Northern Technologies (NASDAQ:NTIC) held its third-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/.
Access the full call at https://edge.media-server.com/mmc/p/vqvp3kq8/
Summary
Northern Technologies reported a 12.6% year-over-year increase in consolidated net sales for Q3 2026, driven by strong demand for Zerust and Natur-Tec solutions.
Despite record sales, the company faced a net loss of $263,000 due to increased raw material costs from Middle East conflicts, impacting gross margins negatively by 477 basis points.
Management remains optimistic about Q4, expecting improved profitability through pricing and procurement initiatives, expansion of higher-margin products, and leveraging joint ventures.
Zerust oil and gas sales increased by 72.3%, while Natur-Tec sales reached a record $6.1 million, with new collaborations in food packaging and biodegradable seedling cups in India.
The company plans to sell its Beechwood, Ohio facility, aiming to consolidate operations and improve financial flexibility, expecting over $1 million in proceeds.
Joint venture sales rose by 15.1%, with stable trends in China and potential recovery in European markets due to economic stimulus measures.
Strategic focus includes reducing debt, enhancing operational efficiencies, and capitalizing on emerging market opportunities, particularly in Brazil and India.
Full Transcript
OPERATOR
Good day and welcome to Northern Technologies’ third quarter 2026 earnings conference call and webcast. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question and answer session. Instructions will be given at that time. Today’s conference is being recorded. As part of the discussion today, the representatives from Northern Technologies will be making certain forward-looking statements regarding Northern Technologies’ future financial and operating results as well as their business plans, objectives, and expectations.
Please be advised that these forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and that Northern Technologies decides to avail itself of the protections of the safe harbor for these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties, including those described in Northern Technologies’ most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and recent press releases.
Please read these reports and other future filings that Northern Technologies will make with the SEC. Northern Technologies disclaims any duty to update or revise its forward-looking statements. I will now hand the call over to Mr. Patrick Lynch, Northern Technologies CEO. Please go ahead, sir.
Patrick Lynch, President CEO
Good morning. I’m Patrick Lynch, Northern Technologies’ CEO, and I’m here with Matt Wolsfeld, Northern Technologies’ CFO. Please note that a press release regarding our third quarter fiscal 2026 financial results was issued earlier this morning and is available at ntic.com. During today’s call, we will review various key aspects of our fiscal 2026 third quarter financial results, provide a brief business update, and then conclude with a question and answer session.
Please note that when we discuss year-over-year performance, we are referring to the third quarter of our fiscal 2026 in comparison to the third quarter of last fiscal. Strong global demand and increasing adoptions of our Zerust corrosion prevention and Natur-Tec bioplastics solutions drove quarterly consolidated sales to new record highs. Disruptions to shipping through the Strait of Hormuz during the quarter, caused by recent increased conflict levels in the Middle East, contributed to a significant increase in our raw material costs.
Higher input costs reduced our gross margin by approximately 477 basis points year over year, and we estimate that gross profit was negatively affected by approximately $1 billion based on gross margin levels prior to the increase in U.S.-Iranian hostilities. We believe that the third quarter cost pressure was temporary, and we are pursuing pricing and procurement initiatives that we expect will improve gross margin and profitability in the fourth quarter.
Since reaching the profitability levels we planned for is taking longer than expected, we believe Northern Technologies must remain focused on the initiatives within our control to drive more profitable growth, including expanding sales of our higher-margin Zerust oil and gas solutions and broadening Natur-Tec applications globally. Our liquidity and financial flexibility remain solid, supported by significant capital within our joint venture network and anticipated proceeds of more than $1 million from the pending sale of our Beechwood, Ohio facility, which is expected to close in fiscal 2027.
The resilience of our business model, continued demand for our technologies, and our focus on execution give us confidence in stronger, more profitable fourth quarter results. So with this overview, let’s examine the drivers for the third quarter in more detail. For the third quarter ended May 31, 2026, our total consolidated net sales increased 12.6% to $24.2 million as compared to the third quarter ended May 31, 2025. Broken down by business unit, this included a 72.3% increase in Zerust oil and gas net sales, a 10.3% increase in Zerust industrial net sales, and a 5% increase in Natur-Tec sales.
