disruptions, as demonstrated during the recent El Niño impacts, by leveraging its diverse geographic presence, highlights a key operational strength against competitors potentially more reliant on specific regions.

Central to Pyxus's strategic positioning and its ability to meet evolving market demands is its proprietary technology platform, SENTRI. This track and trace system provides end-to-end transparency throughout the agricultural product lifecycle, from growth and cultivation through processing and testing. SENTRI enables detailed product tracking, enhances quality control at various stages, supports the company's sustainability commitments by providing visibility into supply chain practices, and facilitates lot number tracking for customers. For investors, SENTRI represents a crucial technological differentiator. It directly addresses increasing customer and regulatory requirements for traceability and compliance, particularly relevant in a sector facing heightened scrutiny. While precise, quantifiable metrics on SENTRI's impact relative to competitors are not detailed, its functionality supports Pyxus's ability to provide a "sustainable and compliant value chain," a strategic imperative that enhances its attractiveness to global customers and reinforces its competitive moat beyond traditional price and quality factors.

Performance Under Pressure: Delivering Growth and Deleveraging

Fiscal year 2025 proved to be a period of significant operational and financial achievement for Pyxus, particularly in the face of challenging market dynamics. The company successfully navigated conditions influenced by the El Niño weather phenomenon, which resulted in shorter crop sizes in key regions like South America and parts of Africa, contributing to undersupply and increased competition for leaf tobacco. Despite these headwinds, Pyxus demonstrated resilience, leveraging its global network and operational discipline.

For the year ended March 31, 2025, Pyxus reported a substantial increase in sales and other operating revenues, rising 22.1% to $2.48 billion from $2.03 billion in the prior year. This growth was fueled by an 18.0% increase in the average price per kilo, reflecting the higher costs driven by undersupply and inflation, and a 3.4% increase in kilo volume, achieved by strategically sourcing additional tobacco from Africa and Asia and accelerating shipments. Gross profit also saw a healthy increase of 9.8% to $343.0 million, benefiting from the higher volume and a 7.7% increase in the average gross profit per kilo to $0.84, driven by a favorable customer and product mix, including contributions from value-added businesses like cut rag.

While the cost of goods and services sold increased by 24.3% due to the higher average cost per kilo (up 19.9%), the company's ability to pass on these costs and improve per-kilo profitability underscores its market position and operational effectiveness. Selling, general, and administrative expenses increased by 6.3% to $171.0 million, primarily due to higher personnel costs, including non-cash equity-based compensation, but decreased as a percentage of sales, indicating improved operating leverage.

Beyond the top and bottom lines, Pyxus made significant strides in strengthening its financial health and liquidity. The company successfully reduced its substantial debt burden, retiring an aggregate of $143 million in senior debt since March 1, 2024. This aggressive deleveraging effort, combined with improved profitability, resulted in a notable reduction in the company's leverage ratio, reaching 3.7x Net Debt/EBITDA at the end of FY2025, the lowest level in over a decade.

The interest coverage ratio also improved to 1.6x over the last twelve months. While seasonal working capital needs, particularly for purchasing more expensive green tobacco in FY2025, led to higher average and peak seasonal borrowings compared to the prior year, the company's disciplined management and accelerated operating cycle (38 days faster than FY24) contributed to the generation of $152 million in adjusted free cash flow during the year.

Post-year-end, the company further enhanced its capital structure by amending its ABL Credit Facility, increasing capacity, extending maturity, and reducing interest rates and fees, signaling improved access to financing on more favorable terms.

Outlook: Anticipating Larger Crops and Continued Improvement

Looking ahead, Pyxus management is cautiously optimistic, projecting continued strong market demand and a shift in supply dynamics for fiscal year 2026. The outlook is shaped by the expectation of larger crop sizes with reduced costs and improved quality emerging from key growing regions in South America and parts of Africa, following the impacts of El Niño in the prior year.

For fiscal year 2026, Pyxus has provided guidance for sales in the range of $2.3 billion to $2.5 billion and Adjusted EBITDA in the range of $205 million to $235 million. While the midpoint of the revenue guidance is slightly below the actual FY2025 revenue, this reflects the anticipated normalization of selling prices as tobacco acquisition costs are expected to decrease with larger crops. Crucially, the EBITDA guidance range suggests continued profitability growth, driven by higher volumes and potentially improved gross margins as purchasing reverts to quality-based pricing rather than being solely influenced by undersupply-driven competition. Management explicitly anticipates that sales and EBITDA in FY2026 will be weighted towards the second half of the year, aligning with the typical cycle of purchasing, processing, and shipping the new, larger crops. This outlook is underpinned by the company's plan to utilize the increased supply to replenish its inventory, which ended FY2025 at a low level ($762 million total inventory vs. $932 million in FY24, with only $8 million uncommitted).

Despite the positive outlook, Pyxus operates in an industry subject to various risks. These include ongoing regulatory pressures on tobacco products globally, potential shifts in customer sourcing requirements (including those driven by tariffs), the inherent volatility of agricultural production due to weather and climate change, intense competition from both global merchants and vertically integrated manufacturers, and risks associated with international operations (political instability, currency fluctuations, inflation). The company's substantial debt, although reduced, remains a factor influencing its financial flexibility and access to capital. However, management's focus on disciplined working capital, strategic sourcing, leveraging technology like SENTRI, and actively exploring opportunities to optimize the capital structure positions the company to mitigate some of these risks and capitalize on the anticipated improvement in supply conditions in FY2026.

Conclusion

Pyxus International has demonstrated significant operational and financial resilience, culminating in a strong fiscal year 2025 performance despite challenging market conditions. The company successfully leveraged its extensive global footprint and operational discipline to navigate supply constraints, deliver revenue and profitability growth, and make substantial progress in strengthening its balance sheet through debt reduction.

As Pyxus looks towards fiscal year 2026, the investment thesis is centered on the potential for continued improvement driven by anticipated larger and lower-cost tobacco crops. Management's guidance reflects expectations for further EBITDA growth, supported by strong market demand and the company's ability to convert increased inventory into profitable sales, albeit with a temporal weighting towards the latter half of the year. While the inherent risks of the tobacco industry and international operations persist, Pyxus's strategic focus on supply chain transparency through technology like SENTRI, disciplined financial management, and proactive adaptation to market dynamics positions it to capitalize on the expected normalization of supply and continue its trajectory of financial recovery and value creation.