NTIC - Earnings call transcript Q4 2019 | Northern Technologies International Corporation

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Operator

As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC's 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 NTIC desires 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 NTIC's most recent annual report on the Form 10-K, subsequent quarterly reports on Form 10-Q and recent press releases. Please read these reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements.

to host like Patrick today's now CEO. Lynch, would introduce for your conference, I and begin. ahead go Sir,

Patrick Lynch

Good Patrick that of a Matt and a Wolsfeld, ntic.com. for morning. press here at fiscal which full NTIC's I'm I'm our earlier were CFO. is Lynch, year NTIC's release fiscal available Please included fourth issued copy note XXXX the XXXX results and financial quarter CEO, in with morning, this

fourth quarter this comment of XXXX with During and we our give fiscal results, conclude various will on for question-and-answer and XXXX, sales update, full aspects key and a call, review net earnings business financial guidance session. a then year fiscal brief our

have significant the growth over years XXXX net results demonstrate fiscal products. sales came undertaken of sales fiscal just XX% the we financial Natur-Tec XXXX, in benefits driven to Natur-Tec NTIC's China our past In sales growth X slightly as XXXX. market fiscal as XX% well nearly compared and in by the bioplastic Our compostable over of geographic that from expansion of

same to we million fiscal In million. per the have share to this XXXX, to NTIC's share. earnings over $XX period subsidiary increased at NTIC period, annual $X.XX $XX.X diluted during successfully China over Chinese launched Overall, have per diluted sales and a addition, record grew XX% our sales while since increased XXX%

has been to equivalents XX, and In addition, twice and which XXX% sale since fiscal a increased for at $X.X securities dividend, XXXX, we grown August cash and available our initiated XXXX. have million cash cash quarterly

and which across during XXXX the however, been growth, immune North is the flow and our ventures. sales America success demonstrate quarter manufacturing full year impacted to which fourth both sales territory global our ZERUST fiscal strong focused expenses prevention NTIC's joint the corrosion served and has continued core global ZERUST free slowdown, double-digit by on in Unfortunately, business the not cash financial plan, strategic generation. controlled long-term results These of

as actively are trade these our progress for market expansive if markets of deterioration grow slowly, well ongoing global industrial result footprint, we signs operating of we a geographic joint Despite strong to as ventures and positioned are We global negotiations our believe all. watching share corrosion end our macroeconomic conditions, prevention any global further at expertise.

let's So drivers these with fourth highlights, examine quarter. the the for

decrease we quarter August quarter sales the For by Broken XX, Natur-Tec XX.X% as decreased total by a XX, ZERUST ZERUST down sales by not the -- sales our Total net fiscal markets net consolidate gas and joint net we for ventures, period million result oil $XX.X for last worldwide demand XXXX. included in million industrial XX.X% net This statements, financial in ended joint unit, industrial sales. $XX.X ZERUST of many a of decrease net in for decline XXXX venture XX.X% decrease do net first which business offset quarter to fourth sales, fourth our in X.X% a ended compared consolidated a across softer fourth XXXX, compared to was to from and serve. sales, XX.X% ventures were the same August net the joint increase the in the to this NTIC million its X.X% the in sales year. $XX.X

manufacturing of of macro customers. economic and quarter industrial current was many global during due slowdown We overall purchasing sales and concerns, the which in are, impacting to the in the the XXXX American continue our believe decisions fiscal ZERUST supply to North turn, decline chain fourth

actively We further. international trends plan deteriorates and market if continue to to monitor accordingly demand adjust

sales. momentum a The to reflect XXXX for this at $XX.X X.X% and XXXX fiscal NTIC increasing during primarily XXXX China compared bioplastics be were fiscal NTIC million in of fiscal subsidiary Net fiscal increase growing, compostable results China and higher XXXX. market our was in sales by our China for appears wholly strong market. Natur-Tec to million owned $XX The result

As a result of We intend and ZERUST within anticipated stand sales growth China Natur-Tec optimistic China, things our today, remain and expand potential of we and growing as in fiscal up the XXXX expect moderate growth continued large be further sales in long-term industrial this NTIC to sales. to about we in presence market.

