--- title: "Northern Technologies Earnings Call: Growth vs. Margin Strain" type: "News" locale: "en" url: "https://longbridge.com/en/news/292259265.md" description: "Northern Technologies International reported Q3 FY26 record sales of $24.2 million, up 12.6% YoY, driven by strong performance in ZERUST oil & gas and Natur-Tec. However, gross margins compressed to 33.6% due to a 30% spike in LDPE prices, resulting in a GAAP net loss of $263,000. Management highlighted robust top-line momentum but acknowledged near-term pressures from raw material costs, higher leverage with debt rising to $14.8 million, and geopolitical disruptions." datetime: "2026-07-10T00:00:29.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/292259265.md) - [en](https://longbridge.com/en/news/292259265.md) - [zh-HK](https://longbridge.com/zh-HK/news/292259265.md) generator: "portal-rs" --- # Northern Technologies Earnings Call: Growth vs. Margin Strain Northern Technologies International ((NTIC)) has held its Q3 earnings call. Read on for the main highlights of the call. ### 4th of July Sale - 70% Off - Unlock powerful investing tools and data-driven insights with TipRanks Premium for more confident investment decisions. - Discover top stock picks and new investment opportunities through TipRanks' Smart Investor Newsletter. Northern Technologies International’s latest earnings call painted a picture of robust top‑line momentum offset by acute margin strain and modest losses. Management emphasized record sales across core platforms, rapid growth in ZERUST oil & gas, and new Natur‑Tec commercialization wins, while candidly acknowledging raw‑material cost spikes, compressed margins, and higher leverage as near‑term pressure points. ## Record Sales Underscore Top‑Line Strength Total consolidated net sales climbed 12.6% year‑over‑year to $24.2 million in Q3 FY26, setting a new quarterly record for Northern Technologies International. This marked the second straight quarter of double‑digit growth, signaling resilient demand across the company’s corrosion‑inhibition and specialty materials businesses despite geopolitical and cost headwinds. ## Joint Ventures Bolster Resilience Sales from unconsolidated joint ventures rose 15.1% year‑over‑year to $26.7 million, while JV operating income increased 12.2% in the quarter. Management highlighted these ventures as a key source of resilience and liquidity, reinforcing the company’s cash and investment profile even as consolidated margins came under pressure. ## ZERUST Oil & Gas Delivers Breakout Growth ZERUST oil & gas posted Q3 record net sales of $2.2 million, surging 72.3% year‑over‑year and marking the fourth consecutive quarter above $2 million. Trailing 12‑month oil & gas revenue exceeded $10 million for the first time, underscoring strong demand for corrosion‑protection solutions in energy markets and establishing a higher‑margin growth engine. ## Industrial ZERUST Adoption Expands ZERUST industrial net sales rose 10.3% year‑over‑year, showing improving uptake across industrial customers. Management framed this expansion as evidence that the core corrosion‑protection franchise remains healthy, providing diversified growth alongside oil & gas and supporting broader platform stability. ## Natur‑Tec Hits Record, Builds Innovation Pipeline Natur‑Tec delivered a quarterly sales record of $6.1 million, up 5% year‑over‑year, with nine‑month revenue also up about 5% and estimated volumes growing 10–12%. The business notched notable innovation wins, including selection in the International Fresh Produce Association packaging program and a Bayer collaboration in India on biodegradable seedling cups. ## Brazil FPSO Contract Fuels Oil & Gas Momentum A multi‑year Brazil offshore FPSO program, estimated at more than $14 million over several years, is ramping through the Brazilian subsidiary and driving strong regional growth. Nine‑month oil & gas revenue across geographies rose about 67%, with Brazil up roughly 67.7%, highlighting how long‑term contracts are translating into tangible top‑line acceleration. ## Operating Expenses Stay in Check Total operating expenses increased 5.3% to $10.2 million, but fell as a percentage of sales to 42.0% from 44.9% a year earlier. Management pointed to this improving efficiency ratio as evidence that prior growth investments are being leveraged and that expense discipline is helping offset some of the margin drag from raw‑material inflation. ## Liquidity Supported by JV Investments and Asset