• Total Consolidated Net Sales: Increased 12.7% to $23.3 million for Q4 2024.
• Zerust Oil & Gas Net Sales: Increased 76.6% in Q4 2024.
• Natur-Tec Sales: Increased 16.4% in Q4 2024 to $5.7 million.
• Gross Profit: Increased by $6 million or 21.5% year-over-year for fiscal 2024.
• Gross Margin: 43.8% for Q4 2024, up from 36.5% in the prior year period.
• Net Income: $1.8 million or $0.19 per diluted share for Q4 2024.
• Non-GAAP Adjusted Net Income: $1.9 million or $0.20 per diluted share for Q4 2024.
• Operating Expenses: Increased 2.3% to $9.5 million for Q4 2024.
• Operating Cash Flows: Generated $5.9 million for the 12 months ended August 31, 2024.
• Outstanding Debt: $7.1 million as of August 31, 2024.
• Dividend: $0.07 per common share declared for Q4 2024.

• Warning! GuruFocus has detected 5 Warning Signs with NTIC.

Release Date: November 19, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• NTIC achieved robust sales growth in both Zerust Oil & Gas and Natur-Tec businesses, contributing to a 21.5% year-over-year increase in gross profit for fiscal 2024.
• The company reported a record-breaking fourth quarter for Zerust Oil & Gas with revenues reaching $4.2 million, supported by increased orders from new and existing customers.
• Natur-Tec sales increased 16.4% over the prior fiscal year period, driven by new customer wins in North America and India, as well as expanding relationships with existing customers.
• Strategic investments in workforce and infrastructure are set to support growth opportunities across global markets, with expectations of further sales growth and improved profitability in fiscal 2025.
• NTIC reported a significant improvement in gross profit margins, with a 730 basis point increase in the fourth quarter, attributed to successful actions addressing inflationary pressures and increased sales of higher-margin products.

Negative Points

• Joint venture operating income decreased by 51.4% in the fourth quarter, primarily due to a onetime gain recorded in the prior year and decreased net income at NTIC's joint venture in Germany.
• Sales across global joint ventures declined by 3.6% in the fourth quarter, with Excor Germany experiencing a 15% decrease in net sales due to softer demand.
• Higher operating expenses were reported for both the fiscal 2024 fourth quarter and full year, primarily due to increased personnel costs and other inflationary increases.
• The economic environment remains fluid, with ongoing challenges such as higher energy prices and regional economic pressures affecting sales and profitability in European joint ventures.
• Outstanding debt increased to $7.1 million as of August 31, 2024, with a focus on reducing debt through positive operating cash flow and improving working capital efficiencies in fiscal 2025.

Q & A Highlights

Q: Could you provide more details on the new Natur-Tec wins and the sectors involved? A: Vineet Dalal, Vice President of Natur-Tec, explained that growth has been observed across all regions and market segments, particularly in Asia and North America. In North America, growth is driven by national distributors expanding through acquisitions, and there is increased demand for compostable products and cutlery resin. In India, growth is seen in apparel packaging and food service resins, with a major fast fashion brand adopting their materials.

Q: What trends are you seeing in the Zerust industrial market in Europe, particularly Germany? A: G. Patrick Lynch, CEO, noted that there are still headwinds in Europe, especially with the transition to electric vehicles affecting manufacturers like Volkswagen.

Q: What are your expectations for gross margins going forward? A: Matthew Wolsfeld, CFO, stated that gross margins will depend on the mix of business units. The industrial and Natur-Tec gross margins have stabilized, and the oil and gas business has a more favorable margin. He estimates that about half of the 500 basis point improvement in gross margin year-over-year was structural, with the rest due to mix.

Q: What are your growth expectations for the oil and gas sector in fiscal 2025? A: Wolsfeld expects significant growth in fiscal 2025, with anticipated growth rates of 20% to 30%. This is due to investments in new regions and existing and new customers. However, the business line will remain volatile due to the size and timing of opportunities.

Q: Can you provide an update on the certification for Zerust technology in the US? A: Wolsfeld mentioned that an API change is expected to take effect in late fiscal 2025, which could impact the adoption speed of VCIs in the US. This change is more about enhancing the credibility of VCIs in the preservation business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.