Northern Technologies International Corporation

What they do

NTIC operates in two reportable segments: ZERUST products and services (corrosion inhibiting packaging and oil & gas solutions) and Natur-Tec products (bio-based and biodegradable polymer resin compounds). The company sells globally and also derives income from equity-method joint ventures, notably EXCOR in Germany, where it provides services for fees and shares profits. Most of its production for NTIC China is for local consumption.

Revenue drivers

• ZERUST industrial — Largest segment, representing 65.8% of Q3 FY2026 net sales ($15.9M); includes corrosion inhibiting packaging and related services sold globally.
• Natur-Tec products — 25.1% of Q3 FY2026 net sales ($6.1M); bio-based biodegradable polymer compounds, with sales growth of 5.0% year-over-year.
• ZERUST oil & gas — Fastest-growing line, 9.1% of Q3 FY2026 net sales ($2.2M), up 72.3% year-over-year; focused on corrosion solutions for oil and gas applications.
• Joint ventures — Non-consolidated JV net sales were $91.2M in fiscal 2025; NTIC receives fees and equity income, but profitability varies quarterly and dividends are not controlled by NTIC.

Recent performance

In Q3 FY2026 (quarter ended May 31, 2026), net sales rose 12.6% to a record $24.2M, with ZERUST industrial, oil & gas, and Natur-Tec all achieving record quarterly sales. Gross margin fell 477 basis points to 33.6% due to higher raw material costs from Middle East disruptions and pricing pressure in Natur-Tec. The company reported a net loss attributable to NTIC of $263,000 ($0.03 loss per share) versus net income of $122,000 in the prior-year quarter. For the nine months ended May 31, 2026, net sales increased 12.3% to $69.5M. Fiscal 2025 annual net income was only $17,619, versus $5.4M in fiscal 2024, reflecting higher tariffs, raw material costs, and operating expenses.

Strategy

Management is focusing on expanding higher-margin ZERUST oil & gas sales and broadening Natur-Tec applications globally. The company is implementing supplier diversification, regional sourcing, cost-reduction programs, and manufacturing optimization to mitigate tariff and supply chain pressures. It is pursuing pricing and procurement initiatives to improve gross margin and profitability. NTIC also plans to close the sale of its Beachwood, Ohio facility, expecting proceeds over $1.0 million in fiscal 2027.

Risks

• Tariff exposure — Tariffs have already increased costs and are expected to continue impacting fiscal 2026 results, especially in the Natur-Tec business.
• Raw material cost volatility — Global disruptions, including Middle East conflict and Strait of Hormuz shipping risks, caused key raw material costs to spike in Q3 FY2026, pressuring margins.
• Joint venture dividend dependence — NTIC owns 50% or less of its JVs and cannot control dividend decisions, making cash flows from these entities variable.
• Economic cyclicality — Weakness in key end-markets, especially automotive, and in global economies (U.S., Europe, India, China) could reduce demand for ZERUST and Natur-Tec products.

Outlook

Management expects raw material costs to ease and pricing/procurement initiatives to improve gross margin and profitability in Q4 FY2026. The company anticipates stronger fourth-quarter results driven by continued demand for its technologies. The Beachwood, Ohio facility sale is expected to close in fiscal 2027, providing over $1.0 million in proceeds. However, tariff-related costs are expected to continue in fiscal 2026, and the company cautions that trade policy could adversely affect future results.