Turning to our joint venture sales, which we do not consolidate in our financial statements, total net sales for the fiscal 2026 third quarter by our joint ventures increased year over year by 15.1% to $26.7 million, reflecting improved year-over-year demand across many of our joint ventures. We continue to closely monitor trends across our European markets for signs of stabilization following years of subdued demand as governments begin to implement targeted economic stimulus packages.
We expect that any economic recovery from these stimulus packages will lead to a positive impact on our joint venture operating income in future periods, especially in Germany. Stable sales trends continued at our wholly-owned Northern Technologies China subsidiary. Fiscal 2026 third quarter net sales at Northern Technologies China decreased by less than 1% to $4.5 million. As I’ve stated before, given that the majority of Northern Technologies’ China sales are for domestic Chinese consumption, we believe Northern Technologies China’s exposure to US tariffs is limited.
We expect demand in China will continue to improve in fiscal 2026, helping to support higher incremental sales and profitability in the market. On a trailing twelve-month basis, Northern Technologies China sales have increased 12.8% to $17.8 million, comparing to $15.8 million for the same corresponding period last fiscal year. We believe that China will likely become a significant market for our industrial and bioplastics segments, so we’ll continue to take steps to enhance our operations in this geography.
Now moving on to Zerust oil and gas. Zerust oil and gas sales were $2.2 million, a third-quarter record and an increase of 72.3% from the same period last year. This growth reflects the investments we have made in our global sales infrastructure and the increasing adoption of our VCI solutions within the global oil and gas industry. The third quarter reflects the fourth consecutive quarter that Zerust oil and gas sales have been over $2 million, and on a trailing 12-month basis, sales are now over $10 million for the first time in our history.
We are encouraged by these trends as adoptions increase and we develop new applications for our corrosion prevention solutions across the global oil and gas market. During the third quarter, we experienced higher year-over-year oil and gas sales in the Middle East, North America, India, and China from both new and existing customers, reflecting the contribution of recent investments we have made to enhance our sales team and add resources to support future growth.
This has improved our sales pipeline as the size and number of opportunities have expanded. Our pipeline includes global opportunities to protect above-ground oil storage tanks, pipeline casings, and offshore oil rigs from corrosion. The nature of this industry will always cause certain fluctuations in Zerust oil and gas sales. Nevertheless, we still expect to see Zerust oil and gas sales and profitability improve significantly in fiscal 2026 as we leverage these investments and rein in operating expense growth.
Turning to our Natur-Tec bioplastics business, third-quarter Natur-Tec sales were a quarterly record $6.1 million, representing a 5% year-over-year increase. We continue to pursue several larger opportunities in North America and India that we believe can further benefit Natur-Tec sales in the coming quarters. In North America, Natur-Tec was recently selected for the International Fresh Produce Association’s Packaging Innovation Program, where we are advancing commercialization of compostable barrier laminate solutions for food packaging applications.
In India, we announced a collaboration with Bayer to develop biodegradable and compostable seedling cups for nursery applications. This initiative is expected to begin with pilot trials in vegetable and fruit nurseries and, subject to successful validation, could create a meaningful new application for our compostable materials platform. These initiatives build on new food packaging opportunities we have discussed on prior calls and demonstrate the expanding range of markets in which Natur-Tec can provide a practical alternative to conventional plastics.
Overall, we believe Natur-Tec is a best-in-class compostable plastics business that is well-positioned for further growth in the US and internationally as we expect sales to continue to expand over time. Before I turn the call over to Matt, I want to acknowledge the hard work and dedication of our global team of both employees and joint venture partners. Our success and our ability to navigate more complex economic periods are a direct result of their efforts.
With this overview, let me now turn over the call to Matt Wolsfeld to summarize our financial results for the fiscal 2026 third quarter.
