• Total Consolidated Net Sales: Increased 5.7% to $21.3 million.
• Natur-Tec Net Sales: Increased 22.8% to $5.9 million.
• Zerust Oil & Gas Net Sales: Increased 0.7% to $1.5 million.
• Zerust Industrial Net Sales: Increased 0.4%.
• NTIC China Net Sales: Increased 8.6% to nearly $4 million.
• Joint Ventures Net Sales: Increased 1.2% to $23.8 million.
• Gross Profit Margin: Improved to 38.3% from 36.3%.
• Net Income: $561,000 or $0.06 per diluted share.
• Non-GAAP Adjusted Net Income: $667,000 or $0.07 per diluted share.
• Operating Expenses: Increased 14% to $9.5 million.
• Operating Cash Flow: Generated $1.4 million.
• Working Capital: $22.2 million, including $5.6 million in cash and cash equivalents.
• Outstanding Debt: $7.3 million, including $4.5 million in borrowings under revolving line of credit.
• Dividend: Quarterly cash dividend of $0.07 per common share.

• Warning! GuruFocus has detected 3 Warning Signs with NTIC.

Release Date: January 09, 2025

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

Positive Points

• NTIC achieved record first quarter consolidated sales, driven by all-time high Natur-Tec sales and stable Zerust Oil & Gas and Zerust Industrial sales.
• NTIC China reported its highest quarterly sales in nearly three years, indicating a positive trend in this key market.
• Gross margin improved year-over-year due to successful quality system improvement initiatives.
• Strategic investments in expanding the oil and gas sales infrastructure are expected to accelerate Zerust Oil & Gas sales in the second half of fiscal 2025.
• Natur-Tec sales increased by 22.8% year-over-year, driven by new customer wins and expanding relationships with existing customers in North America and India.

Negative Points

• Operating expenses increased by 14% compared to the prior fiscal year period, primarily due to increased personnel costs and strategic investments.
• Net income attributable to NTIC decreased to $561,000 from $896,000 in the first quarter of fiscal 2024.
• The economic environment remains fluid, posing potential challenges to NTIC's growth projections.
• Zerust Oil & Gas sales are subject to seasonal fluctuations, which may impact quarterly performance.
• NTIC's outstanding debt increased to $7.3 million, with a focus on reducing debt through positive operating cash flow and improving working capital efficiencies.

Q & A Highlights

Q: What percentage of new tanks are being treated with Northern Technology's Zerust treatment? A: Matthew Wolsfeld, CFO, explained that the cost of Zerust treatment varies based on tank size, ranging from $25,000 to $50,000 for standard tanks, and can be several hundred thousand dollars for larger tanks. Zerust's option is roughly a third of the cost of traditional solutions like cathodic protection.

Q: Is there ongoing revenue from Zerust installations? A: Matthew Wolsfeld, CFO, stated that there are ongoing revenues typically five-plus years after installation as tanks are recharged, with ongoing costs being about 10% of the original treatment.

Q: What is driving the growth in the Natur-Tec segment? A: Matthew Wolsfeld, CFO, highlighted that Natur-Tec's growth is driven by new customer wins and expanding relationships with existing customers, particularly in North America and India. The development of specialized resins for manufacturing products is expected to accelerate growth over the next 6 to 18 months.

Q: Can NTIC achieve a $3 million to $4 million quarter in the oil tank business this year? A: Matthew Wolsfeld, CFO, expressed optimism, citing past performance and ongoing investments in the oil and gas sector. He expects growth in the third and fourth quarters, driven by seasonal patterns and increased sales infrastructure.

Q: How is the Chinese market performing for NTIC? A: Matthew Wolsfeld, CFO, noted a slight recovery in China, with Q1 sales increasing by nearly 10% from Q4. The company is targeting domestic sales in China and expects growth to continue, despite potential temporary fluctuations due to geopolitical factors.

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