down last quarter gas market pipeline the nearly XX% during XX.X% year, ZERUST due corrosion primarily projects which materialize year for this fiscal fourth previous ZERUST conditions. and Oil large oil quarter. included XXXX in challenging fourth sales. products, remain compared control sales cycles from fourth volatile decrease overall oil fiscal year's Net sales and to to sales and sales net long a and were fiscal but multiple gas did not benefited fiscal the gas these of of for during orders quarter types

gas coating consequently were oil and pushed year. the and time delayed there Additionally, projects were several over and gas market to corrosion adopt We successful be we believe cathodic current as VCI protection. to and replace were that will oil customers into remain committed more protection and our fiscal technologies

potential new to orders addition repeat product funnel oil an line. In closed we provide for expected XXXX, to gas, continue remains opportunities While longer customers. countries established to and than it sales expanded several from our in value robust, applications with and to customers, continues take to in ZERUST our current sales our scale and

the size We ZERUST successfully oil will to oil are and our and we able gas market potential to committed and believe expanding and due time. sales profit grow be its gas to presence over global within

to turning business. Now our Natur-Tec bioplastics

strong our sales such, and growth from Natur-Tec's $XX.X landfills of as composting a continued sales large net owned of educational in result corporations, India finished sporting products majority-owned by venues domestic in wholly North XXXX for fiscal subsidiary fiscal adopt America to over significant highlights such Natur-Tec year. of demand in increase North and away initiatives demand waste A rates were fiscal zero-waste and customers an NTIC's Natur-Tec's during resin increased achieve to through million, as in products and network For as record divert of XX% bags subsidiary well NTIC's nearly finished industrial and as compounds last institutions XXXX, China. of America distribution increasingly a end as compostable Natur-Tec organic as facilities. couple growth higher include cutlery

environment steady service Asia, demand In limiting saw lids. cups solutions, and applications in products, Furthermore, concerns and bio-based for initiatives brands growth demand Natur-Tec as the regulation subsequent food such for such and heightened as adopt resin paper coated sustainability microplastics in increased for economy, conventional countries compounds residues with its more its Natur-Tec plastic apparel extrusion about drinking in compostable saw and packaging. plastics global apparel India, more their products and packaging circular as for straws,

is As the interest conventional the Natur-Tec's facing societal you bio-based criticism reflected increasing can due solutions and to have and for polypropylene experienced. And ever-increasing that polyethylene of and see, plastics and political compostable we global is waste product in disposal environmental the use this concerns.

So while global in XX-year at our sales more diversified any now market uncertain history. short other is demand ZERUST than remains the business time for term, in our

addition, have the the further experienced In reflect management and we created. sheet strong balance team business platform resiliency of model, NTIC's asset-light

NTIC X years has product the our profitably oil throughout and gas beyond, I by and ZERUST look next I'm growing by to As categories. potential stockholders value to sales for and the continue creating excited Natur-Tec

summarize the fiscal Matt Wolsfeld our now financial me let over overview, this to results for XXXX. call to turn With

Matthew Wolsfeld

decreased sales sales. many ZERUST million XXXX year. in across joint sales NTIC's decrease by XX.X% increased for or fiscal to in as Patrick. or X.X% sales, impacted X.X% prior net net full to compared result $X.X ventures joint Lower offset which a increase compared income, in which Thanks, XXXX was of a total operating year XXXX X.X% $X.X the our fiscal fiscal global the of million a fiscal Natur-Tec partially venture

