Tootsie Roll Industries Reports Revenue Decline but Increased Net Earnings in Q1 2025

Tootsie Roll Industries, Inc. reported a decline in financial performance for the first quarter of 2025, with total revenue of $148.5 million, down from $153.2 million in the same period last year. The decrease in revenue was primarily driven by a 3.3% drop in net product sales, which fell to $146.5 million from $151.5 million. The company attributed this decline to challenging market conditions, including increased resistance from customers and consumers to higher prices. Despite the revenue drop, net earnings attributable to Tootsie Roll increased to $18.1 million, or $0.25 per share, compared to $15.8 million, or $0.22 per share, in the prior year, reflecting improved operational efficiencies and cost management.

In terms of operational metrics, Tootsie Roll's product cost of goods sold decreased to $95.5 million from $102.7 million, resulting in a gross margin improvement. The adjusted product cost of goods sold as a percentage of net product sales improved to 65.3% from 67.6% year-over-year. Selling, marketing, and administrative expenses also saw a significant reduction, totaling $29.4 million compared to $38.9 million in the first quarter of 2024. This reduction was partly due to lower deferred compensation expenses, which contributed to a more favorable earnings from operations of $23.1 million, up from $11.1 million in the previous year.

The company continues to face challenges in its international operations, particularly in Spain, where it reported an operating loss of $0.6 million in the first quarter of 2025, compared to breakeven results in the same period last year. Management anticipates that these challenges will persist, potentially requiring additional cash financing in the future. Tootsie Roll's current ratio improved to 4.2:1 as of March 31, 2025, compared to 3.8:1 at the end of 2024, indicating a strong liquidity position.

Looking ahead, Tootsie Roll is focused on strategic investments in plant manufacturing operations to enhance product quality and expand capacity. The company is pursuing a plant expansion project expected to cost between $95 million and $100 million over the next several years, primarily funded through cash flow from operations. However, the company remains cautious about the impact of rising input costs, particularly for cocoa and chocolate, which are expected to increase further as existing supply contracts expire. Management is also monitoring the effects of potential tariffs on imported ingredients and packaging materials, which could adversely affect future earnings.

Overall, while Tootsie Roll Industries, Inc. has shown resilience in its earnings performance amid declining revenues, the company faces ongoing market challenges and rising costs that could impact its financial outlook in the coming quarters.