Tootsie Roll Industries (TR) Q3 2024 earnings summary

Executive summary

• Net product sales declined 9.8% year-over-year in Q3 2024 and 7.7% for the nine months ended September 30, 2024, due to customer resistance to higher prices and timing of sales between quarters.

• Net earnings attributable to Tootsie Roll Industries, Inc. were $32.8M in Q3 2024 (down 4.5% year-over-year) and $64.3M for the nine months (up 2.9% year-over-year).

• Earnings per share were $0.46 in Q3 2024 (down from $0.48) and $0.90 for the nine months (up from $0.87).

• Gross profit margins improved due to higher price realization and operational efficiencies, but were partially offset by increased ingredient and labor costs.

• Domestic and foreign sales both decreased, with domestic sales representing over 91% of total net product sales.

Financial highlights

• Total revenue was $225.9M in Q3 2024 (down from $249.9M) and $529.8M for the nine months (down from $572.1M).

• Adjusted product cost of goods sold decreased 9.9% in Q3 2024 and 8.4% for the nine months, with adjusted gross margin as a percent of sales improving slightly.

• Adjusted operating earnings were $40.0M in Q3 2024 (down 9.4%) and $76.4M for the nine months (down 5.8%).

• Other income, net, increased to $7.2M in Q3 2024 (from a loss of $0.7M) and $21.1M for the nine months (from $8.9M), driven by higher investment income and gains on trading securities.

• Effective tax rate decreased to 22.6% in Q3 2024 and 22.4% for the nine months, contributing to higher net earnings.

Outlook and guidance

• Management expects the adverse sales trend to continue through the rest of 2024 and possibly into 2025 due to ongoing customer resistance to higher prices.

• Cocoa and chocolate costs are expected to remain elevated and volatile, negatively impacting margins for the remainder of 2024 and into 2025.

• The company is evaluating a plant expansion over the next five years, with most expenditures likely in the next three years, estimated at $70M–$80M.

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