Tootsie Roll Industries reported first-quarter 2025 net product sales of $146.5 million, a decrease of 3.3% compared to $151.5 million in Q1 2024. The decline was more pronounced in foreign markets, down 16.3%, while domestic U.S. sales decreased by 1.8%. Management attributed the sales headwinds to increased resistance from customers and consumers to higher price realization efforts implemented in prior periods.
Despite the top-line pressure, the company demonstrated improved profitability. Adjusted earnings from operations increased by 5.7% to $19.4 million in Q1 2025 from $18.4 million in Q1 2024, resulting in a 1.2 percentage point increase in the adjusted operating margin, from 12.1% to 13.3%. Net earnings attributable to Tootsie Roll Industries, Inc. increased to $18.1 million ($0.25 per share) in Q1 2025, up from $15.8 million ($0.22 per share) in Q1 2024.
The improvement in profitability was largely driven by higher price realization and enhanced plant manufacturing operating efficiencies, which led to a 2.3 percentage point decrease in adjusted product cost of goods sold as a percentage of net product sales, falling from 67.6% to 65.3%. Investment income also saw a substantial increase, rising from $1.9 million in Q1 2024 to $3.5 million in Q1 2025, reflecting a higher interest rate environment and larger average cash and investment balances. Share repurchases totaling $6.5 million in Q1 2025 also contributed to the higher earnings per share.
The company maintains a robust liquidity position with net working capital at $250.9 million and aggregate cash, cash equivalents, and investments totaling $507.6 million at March 31, 2025. This strong balance sheet supports ongoing operations, dividend payments, share repurchases, and a significant multi-year plant expansion project. However, the company anticipates incurring even higher costs for cocoa and chocolate during the balance of 2025 and into 2026 as older supply contracts expire and new, higher-cost contracts take effect, which will increasingly pressure gross profit margins.
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