Matthew Wolsfeld, Chief Financial Officer
Thanks, Patrick. Compared to the prior fiscal year period, NTIC’s consolidated net sales increased 12.6% in the fiscal 2026 third quarter, the second consecutive quarter of year-over-year double-digit growth. Sales across our global joint ventures increased 15.1% in the third quarter. Joint venture operating income in the third quarter increased 12.2% compared to the prior fiscal year period, primarily due to higher sales at our joint ventures. Total operating expenses for the fiscal year 2026 third quarter increased 5.3% to $10.2 million, primarily due to higher year-over-year selling, general, and administrative as well as research and development expenses. Operating expenses as a percentage of third quarter sales were 42% compared to 44.9% for the prior fiscal year period. We expect quarterly sales to grow faster than operating expenses as we continue to leverage recent investments and upgrades across our global operations. Gross profit as a percentage of net sales was 33.6% during the three months ended May 31, 2026, compared to 38.4% during the prior fiscal year period. As Patrick discussed, gross margin for the third quarter was impacted primarily by higher raw material costs as a result of the conflict in the Middle East and disruption of shipping through the Straits of Hormuz.
We expect gross margin to improve sequentially for the fourth quarter of fiscal 2026. NTIC reported a net loss of $263,000, or $0.03 per share, for the fiscal 2026 third quarter compared to net income of $122,000, or $0.01 per diluted share for the fiscal 2025 third quarter. For fiscal 2026 third quarter, NTIC’s non-GAAP adjusted net loss was $158,000, or $0.02 per diluted share compared to a non-GAAP adjusted net income of $228,000, or $0.02 per diluted share for the fiscal 2025 third quarter.
A reconciliation of GAAP to non-GAAP financial measures is available in our third quarter fiscal 2026 earnings press release that was issued this morning. As of May 31, 2026, working capital is $20 million, including $7.3 million in cash and cash equivalents compared to $20.4 million including $7.3 million in cash and cash equivalents as of August 31, 2025. As of May 31, 2026, we had outstanding debt of $14.8 million. This included $11.8 million in borrowings under our existing revolving line of credit compared to $9.3 million as of August 31, 2025.
Reducing debt through positive operating cash flow and improving working capital efficiencies is a strategic near-term focus. During the third quarter of fiscal 2026, we committed to a plan to sell our Beechwood, Ohio facility, which has historically been used for our ZERUST segment. As a result, we reclassified the carrying value of the property by $869,000 from property, plant, and equipment to assets held for sale on the consolidated balance sheet as of May 31, 2026.
On May 31, 2026, we received a non-binding letter of intent to purchase the property for $1.15 million in cash, subject to a customary diligence period and execution of a definitive purchase and sale agreement. We expect the sale of the property to close during fiscal 2027. On May 31, 2026, the company had $30.4 million in investments in joint ventures, of which 54.4% or $16.5 million was in cash, with the remaining balance primarily invested in other working capital.
To conclude our prepared remarks, we believe our third quarter results demonstrate the continued strength and resilience of our business, highlighted by record quarterly consolidated sales and growth across our core corrosion prevention and bioplastics platforms. While profitability during the quarter was affected by a sharp increase in raw material costs associated with geopolitical disruption in the Middle East, we believe this pressure was temporary and does not change our view of the long-term earnings potential of the business.
As we move through the fourth quarter of fiscal 2026, we expect continued sales growth and improved profitability supported by pricing actions and disciplined expense management. We also remain focused on advancing higher-margin ZRs, oil and gas opportunities, and expanding Nature Tech applications globally. We believe these factors position NTIC to deliver stronger financial performance and cash flow generation in the coming quarters. With this overview, Patrick and I are happy to take your questions.
OPERATOR
Thank you. Ladies and gentlemen, to ask a question at this time, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press Star 11 again. Please stand by while we compile the Q and A roster. The first question coming from the lineup, Timothy Clarkson with Ben Clements. Your line is now open.
Timothy Clarkson
Hey guys, just a couple of questions. I was just wondering if you’re going to separate the oil and gas business. You said you did on pace to do about 10 million. I guess that’s annually. I mean, how profitable would that division now be? Would that be a 10% net business or a 5% net business or don’t you even look at it that way?
