Karat Packaging Inc. reported a net sales increase of 8.4% for the first quarter of 2025, reaching $103.6 million compared to $95.6 million in the same period last year. The growth was driven by a 10.9% increase in sales volume, although it faced a $3.9 million unfavorable pricing comparison. The company's gross profit also rose to $40.8 million, maintaining a consistent gross margin of 39.3%. Net income for the quarter was $6.8 million, reflecting a 5.2% increase from $6.5 million in the prior year, with a net income margin of 6.6%.
In terms of operational changes, Karat Packaging's current assets increased to $171.98 million as of March 31, 2025, up from $160.99 million at the end of 2024. This rise was primarily attributed to a $9.2 million increase in inventories, as the company prepared for the summer peak season. However, current liabilities also rose significantly to $60.08 million, leading to a decrease in working capital to $111.9 million from $114.6 million. The increase in liabilities was largely due to higher accounts payable and related party payables.
Strategically, the company has focused on enhancing its supply chain resilience by reducing reliance on imports from China, which now account for 18.4% of total sourcing. This shift is part of a broader strategy to diversify suppliers and mitigate risks associated with tariffs and global trade uncertainties. Additionally, Karat Packaging has entered into a lease agreement for a new distribution center in Chino, California, expected to be operational by the end of May 2025, further expanding its distribution capabilities.
Karat Packaging's financial outlook remains cautiously optimistic, with a focus on maintaining liquidity and managing costs amid fluctuating raw material prices and potential supply chain disruptions. The company generated $7.7 million in net cash from operating activities during the quarter, a 17.8% increase from the previous year. On May 6, 2025, the Board of Directors declared a quarterly cash dividend of $0.45 per share, reflecting the company's commitment to returning value to shareholders while navigating a complex economic landscape.
About Karat Packaging Inc.
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