Our administrative only $X.X during by to expenses support fiscal to across in increased costs, as our certain platform 'XX, general made investments $XXX,XXX operating current total due growth. we've $XX.X X.X% million global anticipated and future million to an increase and sales primarily or

improved percentage expenses For XX.X% to as basis last a XX.X% fiscal compared points of operating net sales XXX XXXX, year. fiscal to

solutions million as fiscal We products. well R&D as new invested to in in And last million bioplastic during continue invest $X.X activities compared XXXX, fiscal $X.X to VCI NTIC year. developing

the per quarter XXXX million fourth diluted to for quarter. $XXX,XXX compared $X.X fiscal the $X.XX net for XXXX income per share share reported of fourth NTIC or $X.XX or diluted fiscal

the compared to For share, million or reported year, year's last diluted NTIC net $X.X million income income per $X.XX or net $X.X diluted per of share. of $X.XX

million in available-for-sale of cash XX, August cash of to equivalents XXXX, cash securities $XX.X compared and in $X.X including available-for-sale in million, securities As and and million capital million working August including $X.X and XXXX. $X.X nearly million as $XX.X million, XX, cash equivalents was $X.X in

from operating $XXX,XXX NTIC XXXX, to fiscal year. $X.X generated For last activities of cash fiscal compared million

flows strong approximately million cash, XXXX, additional capital, significant continue require $XX model invested August going million forward. our business XX, On the of in working model $XX produce investment we does with capital. venture, cash will had to company financial remaining or was NTIC's not which joint XX% and in expect balance operating of the

of August our NTIC's commitment XXXX, on $X.XX was value to August strength On fourth the XXXX as the performance to of payment fiscal stockholders. first in payable which XXXX. continued Directors XX, financial share XXXX X.X% fiscal Board cash our Board reflects shareholders declared Directors per record Board's X, the quarter, common approved increase of the During in dividend create quarterly of an a of $X.XXX, dividend XXXX, August that quarter for and to XX,

Now August year XXXX. the XX, turning guidance ending NTIC's annual to fiscal for

attributable XXXX our million expect million. $X.X risks We income net including in $XX for per range $X.XX our earnings sales and in estimates to to uncertainties, estimate $X.X disclosure million those and are and $XX subject fiscal our a NTIC will $X.XX release. statements forward-looking or significant between between We XXXX. between our described fiscal million and to diluted share These and range

long-term can built direction we're we're about drive and you headed. profitable the platform to that As growth, a we've see, excited strong

happy and Patrick your questions. are With to take this, I

Operator

from And Tim Instructions]. comes first Clarkson [Operator question from Van our Clemens.

Timothy Clarkson

quarter. Solid

Just business. It part the big a to questions. oil couple in quarter the gas in the the and like me was seemed fourth difference of of

Matthew Wolsfeld

Yes. makes of shortfall. the up would I say that majority the

Timothy Clarkson

right? And that be volatile anyhow, to business tends just

Matthew Wolsfeld

anticipated It fourth tends -- our in of off we be first do an XXXX, There we and in the were standpoint to expected a both half volatile. and say, the to quarter quarter. certainly from conclude that projects certainly income to into shortfall to a led fourth let's that from were what significant, in that certain revenue the pushed the

Timothy Clarkson

in I money Can to been that your know a the about there's much are for mentioned investments in Europe. spent what how of you've me venture and there scale joint expectations Right. talk Natur-Tec? some you you

Matthew Wolsfeld

for joint Natur-Tec. venture No. There's in no Europe

not is sales, similar sales to through existing subsidiaries. Natur-Tec owned in manner we're joint focus partnering Natur-Tec wholly of doing It's going our subsidiaries or how joint in ventures, any we're be increased with venture. the majority-owned subsidiaries, to but starting The a of to either kind what doing we're Europe not a For potentially on everything through ZERUST. in with some

Timothy Clarkson

Right. money that you How much on so far? have spent

Matthew Wolsfeld

just after certain Very, plan We're putting very together a aspects in market. of initial for go little. stages strategic to European the how of the

Timothy Clarkson

terms clothing. results Are you had How working lot of success like States about places fast the in as know -- as Levi other with that? that people seeing far and any a far you've in I as as like food in restaurants United of Strauss

Patrick Lynch

to the supplying America. a cutlery this national -- into in suppliers industry North they fairly enter on some fast to large basis. Well, certainly with to a with we for year, food provide the the distribute that American systems agreement did, make resin company an them We are

promises this significant business new that coming year. line in us be very So a to for

Operator

from Capital. from next Dowling Jefferies our comes Jim And question

James Dowling

end and that Would you more terms for of North in America your showing weakness ZERUST the be markets are both specific in abroad?