Matthew Wolsfeld, Chief Financial Officer
We don’t specifically look at it like a separate business as a standalone like that. I mean, you can certainly look at oil and gas and say, yeah, we expect the total revenue from oil and gas to be around 10 million for the year. We know what the gross margins are, we know what the contribution is going to be. We can certainly see how things are ramping up in oil and gas kind of across the board and certainly with expectations of what’s going to happen and what we’re expecting to see in the fourth quarter, that’s going to drive a significant amount of profitability.
And so that’s really what’s going to be the key contributors. If you look at third quarter oil and gas this year compared to third quarter oil and gas last year, it’s certainly up significantly. It’s up 72%. Just oil and gas comparing that amount, you know, I’d say that the disappointment is that if you look at the trailing oil and gas numbers, third quarter was lower than second quarter. And the expectation was that we were going to kind of continue to build on oil and gas revenue.
And so there’s obviously a very low comparison to the prior third quarter. You know, there were some shipping issues, there were some large projects that came in and ultimately ended up being invoiced in June. That will help significantly from a gross margin contribution standpoint in our fourth quarter, which kind of gives me at least already having it invoiced at this point in time now that we’re already 40 days into the fourth quarter, a lot more confidence in our fourth quarter numbers compared to where we expected to be.
Timothy Clarkson
Sure. But I mean, just in general, the gross margins in oil and gas are higher than the gross margins in the rest of the company.
Matthew Wolsfeld, Chief Financial Officer
Yes. And so we expect that to kind of play out from a weighted average standpoint. You know, the biggest hit we had, you know, in the quarter, if you kind of look down the line, you know, revenues were strong across the board. Joint venture contribution in total was up. The biggest, you know, and we were able to hold operating expenses at the 5% level, which is what we had planned to do. The big issue that we had was the gross margin impact with polyethylene prices increasing by 30 plus percent with the conflicts going on in the Middle East.
We have now seen the growth. We’ve now seen polyethylene prices, if you look at the markets, return back to the August 2025 levels. We expect that to flow through, you know, we’ve seen that flow through, through May and through June. We’ve seen that flow through our inventory. And we were able to pass a lot of those cost increases on to customers. But ultimately, we dropped a few percentage points from a gross margin standpoint because of that situation.
So we’re still pretty optimistic given what we’ve seen in June, given what we’ve seen with what the backlog is for July and August, that we’re still going to be, it’s still going to be a pretty strong fourth quarter. It should be our strongest quarter of the year and certainly give us a lot of momentum with what we expect to do going into fiscal 27. Now, you mentioned that there’s been some positive things going on in Germany. Can you do a little more color on that?
I think the positivity, when I look at what’s going on kind of in Germany and things like that, we are seeing from a revenue standpoint that, you know, revenues are bouncing back, you know, revenues are bouncing back compared to prior periods. We’re starting to see kind of a stabilization where we hope that we certainly hit the trough as far as, and are starting to come back as far as what’s happening from an industrial standpoint, you know, if they can get some things figured out in, at the country level as far as what, you know, as far as energy prices and things, hopefully that trend kind of continues from our standpoint.
And I assume you guys are always looking to try to, you know, cut expenses wherever you can. Yeah, certainly. But I mean, I think, you know, one of the key comments that Patrick made, you know, when you look at it, is we are ramping up revenues. We do expect fourth quarter revenues to be higher than third quarter revenues, and we do expect to hold our expenses relatively flat. And so, you know, we’re not going, we’re not coming into this saying the reason why that we didn’t make money this quarter is because we increased our expenses and we made all these investments.
We’re now at a point where we have, you know, capped off the investments, we’re holding things as flat as possible, and we’re seeing the revenue, you know, where we expect the increased revenue to drive the gross margin dollars to the bottom line. And that’s what I expect to see in fourth quarter and expect to see throughout fiscal 27. We do not have significant investment plans either from an employee standpoint or from a capital purchase standpoint in North America in fiscal 27.
One of the things we do have is because of the growth that we’re seeing in Brazil inside of oil and gas, because of the growth that we’re seeing in Nature Tech India, because of the opportunities there that we’re looking at over the next coming years, they are investing in some new facilities to be able to meet the demand there. So there will be some investments, but those are at the subsidiary level, not at the NTIC level.
Timothy Clarkson
Okay. Well, I’m obviously anxious to see the improved profitability and I’m still there. So thanks for your time. Thanks, Debbie.
