Northern Technologies International Corporation reported consolidated net sales of $23.3 million for the first quarter of fiscal 2026, marking a 9.2% increase year-over-year and a new quarterly record. This growth was driven by a 6.9% rise in ZERUST® industrial sales to $14.9 million, a 58.1% surge in ZERUST® oil and gas sales to $2.4 million, and a 2.2% uptick in Natur-Tec® product sales to $6.0 million. NTIC China contributed significantly with net sales of $4.9 million, up 23.5% versus the prior year quarter, reflecting robust demand across Asia-Pacific markets.

Despite record revenue, NTIC’s gross profit margin declined by 230 basis points to 36.0% due to supplier lead-time issues that increased direct costs. Operating expenses as a percentage of sales improved to 41.8% from 44.4% a year earlier, reflecting the third consecutive quarter of disciplined cost control. However, higher operating expenses in absolute terms and an effective tax rate of 34.4%—driven by normal statutory rates at foreign subsidiaries and withholding taxes—contributed to net income falling to $238,000, or $0.03 per diluted share, compared with $561,000, or $0.06 per share, in the prior year quarter.

Joint venture operations generated $24.5 million in net sales, up 2.9% year-over-year, but joint venture operating income decreased 5.1% to $2.3 million due to slightly higher operating costs. North American Natur-Tec® sales reached a quarterly high, supported by new bio-based polymer resin compound contracts. ZERUST® oil and gas achieved over $2 million in sequential quarterly sales for the second consecutive quarter, indicating strengthening demand from both new and existing energy sector customers.

Management expects profitability to improve in the coming quarters as sales growth outpaces operating expense increases and gross margins recover from supply chain disruptions. Investments in new personnel and expanded global facilities are anticipated to leverage higher volume, while operating expenses as a percentage of sales should continue to decline. The effective tax rate is projected to normalize as additional North American profits offset foreign statutory tax impacts, positioning NTIC for higher year-over-year net income in fiscal 2026.