Matthew Wolsfeld

our Yes, with the obviously obviously a an happened the and in throughout the from significant Europe cars sales We've auto just and market had impact market look standpoint us end what standpoint, from being most at impact expectations this a that's the from ZERUST, being to worldwide. auto With from standpoint, a seen standpoint down market Asia economic global you certainly of is sales what's pressure -- the standpoint. United there's States throughout produced. biggest were trade softening, specifically was year tariff on overall the when an from overall are everything that number

James Dowling

quantification for What sales? directly get up make Well, the two percentage the of to the auto or does that. for industry -- indirectly ZERUST either at ways

Matthew Wolsfeld

European market market. when as down is China, we're slightly market our which our in It at depends it's on -- a American on the in about. Asian In XX% automotive-based. And XX% North talking look we up far the XX%, the comes market reliance XX% specifically to then as on markets, probably automotive range our

Operator

Claugus Thomas comes our question next And from Ampla. from

Thomas Claugus

How Or and is revenue currently? the is outside U.S.-based it gas of much the entirely oil of ZERUST U.S.?

Patrick Lynch

Percentage-wise?

Matthew Wolsfeld

revenue. of fluctuate I would but now say, American-based projects, North the completed it's tends we've to around of percentage-wise, all size probably projects It XX% the just the because world.

Patrick Lynch

We've gotten Azerbaijan... Africa, India, in in Europe, projects

Matthew Wolsfeld

find business the still area. the place that we and the But a a Texas, sales activity takes Oklahoma of the in of lot -- lot still

Thomas Claugus

Okay. is going QX up to And -- business you August, do think? sort you do expect then since PMIs is of low since have be that expected? holding the watermark, Or better than fallen

Matthew Wolsfeld

months only couple from certainly, a at certainly standpoint, better have, standpoint, is where But X.X a sign. least we from a sales QX than it than starting. looks which looks a revenue and is positive months it QX, QX we're standpoint, visibility months, QX, like from did obviously, a X of into Well, about in. But we're stronger from

expectations we So some growth industrial low if guidance looked together see relatively standpoint. across -- expectations higher things standpoint are, up guidance get our remaining how and to globally. revenue XX% earnings markets, we some traditional ZERUST of we XX%, and can at of for the a the the that's in flat line year, then level to end worldwide with a XX% putting -- from next with hopes from Natur-Tec The recovery being the product

Thomas Claugus

this is guidance in Yes, -- annualized little your million I than right rate run I higher because mean the quarter. is thought a was fact now $XX

from -- ZERUST? and was then think Natur-Tec there destocking going -- destocking coming visibility some and expected -- mainly you is the do on So just in

Matthew Wolsfeld

Certainly, at end quick are a far expectations flat. of when -- a a would is place the is relatively relatively the be take we're that low amount also and year. then the during that recovery products the with where back We'll what happens From our standpoint bounce standpoint be guidance selling if that expectations level the level. from the again, the it, both see there that there at stocking would the as as distributor customer would stocking of and we seen the there's mentioned, as as where at bites you It's destocking two the far apple I'm I areas. almost levels in, is we've a -- and of those can't from the two held inventory like decrease a where as come the fourth fiscal quarter now the of was watermark stronger revenue certainly, what months quarter. standpoint. couple are saw and right fourth But that low our from year in out say first the of than

Thomas Claugus

finished read final better a And question. I've one sales transcripts for to last Okay. strategy guys. produce And versus The from my Is make is, to is resin? resin? Natur-Tec it asking is strategic to goods it important, finished you -- business I'm Or from you standpoint, how for ship other goods? it guys better a standpoint.

Patrick Lynch

of as and was enough we we there would for Initially, into could marketplace a we prefer would a function prove in that finished when to mostly us, make proof products satisfy got systems. the the demand market, For that to needs. so these concept they resin well to this we customer wanted selling that be

products ago, mentioned selling few into primarily. under So a now example, with is they will American I of brand. that as And be to just contract, the own supply those large just that cutlery converted only will be we got resin then truckloads for compostable manufacturer this minutes their

Operator

[Operator Instructions].