OPERATOR
Thank you. Our next question coming from the lineup, John Merriwood, Ascend Wealth Advisors, Gilanis Malvin.
John Merriwood
Thank you and good morning. I’ve got a couple of questions for you. Number one, can you expand on how you’re addressing your ability to source raw materials used for, let’s say, Nature Tech or even to get yourself away from the need to source raw materials from the Mideast, if that’s possible, and how that might play out and help you in improving your raw material cost?
Patrick Lynch, President CEO
I think the one item to point out is that there are no raw materials that we’re sourcing from the Middle East. It simply has to do with the raw material impact that the situation in the Middle East had on raw material prices around the world. And so we are not currently sourcing from anywhere. But obviously, there’s a huge amount of global trade that flows through the straits. And so that ripple effect is what caused the 30% plus increase in the LDP prices.
That ripple effect is what we saw that caused a lot of our other base chemistries that go into some of our powder-based materials and things like that to increase. So from a production standpoint, we’ve spent the past three years looking at diversifying our capabilities of producing in China, producing in India, producing and subcontracting in Vietnam and Thailand, other areas, so that as there are tariff changes and opportunities, we’re able to kind of capitalize on those countries.
We’re still pursuing that plan. And so we’ve certainly established over the past three years the ability to source from different areas around the world to get the most effective pricing to keep our costs down and our gross margins at stable levels.
John Merriwood
Okay, very good. And then my second question is if you could expand on your recently announced compostable seedling cup efforts and is that something that could be replicated in, let’s just say North America for the U.S., Canadian, Mexican market, or maybe even in South America? And secondly, can you kind of expand on the timeline of when this effort could potentially play out beneficially for you? In other words, get away from the kind of the trial stage and implementation to where it actually may impact the bottom line.
Patrick Lynch, President CEO
I would say that it can be implemented globally. And in terms of how long it’s going to take to hit our bottom line, I would guess that they’ll be testing for another period of time. So maybe start some commercialization in a year.
We might see some commercial sales in a year.
John Merriwood
I see. Okay. And so is it. This effort is focused in India with Bayer, but it has a global approach. In other words, trial. Can you set up operations to do this within, say, the US or within Canada where there’s large agricultural efforts?
Patrick Lynch, President CEO
Absolutely. Applications in those countries.
John Merriwood
Okay, and would that. So is this a global effort with Bayer? In other words, it’s not just specific to India.
Patrick Lynch, President CEO
For right now, it’s specific to India. I don’t presume to know everything that Bayer is thinking.
John Merriwood
Right. Okay. Okay. Very good. Thank you. Those are the questions I had.
OPERATOR
Thank you. Our next question in queue coming from the lineup Don Hall with DMH Investments, the Atlanta Sun Open.
Don Hall
Good morning gentlemen. I believe in previous conference calls you mentioned some contracts particularly in Brazil and then possibly some other countries and I think it was for the Xeros product. Are those proceeding as expected or is there more you can tell us about them or am I possibly mistaken?
Patrick Lynch, President CEO
No, you’re not mistaken. The contract in Brazil was related to opportunities that we have for offshore FPSOs. And that is a contract that was about a 14 plus million dollar contract over several years that is scaling up. As far as our Brazilian subsidiary taking advantage of that, that is in process. That’s been in process for a few quarters. If I look at the Brazilian oil and gas revenue, the nine months ended in May 2026 compared to the prior nine month numbers is up close to 70%.
That’s a result of the implementation of this contract. We expect based on how we are servicing those companies. It’s kind of a cumulative effect. It’s not the kind of situation where you have, you know, $4 million per year over a three year period. It’s a ramp up where you are providing the materials and service to these offshore, offshore FPSOs and continue to add more and more. So it’s a slow scale up to where in year three you’d ultimately be implementing on, you know, a number of FPSOs.
Ten, you know, three times the number of FPSOs in the third year that you would in the first year. So it’s kind of a cumulative buildup of the, of the project. But yeah, that’s certainly moving forward and certainly is successful and should lead to some increased sales in that geography, right? Yes. Yeah. Yeah.
