Alliance One International Shares Skyrocket, Investors Accepted New Business Strategy

Alliance One

Improving financial prospects continue to provide support to Alliance One International (NASDAQ:AOI) share price over the past few months. AOI stock rallied close to 30% during Friday trade. The stock price doubled from the 52-week low of $9 a share it hit in September, supported by stronger than expected results for the third quarter and the change in future business strategy.

Alliance One is an independent leaf tobacco merchant serving the cigarette manufacturers. The company generated revenue growth of 5.1% to $477 million in the third quarter, driven by growth in sales prices due to product mix.

The impact of improvement of 4.9% growth in sales price enhanced its gross margin and thus the earnings figures.

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Its gross profit in the third quarter surged 12.8% Y/Y to $73.5 million. Consequently, adjusted EBITDA grew 12.1% to $57.0 million, compared to the same period last year.

Pieter Sikkel, President, and Chief Executive Officer said, “the Fiscal year 2018 continues to progress in line with our expectations. We achieved solid sales growth during the third quarter when compared to last year. Our volume sold has increased, as crop sizes have returned to more normal levels in many key markets despite reduced crop sizes in Africa.”

Investors are also encouraging the move in the company’s business strategy. The CEO has announced a new business plan for the complete transformation of the company, which they are calling ‘One Tomorrow.’

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Based on the plan, Alliance One International will invest in growth opportunities to reshape its brand as the dominant provider of independently verified, responsibly produced, and traceable agricultural products and services.

The company also wants to expand its revenue generation channels to new industries and sectors. It was previously working as a package and tobacco selling merchant to manufacturers. The latest results signal that the strategy of expanding the product line has significantly added to its revenue and margins in the previous quarter.

Pieter Sikkel says, “Most of our new business lines focus on products that are value-added or require some degree of processing. These products generally have higher margin potential than our core business and play well to our strengths.”

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