Northland. Our next Gus Richard from question from comes

Auguste Richard

things couple on of A products. the Natur-Tec

are apparel You for on working guys lines. fibers

-- distance, where I bit can and about that's little that stands? that you program talk know the a Just but often

Patrick Lynch

very really a that. to process. it's early about the think little still in bit talk I premature That's

Auguste Richard

constraints capacity that were you about PLA? of a material? been I talk those Have And supply there in the there last year. on some little Is think relieved? coming then can more earlier bit Okay. raw

Patrick Lynch

schedule We expect but to of for be being enough But exactly the right more is. coming, sure we not now, capacity our we're meet to are demand. that in what allocated material

Auguste Richard

seasonality August Or little weak? How are we're I a normally an when the typically can And weakest slowdown. the is in that about quarter seasonally how the bit usually behave play does industrial that you autos talk ZERUST business? out? the does in then know as

Patrick Lynch

us, speaking, rust into rust stronger quarter heat and for and to Generally have you time faster. when you fourth primarily third are any humidity, things get season, tend

slowdown some month when shut season a pretty You for of down for plants, see certain for particularly the do holidays, August the Europe, but that's in how in summer work would much us.

Auguste Richard

said Or just then but that those the that the revenue not out you're of on they And Okay. quarter, projects are think seeing August you forward? gas, and oil pick they'll and of I on up? sure when next is -- it will into evidence move the couple the quarters delay pushed

Matthew Wolsfeld

-- I would will expectations half in of say quarters first XXXX. be that revenue our first two fiscal realized of the are the that,

Patrick Lynch

year. fiscal Current

Operator

comes next our question Associates. Joe Furst And Furst from from

Joe Furst

just a I item. tank to your What's a the business, for you about vast that market? to such it's increase gas question in business the because be had it and able take to oil going particularly to

Patrick Lynch

for number getting tanks now, been right basis. an our the number annual repeat Well, as a expanding years, we for of tanks we've stating we are business and of on

increase understanding XX standard within significantly. to have protection. and standard, expect trying engineers approved year are technologies last then a this those international have on for the been Institute those organization NACE, that preliminary the applying sales years key now we standard get by to things finalize VCI to months. that to Once tank is are expect American Petroleum of working it as well-established working standard One they this corrosion a as for for and over to that well the we the jointly becomes already approved is both been several My our approved drafts next on the the

Operator

Clemens. question next from Clarkson from Van And Instructions]. Tim our [Operator comes

Timothy Clarkson

familiar would are on big compostable a people maybe your to basis, Just what products picture who compostable for products, with competition? be some superior makes what the --

Patrick Lynch

manufactured modify certain larger dramatically not products. we've the and process this out reduce And to companies the on produced the able -- managed filed finished have otherwise first systems to NatureWorks formulations strength cost get compatibilize finished by resin just that that to, We've films. mechanical systems other chemical of for the and patent various a the of now the that functionality we compatible BASF are Well, year of resin blending of better based all, properties generated or overall we the like add the be plastic to tensile finished have product. also also fillers dramatically managed we've increases the of to

our equivalent bags similar than or So up would our -- wind up stronger products way. products you film being manufactured that wind for expect much

So is finished product basically extruders the we have cost processable that at products. producible easily for -- a overall more to also and the lower stronger, and

Timothy Clarkson

Right.

in or salad, just wet out if a practical snap grass, you're So the fork explode, like of some products bag if terms, of you're do? doesn't bunch eating cheaper, these doesn't heavy carrying a the inferior

Patrick Lynch

The through spoon or hot snap wilt you're fork a example. for when or soup, you hot won't stirring melt on or coffee

Operator

now further would CEO, further sir. I'm you, no host, remarks. to for so turn back your And you. questions, like over showing Lynch, Thank I to Patrick call the Thank

Patrick Lynch

a you. everyone you in like for for participating NTIC. and Thank today your have to interest I'd thank pleasant day. Hope

Operator

this today's for concludes and Ladies Thank participating. call. conference gentlemen, you

You disconnect. may now

Northern Technologies International (NTIC) 12 Nov 192019 Q4 Earnings call transcript