Tootsie Roll Industries (TR) Q2 2024 earnings summary

Executive summary

• Net product sales declined 6% year-over-year in Q2 2024 to $148.8M and 6% in H1 2024 to $300.3M, reflecting consumer resistance to higher prices and adverse timing of seasonal sales.

• Net earnings rose to $15.6M in Q2 2024 (up 6%) and $31.5M in H1 2024 (up 12%), with EPS up 10% to $0.22 in Q2 and 13% to $0.44 in H1.

• Gross profit margin improved due to higher price realization and manufacturing efficiencies, despite higher ingredient and labor costs.

• Management expects continued sales headwinds and margin pressure in the second half of 2024 due to market resistance and elevated cocoa costs.

Financial highlights

• Q2 2024 net product sales: $148.8M (down from $158.8M in Q2 2023); H1 2024: $300.3M (down from $319.5M).

• Q2 2024 net earnings: $15.6M; H1 2024: $31.5M (up from $28.1M in H1 2023).

• Q2 2024 EPS: $0.22 (up from $0.20); H1 2024 EPS: $0.44 (up from $0.39).

• Q2 2024 gross margin: $50.5M (33.5% of revenue); H1 2024 gross margin: $100.5M.

• Favorable freight, investment income, leasing revenue, and FX contributed to higher net earnings.

Outlook and guidance

• Cocoa and chocolate costs have risen significantly and are expected to pressure margins in H2 2024 and 2025.

• Management remains cautious about passing higher input costs to customers and consumers.

• Plant expansion is under evaluation, with projected investment of $70M–$80M over the next five years, mostly in the next three years.