Northern Technologies International (NASDAQ:NTIC) executives told investors the company’s fiscal 2026 second-quarter results were “in line with expectations,” driven by broad-based sales growth across its corrosion-inhibiting and bioplastics businesses, while acknowledging that profitability remained pressured by investment spending and a more uncertain macro backdrop.
Chief Executive Officer Patrick Lynch said performance reflected “the resilience of our business model and the increasing value customers place on our corrosion prevention and compostable plastic solutions,” even as geopolitical tensions in the Middle East, supply chain pressures, and continued weakness in parts of Europe added uncertainty.
Sales rose 15% as oil & gas posted a record quarter
By business unit, management reported:
- Zerust Oil & Gas net sales increased 72.1% to $2.7 million (a second-quarter record).
- Zerust Industrial net sales increased 11.2%.
- Natur-Tec net sales increased 8.1% to $5.4 million.
Lynch highlighted a previously announced oil-and-gas win: a three-year contract disclosed in November 2025 with an estimated total value of approximately $13 million for “a major offshore project with a leading global EPC company.” He said the project is expected to ramp during the current fiscal year and continue through calendar 2028, calling it “a significant validation of our engineering capabilities” and pointing to Brazil as “one of the fastest-growing deepwater markets globally.”
During the question-and-answer session, Lynch added that oil-and-gas growth in the quarter was not limited to Brazil. He described “a non-Brazil increase this quarter of about 85%” versus the prior-year quarter and said the company also saw growth in the Middle East, North America, India, and China. He tied some of that momentum to investments in headcount and the launch of a new UAE subsidiary to pursue regional opportunities.
Joint ventures and China showed continued strength
NTIC also provided updates on its joint venture network, which it does not consolidate. Lynch said second-quarter net sales at joint ventures rose 18.6% year over year to $23.5 million. Chief Financial Officer Matt Wolsfeld added that joint venture operating income increased 19.8%, “primarily due to higher sales.”
Lynch said the company continues to watch for stabilization in Europe after “years of subdued demand,” noting that targeted stimulus measures could improve joint venture operating income in future periods, “especially in Germany.” He also pointed to Germany as a key factor behind lower joint venture contribution versus historical levels during Q&A, referencing a time when the German joint venture contributed “anywhere from $0.10–$0.12 per share per quarter” versus “$0.05 or $0.06 per quarter” more recently.
At the company’s wholly owned China subsidiary, second-quarter net sales increased 18.5% to $4.4 million. Lynch said most China sales are for domestic consumption, which he said limits exposure to U.S. tariffs. In response to a question about electric-vehicle adoption, Lynch said the business has shifted over time from supplying foreign automotive companies to supplying “domestic consumption,” which he characterized as positive given export volatility.
Margins, expenses, and earnings: operating leverage remains the focus
Wolsfeld said consolidated sales growth in the quarter represented the company’s “strongest year-over-year growth rate we’ve achieved since fiscal 2022.” Operating expenses increased 7.7% to $9.5 million, driven by higher selling and general and administrative expenses, partially offset by reduced R&D spending. As a percentage of sales, operating expenses were 43.2%, compared with 46.2% a year earlier.
Gross profit margin was essentially flat: 35.7% versus 35.6% in the prior-year quarter. Wolsfeld said the company expects gross margin to improve sequentially during fiscal 2026.
On the bottom line, NTIC reported a net loss of $35,000, or $0.00 per share, compared with net income of $434,000, or $0.04 per diluted share, a year earlier. Wolsfeld noted the prior-year quarter included $1.1 million in other income from a one-time Employee Retention Credit payment, while no other income was recorded in the current-year quarter.
On a non-GAAP basis, the company reported adjusted net income of $70,000, or $0.01 per diluted share, compared with an adjusted net loss of $300,000, or a loss of $0.03 per diluted share, in the year-ago quarter. Wolsfeld pointed investors to the earnings release for a reconciliation.
Management also discussed business factors affecting margins. In response to a question about Natur-Tec margin volatility, Lynch cited fluctuating material input prices, tariff-related manufacturing shifts, and competitive pricing pressure on end products. He said the company is working to expand Natur-Tec manufacturing across China, Vietnam, and India, with longer-term plans to explore North American production, and emphasized a goal of selling more proprietary resins.
For Zerust, Lynch said supplier issues discussed in the first quarter continued to affect inventory and results in the second quarter. He also warned that rising energy and polyethylene prices could be a factor in the second half, adding that the company aims to pass through increases where possible and said customers can often understand increases given broader visibility into energy and supply chain conditions.
Balance sheet, dividends, and investments
Wolsfeld said working capital was $20.2 million as of February 28, 2026, including $5.6 million in cash and equivalents, compared with $20.4 million in working capital and $7.3 million in cash and equivalents as of August 31, 2025. Outstanding debt totaled $14.3 million, including $11.3 million drawn on a revolving line of credit, compared with $12.2 million on the revolver at the prior fiscal year-end.
Wolsfeld said reducing debt through positive operating cash flow and working capital efficiencies is a “strategic focus for fiscal 2026 and beyond.” He also said the company had $29.7 million of investments in joint ventures, with 51.8% (or $15.4 million) in cash.
In January 2026, NTIC’s board declared a quarterly cash dividend of $0.01 per share, payable February 11, 2026, to stockholders of record on January 28, 2026.
During Q&A, management discussed cash and debt trends, pointing to a plan to increase dividends upstreamed from subsidiaries and joint ventures, improve earnings, and reduce investment cash outlays versus the prior two years. Lynch also reviewed major investments made recently, including hiring in oil and gas (and launching the UAE subsidiary), spending “about $4 million plus” on facility expansion and added manufacturing capabilities, and implementing a new SAP system that he said has been “more painful to deal with” but should improve data and global integration longer term.
Outlook: expects stronger second half despite macro uncertainty
Looking ahead, Lynch said the company expects “continued sales growth and improved profitability” in the second half of fiscal 2026, supported by stable trends in North America and continued strength in China, Zerust Oil & Gas, and Natur-Tec. He and Wolsfeld both emphasized operating leverage, with Lynch saying the main goal is to grow revenue while holding operating expenses “as low as possible,” rather than cutting aggressively.
Asked about the impact of the war and Middle East tensions, Lynch described direct disruptions affecting personnel and operations in the region, as well as secondary effects from higher energy and raw material costs and potential supply constraints in certain geographies. He said the company’s global footprint provides flexibility to source and supply customers through multiple subsidiaries.
Wolsfeld said management expects revenue growth to “increasingly translate to improved profitability,” supported by disciplined expense management and a continued focus on working capital efficiencies and debt reduction.
About Northern Technologies International (NASDAQ:NTIC)
Northern Technologies International Corporation (NASDAQ: NTIC) is a Minnesota‐based specialty chemical company that develops, manufactures and markets environmentally responsible corrosion prevention and metal surface treatment products. The company’s solutions include volatile corrosion inhibitor (VCI) films, emitters, powders and liquids designed to protect ferrous and non‐ferrous metals in industrial, aerospace, defense, electronics and automotive applications. In addition, NTIC offers packaging materials, engineered coatings and specialty pretreatment chemicals that meet stringent environmental regulations while extending equipment life and reducing maintenance costs.
NTIC serves a diversified global customer base, including metal fabricators, automotive suppliers, electronics manufacturers and oil and gas producers.