Don Hall
Okay, good. Thanks very much. How about other, are there other possibilities like that?
Patrick Lynch, President CEO
Yeah, I mean, overall the nine month oil and gas revenue across the board is up 67%. So that means that the non-Brazil number is up, you know, the non-Brazil number is up 67% flat. The Brazil oil and gas number is up 67.7%. The increased revenue that we’re seeing in the oil and gas base is in North American opportunities in our new subsidiary in the Middle East that we spent significant amounts investing in over the past, over the past 12 to 18 months that is scaling up well and is at a point where it’s making contributions.
So the expectations are that we’re going to continue to see sizable annual revenue growth in all of the areas in oil and gas.
Don Hall
Yeah. All right, thank you very much. Thanks, Don.
OPERATOR
Thank you. Our next question coming from the lineup. Gus Richard with Nordland Capital Markets. Elon is now open.
Gus Richard
Yes, thanks for taking the questions. Just wanted to ask about Nutra Tech. You know, in the press release you mentioned gross margin pressure on the call, you mentioned, you know, new products, which I would expect to help gross margins. I was just wondering if you could talk about how you see the trajectory of those two things in terms of margins for Nutra Tech.
Patrick Lynch, President CEO
Yeah, I mean, I think there is, there’s different aspects, as you’re well aware, there’s different business lines inside of Nutra Tech and there is the, what I’ll call the commodity Nutra Tech business made up of bag liners and cutlery and things like that. And then there is the, you know, the proprietary resin formulations that we’re working on for applications with other companies. I think what we’re seeing is that for a lot of the commodity-based trash bag liner revenue that we have, it is a cost-sensitive, price-sensitive business.
And so in order to maintain those revenues at times there are pricing issues that we have and you know, different, you know, that have impacted our gross margins. That was, that’s what I, you know, alluded to in the, in the, in the earnings release as far as how some of the Nutra Tech gross margins have been impacted. So you know, we’re not seeing, we saw some positive gross margin improvement over the prior 18 months with some of the raw, raw material prices coming down.
But we’re also seeing, you know, as we, as I noted, we’re seeing some of the price competition inside of Nutra Tech being a little bit of a headwind. And so that kind of on top of the issues we saw with the Xeros industrial raw material prices is what kind of caused the impact for the overall gross margin of the company to be lower than expected. I can say that even inside of Q4 for the industrial business, we have seen a recovery of the gross margin for Nutra Tech.
It’s still at a point where those aren’t one-time issues. Those are discounts and pricing that we have pushed through to customers. That’s not going to change unless we’re able to change input costs.
Gus Richard
Okay, got it. And then just so it’s clear in my mind, you know, the war has had an impact on the oil and gas business globally, not just you guys. And I’m just wondering from your perspective, has the war in the Middle East had a positive or negative impact on your oil and gas business, people ramping up production places or ramping it down or what have you?
Patrick Lynch, President CEO
It definitely had a negative impact in the third quarter. I mean, we had our, the individuals that are working in our operations in Dubai were, you know, they weren’t allowed to leave their houses, you know, at various times in our second quarter because there were, you know, bombs and missiles flying overhead and bomb sirens going off and things like that. So it certainly has an impact on what is, you know, what they’re able to do and projects, you know, in normal business occurring in the area.
So certainly the, you know, what we saw in that area was down a little bit. But I can say that there’s a lot of infrastructure in that region that was damaged, you know, that is going to need to be rebuilt. There are going to need to be investments there. You know, they are going to be doing that over the coming years. That certainly is going to continue to drive opportunities. So you know, long term I don’t see even looking forward just a couple quarters.
It looks like the opportunities have kind of rebounded and things have calmed down. But certainly during the second quarter it was a, you know, it was concerning with what was going on very close to employees that we had in the region.
Gus Richard
Got it, thanks. And then, you know, your decision to sell Beechwood to Zebra Business Industrial is improving, looks strong. And just wondering what went into the decision to sell a Beechwood facility.