Sale As of May 31, 2026, Northern Technologies held $30.4 million in investments and joint ventures, with cash accounting for 54.4% or $16.5 million. Working capital stood around $20 million, including $7.3 million in cash, and the company expects additional liquidity from a planned sale of its Beachwood, Ohio facility, where assets held for sale total $816,000. ## Gross Margin Hit by Raw‑Material Spike Gross margin dropped to 33.6% in Q3 FY26 from 38.4% a year earlier, a compression of roughly 477 basis points. Management tied the decline mainly to a sharp rise in LDPE prices of more than 30% linked to shipping disruptions, estimating that the raw‑material shock reduced quarterly gross profit by about $1 million. ## Quarter Swings to GAAP and Non‑GAAP Losses The margin squeeze pushed Northern Technologies into a small GAAP net loss of $263,000, or $0.03 per share, versus net income of $122,000 in last year’s Q3. On a non‑GAAP basis, the company reported a $158,000 loss, or $0.02 per share, compared with adjusted net income of $228,000 in the prior‑year period, underscoring the near‑term profitability impact. ## Leverage Rises as Borrowings Increase Outstanding debt climbed to $14.8 million as of May 31, 2026, including $11.8 million drawn on the revolver, up from $9.3 million as of August 31, 2025. Management acknowledged the higher short‑term leverage and stressed a near‑term focus on paying down debt using operating cash flow and tighter working‑capital management. ## Natur‑Tec Margins Face Competitive Pressure Despite achieving record sales, Natur‑Tec saw margin pressure in commodity product lines such as bags and cutlery due to price sensitivity and competitive pricing concessions. These dynamics partially offset volume gains and limited overall gross margin recovery, emphasizing that not all Natur‑Tec growth is translating into profit expansion yet. ## Middle East Disruptions Weigh on Operations Geopolitical conflict and related disruptions in the Middle East impacted shipping routes, particularly through the Strait of Hormuz, and complicated operations for staff in Dubai. The company cited project delays, higher input costs, and timing shifts in invoicing as factors that dampened third‑quarter profitability beyond the direct raw‑material cost impact. ## Oil & Gas Revenue Shows Timing Variability While oil & gas remains a standout growth segment, management cautioned that quarterly results can be lumpy. Q3 oil & gas revenue came in below Q2 due to shipping and timing issues, with some invoicing pushed into June, highlighting limited short‑term visibility even as the underlying contract pipeline stays robust. ## Guidance Emphasizes Margin Recovery and Debt Reduction Management guided to a stronger, more profitable fourth quarter, expecting Q4 sales to exceed Q3’s $24.2 million and gross margin to improve sequentially from 33.6%. They aim for sales growth to outpace operating expenses while leveraging higher‑margin ZERUST oil & gas, expanding Natur‑Tec, executing pricing and procurement initiatives, and using cash flow plus asset sale proceeds to reduce the current $14.8 million debt load. Northern Technologies International’s earnings call balanced impressive growth data with frank acknowledgement of margin and leverage challenges. Record sales, surging ZERUST oil & gas, and Natur‑Tec innovation underpin a constructive long‑term story, while investors will watch closely to see if raw‑material relief, pricing actions, and disciplined cost control can translate into the stronger profitability promised for Q4 and beyond. ### Related Stocks - [NTIC.US](https://longbridge.com/en/quote/NTIC.US.md) - [BAYN.DE](https://longbridge.com/en/quote/BAYN.DE.md) - [BAYRY.US](https://longbridge.com/en/quote/BAYRY.US.md) - [BAYZF.US](https://longbridge.com/en/quote/BAYZF.US.md) ## Related News & Research - [17:17 ET/C O R R E C T I O N -- OneNexus/](https://longbridge.com/en/news/296402397.md) - [Private Equity's Return to Oil, Gas and Coal Already Tops All of 2025, Driven by One $9.7B Deal](https://longbridge.com/en/news/296383691.md) - [Essential Partners LLC Sells 3,903 Shares of Valero Energy Corporation $VLO](https://longbridge.com/en/news/296324644.md) - [Hot US Weather Forecasts Push Nat-Gas Prices Higher](https://longbridge.com/en/news/296645993.md) - [Diversify Advisory Services LLC Invests $1 Million in Valero Energy Corporation $VLO](https://longbridge.com/en/news/296454381.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**