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Northern Technologies International (NTIC) - 2025 Q2 - Earnings Call Transcript
NTICNorthern Technologies International (NTIC)2025-04-10 14:42
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Financial Data and Key Metrics Changes - For the second quarter ended February 28, 2025, total consolidated net sales decreased by 8.5% to 19.1millioncomparedtothesameperiodlastyear[11]−Grossprofitasapercentageofnetsaleswas35.619.1 million compared to the same period last year [11] - Gross profit as a percentage of net sales was 35.6%, down from 40.0% in the prior fiscal year period, reflecting a less profitable mix of sales [25][26] - Net income for the second quarter was 434,000, or 0.04perdilutedshare,comparedto0.04 per diluted share, compared to 1.7 million, or 0.17perdilutedshare,forthesameperiodlastyear[26]BusinessLineDataandKeyMetricsChanges−Xero′soilandgasnetsalesdecreasedby28.50.17 per diluted share, for the same period last year [26] Business Line Data and Key Metrics Changes - Xero's oil and gas net sales decreased by 28.5%, while NatureTech net sales decreased by 11.8%, and Xero's industrial net sales decreased by 3.7% [11] - NatureTech sales were 5 million, down from 5.6millioninthesameperiodayearago,attributedtoordertimingandseasonalvariation[19]−Xero′soilandgassaleswere5.6 million in the same period a year ago, attributed to order timing and seasonal variation [19] - Xero's oil and gas sales were 1.5 million, down from 2.2millioninthesameperiodlastyear,butshoweda7.22.2 million in the same period last year, but showed a 7.2% increase on a trailing 12-month basis [16][17] Market Data and Key Metrics Changes - Joint venture sales decreased by 15.7% year-over-year to 19.8 million, reflecting high energy prices and regional economic pressures in Europe [12] - NTIC China subsidiary reported an 8.1% increase in net sales to 3.7million,stabilizingandapproachingsaleslevelsfromfiscal2021and2022[13][14]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonmanagingcash,reducingdebt,andenhancingflexibility,withadisciplinedapproachtocapitalallocation[10][30]−Strategicinvestmentsarebeingmadetosupportexpectedgrowthintheoilandgasbusinessinthesecondhalfofthefiscalyear[25]−Thecompanyremainscommittedtolong−termgrowthopportunitiesintheChinesemarketforindustrialandbioplasticsegments[15]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementacknowledgedtheincreasingintensityofheadwindsduetochangesinU.S.tradeandeconomicpolicies,butexpressedconfidenceinareboundinNatureTechandU.S.oilandgassalesinthesecondhalfofthefiscalyear[7][9]−Theleadershipteamhassuccessfullynavigatedpreviouseconomicchallengesandbelievesthecurrentbusinessmodelprovidesflexibilitytohandleuncertainties[21][22]OtherImportantInformation−Thecompanydeclaredaquarterlycashdividendof3.7 million, stabilizing and approaching sales levels from fiscal 2021 and 2022 [13][14] Company Strategy and Development Direction - The company is focused on managing cash, reducing debt, and enhancing flexibility, with a disciplined approach to capital allocation [10][30] - Strategic investments are being made to support expected growth in the oil and gas business in the second half of the fiscal year [25] - The company remains committed to long-term growth opportunities in the Chinese market for industrial and bioplastic segments [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the increasing intensity of headwinds due to changes in U.S. trade and economic policies, but expressed confidence in a rebound in NatureTech and U.S. oil and gas sales in the second half of the fiscal year [7][9] - The leadership team has successfully navigated previous economic challenges and believes the current business model provides flexibility to handle uncertainties [21][22] Other Important Information - The company declared a quarterly cash dividend of 0.07 per common share, with plans to adjust the quarterly dividend to one cent per share to manage cash position [30] - As of February 28, 2025, working capital was 21.4million,withoutstandingdebtof21.4 million, with outstanding debt of 8.1 million [28][29] Q&A Session Summary Question: How are the investments in the oil and gas sales team working out? - The company hired eight people, some of whom did not work out, but expects the impact to show in the second half of the year [34] Question: What are the dynamics behind potential issues in the compostable business? - A large distributor in the U.S. has been added, which is expected to significantly boost business, along with a new line of technology in food packaging [36] Question: Was the employee retention payment an actual cash payment? - Yes, it was an actual cash payment [38] Question: How is the core business performing currently? - The core business is expected to remain flat [41] Question: Can you provide more details on the gross margin decline? - The decline was due to increased pricing pressures in the NatureTech business, leading to a decrease in sales prices [46][47] Question: What is the outlook for the oil and gas business in the second half? - The focus will be on oil storage tank bottoms and pipeline casings, with expectations of significant business from large customers [60] Question: How is the situation in Brazil regarding the oil and gas industry? - Brazil is performing well, with significant business and ramping sales in the oil and gas sector [67]