Tootsie Roll Industries (TR) investor relations material

Executive summary

• Net product sales increased 2.0% year-over-year to $149.5 million in Q1 2026, driven by a 3.4% rise in domestic sales and successful marketing, while foreign sales declined 13.0% and now represent only 7.3% of total sales.

• Net earnings attributable to shareholders were $17.7 million, down from $18.1 million in Q1 2025, with EPS flat at $0.24.

• Gross margin declined to $51.3 million from $52.5 million year-over-year, primarily due to higher cocoa and chocolate costs, despite successful marketing and sales programs.

Financial highlights

• Adjusted product cost of goods sold rose 4.5% year-over-year, with gross margin percentage declining 1.6 points to 66.9%.

• Adjusted selling, marketing, and administrative expenses increased 1.3% year-over-year, but as a percentage of sales, improved by 0.1 points to 22.3%.

• Operating income (adjusted for deferred compensation) fell 8.6% to $17.8 million, with margin dropping to 11.9%.

• Net cash provided by operating activities increased to $11.5 million from $3.6 million year-over-year.

• Investment income from marketable securities contributed positively to net earnings.

Outlook and guidance

• Management expects continued pressure on gross margins from elevated cocoa and chocolate costs, though some relief is anticipated later in 2026 and into 2027 as lower commodity prices flow through the supply chain.

• Packaging suppliers have announced price increases due to higher energy costs, with future impact uncertain.

• Operating losses at the Spanish subsidiary are expected to persist, requiring additional cash financing.

• A major plant expansion is underway, with $75–85 million in total expected costs over seven years, mostly in 2026–2027.

• Continued investments in manufacturing operations aim to meet new product demands and improve efficiencies.