Patrick Lynch, President CEO
Well, we’ve had that facility for probably 20 years right around there. And for the most part with the building that we purchased up in Minnesota, the expansion, the building we, that we purchased right next to our headquarters, we’ve had for a long time. It’s given us more opportunity just to consolidate everything in Minnesota. And so we moved. The Beechwood office was kind of the oil and gas group and the R&D people that were there that were kind of working in the Beechwood office, they’re being brought up to Minnesota just as an effort to kind of consolidate the facility.
There’s no real reason to remain in Ohio.
Gus Richard
Got it. And then last one for me on SG&A, you know, it’s a little bit above what I would have expected. Was there a one-time item there or what’s going on with that line?
Patrick Lynch, President CEO
No, no significant one-time, no significant one-time charges or one-time expenses in SG&A.
Gus Richard
All right, thanks so much. Thanks, guys.
OPERATOR
Thank you. Our next question coming from the line of Zach Liggett with Desmond Liggett Wealth Advisors. Yelena is now open.
Zach Liggett
Great. Good morning. Thanks for taking the questions. Nice, nice job on the quarter. A lot of, a lot of stress here in the Middle East. You guys seem to be handling things pretty well with the things you can control. Nature Tech, good color there. Any way you can quantify what the volume growth looked like? And then my follow up to that is on the innovation front, is there any more you can tell us about what’s happening with the food packaging innovation?
Patrick Lynch, President CEO
From a volume standpoint, if I look at Nature Tech from a revenue standpoint, the Nature Tech revenues for the nine-month period are up 5%. For the third quarter, it’s up 5%. I would say from a volume standpoint, it’s probably up closer to 10 to 12% if I’m looking at case quantities and things like that. So you can kind of see based on that what portion of it is price concessions and what portion of it is volume growth. So that’s where we are from that standpoint.
As far as, you know, expectations of what’s going on with food packaging, those are, I’d say, a little longer in the development as far as what needs to happen with these specific chemistries, and then being able to use the resin that we produce on the customers’ existing equipment to generate that product. There’s just a lot more involved with doing things that involve food that take a little more time. But certainly, the applications that we’re pursuing have been very positive.
We’re very optimistic about them, and they are sizable, you know, healthier margin opportunities. So those are certainly some of the things that we expect to fuel the growth of Nature Tech over the coming, you know, 12, 18, 24 months are some of these food service opportunities both in the United States and in India.
Gus Richard
Okay, great. And then last one for me, on the AI front, I think I asked this before, but I’m curious, with your sales teams or just internally, are you guys piloting any projects? Are you finding any productivity gains from the use of AI tools at this point?
Patrick Lynch, President CEO
Yeah, well, specifically, from an AI standpoint, one of the benefits that I wasn’t expecting when we made this decision, but when we made the switch to SAP 18 months ago, let’s say that the data that we’re able to gather from both a manufacturing standpoint, from a sales standpoint, from a product sales standpoint, there’s significantly more data available than what our historical system had. And what we’re finding is that with using external tools like Claude and being able to really kind of pound through and analyze hundreds of thousands of lines of data that we didn’t have before, it gives us a really, really clear insight into what’s going on with each individual customer, each individual ordering level of the customers, gross margin at the customer level, gross margin at the product level, which we didn’t and wouldn’t have had access to before. And so those are certainly some of the areas where we’re able to go in and rather than going in and hammering something with a hammer, we’re able to go in with a scalpel to kind of fix different things and kind of evaluate where we are. Additionally, on top of that, what we’re finding is that SAP that we’re looking at implementing is they have internal AI tools that can be utilized directly in your system.
So employees will be able to utilize the SAP AI tools to pull up things faster, to be able to respond to customers faster, other things like that. So on all levels, from executive level down, we are working to implement these things to become, I wouldn’t say just more efficient, but be able to be more reactive and be able to really tighten things up from a business standpoint.
Gus Richard
Yep. Good. Sounds great. Thanks for taking the questions.
OPERATOR
Thank you. And I’m showing up for the questions in the Q and A queue at this time. I will now turn the call back over to Mr. Patrick Lynch for any closing comments.
Patrick Lynch, President CEO
Thank you for joining us this morning, and have a nice day.
OPERATOR
This concludes today’s conference call. Thank you for your participation. And you may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
Recent Comments