OTC: PYYX

Our arrangements with suppliers vary depending on our predictions of future supply and demand, local historical practice, and availability of capital. In some locales, we purchase crop inputs, such as seeds, fertilizer, pesticides, and other products related to tobacco crop production, and issue them to suppliers with whom we have purchase contracts. The suppliers, who generally operate small farms, then utilize these inputs to grow tobacco, which we are contractually obligated to purchase if the supplier meets our specifications. The advances of inputs for the current crop generally include the original cost of the inputs plus a mark-up and interest as it is earned. Where contractually permitted, we charge interest to the suppliers during the period the current crop advance is outstanding. We account for our advances to suppliers using a cost accumulation model, which results in us reporting our advances at the lower of cost or recoverable amounts excluding the mark-up and interest. The mark-up and interest on our advances are recognized when the tobacco is delivered as a decrease in our cost of the current crop. Upon delivery of tobacco, part of the purchase price paid to the supplier is paid in cash and part through a reduction of the advance balance. The advances applied to the delivery are reclassified out of advances and into unprocessed inventory. Under longer-term arrangements with suppliers, we may advance or guarantee financing on suppliers' capital assets, which are also recovered through the delivery of tobacco to us by our suppliers.

Our agronomy team maintains frequent contact with suppliers prior to and throughout the growing and curing seasons to provide technical assistance to improve the quality and yield of the crop. As a result of various factors, including weather, not all suppliers are able to fully settle advances through delivery of tobacco in a given crop year. Throughout the crop cycle, we monitor events that may impact the suppliers’ ability to deliver tobacco. If we determine we will not be able to recover the original cost of the advances with deliveries of the current crop or future crop deliveries, the unit cost of tobacco received is increased when unrecoverable costs are within a normal range or expensed immediately when they are above a normal range. The normal range is based on our historical results.

We process tobacco to meet each customer's specifications as to quality, yield, chemistry, particle size, moisture content, and other characteristics. Unprocessed tobacco is a semi-perishable commodity. The processing of leaf tobacco facilitates shipping by preventing spoilage and is an essential service to our customers as the quality of processed leaf tobacco substantially affects the quality of the manufacturer’s products. Accordingly, our production facilities are in proximity to our principal tobacco sourcing locations. We process tobacco in Company-owned and third-party facilities around the world, including in Argentina, Brazil, China, India, Indonesia, Jordan, North Macedonia, Malawi, Tanzania, Thailand, Turkey, United States, and Zimbabwe. After processing, whole leaves, bundles, strips or stems, and scrap, where applicable, are separately packed in cases, bales, cartons or hogsheads for storage and shipment. Packed flue-cured, burley and oriental tobacco generally is transported in the country of origin by truck or rail, and exports are moved by ship.

Our production processes and capabilities are optimized to extract maximum utility from the tobacco leaf, which in turn creates additional products to serve the needs of our customers. These products, referred to as Value-Added Tobacco Products ("VATP"), are derived from the tobacco we process in our facilities. A large portion of the VATP business is comprised of our cut rag tobacco operations where processed tobacco strips are blended and flavored to create a cut filler for use by manufacturers of nicotine products. A smaller portion of the VATP business leverages other byproducts from our tobacco processing operations, such as stems, small lamina, and scrap that would otherwise be discarded, and are used to create cut rolled expanded stems, rolled stems, and reconstituted tobacco products, which are used as inputs for various nicotine products.

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We utilize contracts, joint ventures, and other arrangements for the purchase of tobacco grown in other countries that produce export-quality flue-cured and burley tobacco. Much of the tobacco we purchase is sourced from the African, Asian, and South American regions in which we operate. The approximate percentage of tobacco purchases from these regions were as follows:

Years Ended March 31,

202620252024

Africa33.1%34.4%32.7%

Asia21.6%19.6%18.7%

South America22.7%23.7%28.1%

Seasonality

The purchasing and processing activities of our leaf tobacco business are seasonal and vary by market and tobacco variety. Tobacco grown in North America is purchased, processed, and marketed generally during a five-month period beginning in August and ending in December. Tobacco grown in South America is usually purchased, processed, and marketed from January through July and, for tobacco grown in Africa, from March through September. Other tobacco markets around the world have similar purchasing and processing activities, although these activities occur at various times of the year.

During the purchasing, processing, and marketing seasons, inventories of unprocessed tobacco, inventories of redried tobacco, and trade accounts receivable normally reach peak levels in succession. Current liabilities, particularly advances from customers and short-term notes payable, normally reach their peak in this period as a means of financing the seasonal expansion of current assets. At March 31, the end of our fiscal year, the seasonal components of our working capital primarily reflect the foreign-grown tobacco operations.

Track and Trace Technology

In connection with our leaf tobacco operations, the Company leverages its proprietary "track-and-trace" platform, branded as SENTRI®, to provide transparency into the lifecycle of agricultural products. SENTRI® houses our farm monitoring information and supports our analysis of data related to the production, harvest, processing, formulation, testing, and release of individual batches of products. By tracking data on products at each stage of our supply chain, SENTRI® permits proactive decision making for both the Company and our leaf tobacco customers. The key features of SENTRI® include:

•Product Tracking: Data collection and tracking at various stages in the product lifecycle can provide customers with visibility into where products originate, how they were produced, and the product testing completed along the product journey.

•Control and Visibility: With access to increased supply chain data, we can monitor quality control at various points in the product route to market.

•Sustainability Commitments: SENTRI® incorporates visibility into the crop production practices and procedures, helping promote compliance with applicable regulations throughout a product's supply chain journey.

•Lot Number Tracking: We can track specific products through the manufacturing process by lot number with full visibility to our customers. This provides more information about the product, its origin, and other information relevant to quality control and product transparency.

•Agronomic Services: SENTRI® utilizes an experienced team to track and analyze data and insights regarding growing practices.

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Key Customers

In our leaf tobacco business, our primary customers are major consumer tobacco product manufacturers. See "Note 26. Segment Information" to the "Notes to Consolidated Financial Statements" for additional information regarding customers, and their respective affiliates, that account for more than 10% of our annual revenues. Our sales to customers were delivered to the following geographic regions:

Year Ended March 31,

2026

(dollars in millions)$%

Africa410.817.0

Asia755.331.3

Europe884.636.7

Other362.315.0

Total2,413.0100.0

Competition

Leaf tobacco industry competition is based on the Company's ability to meet individual customer specifications, including, but not limited to, crop production and curing, sustainable best practices, buying, processing, residue compliance and crop financing, as well as the price charged for products and services. Pyxus is one of only two global, publicly held leaf tobacco merchants. We hold a leading position in most major tobacco growing regions in the world, including the principal export markets for flue-cured, burley, and oriental tobacco. In addition to the primary global independent leaf tobacco merchants, there are other global, regional, or national competitors. These include local independent leaf merchants that have low fixed costs and overhead and some of our customers that have vertically integrated operations in certain markets.

We have long-standing relationships with growers across the globe with whom we contract directly to procure tobacco, and our grower base is critical to our ability to provide sustainable, compliant crops that meet the specific requirements of our customers. We strive to maintain strong, productive relationships with our growers by providing them with agronomic expertise, which includes training on good agricultural practices to support quality and high-yielding crops, and training on our agricultural labor practices that set human rights standards by which they are expected to comply. We remain committed to conducting our global business in an ethical and responsible manner, in accordance with international standards and practices relating to human rights and the environment, to give our customers confidence that we can satisfy their demand requirements through a sustainable and compliant value chain.

Regulation

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