Northern Technologies International Corp (NTIC) Q3 2023 Earnings Call Transcript

Northern Technologies International Corp (NASDAQ: NTIC) Q3 2023 earnings call dated Jul. 13, 2023

Corporate Participants:

G. Patrick Lynch — President and Chief Executive Officer

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

Vineet Dalal — Vice President Natur-Tec

Analysts:

Timothy Clarkson — Van Clemens — Analyst

Gus Richard — Northland Capital Markets — Analyst

Richard Hillman — Investor — Analyst

Gregory Weaver — Invicta Capital Mnagement — Analyst

Don Julio — — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, thank you for standing by. Welcome to Northern Technologies International Corporation Third Quarter 2023 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today’s conference is being recorded.

As part of the discussion today, the representatives from NTIC will be making certain forward-looking statements regarding NTIC’s future financial and operating results as well as their business plans, objectives, and expectations. Please be advised that these forward-looking statements are covered under the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995 and that NTIC decides to avail itself of the protections of the Safe-Harbor of these statements. Please also be advised that actual results could differ materially from those stated or implied by the forward-looking statements due to certain risks and uncertainties including those described in NTIC’s most recent Annual Report on Form 10-K, subsequent quarterly reports on Form 10-Q and recent press releases. Please read these reports and other future filings that NTIC will make with the SEC. NTIC disclaims any duty to update or revise its forward-looking statements.

I will now hand the conference over to your speaker host for today, Mr. Patrick Lynch, Chief Executive Officer. Please go ahead, sir.

G. Patrick Lynch — President and Chief Executive Officer

Good morning, I’m Patrick Lynch, NTIC’s CEO. And I’m here with Matt Wolsfeld, NTIC’s CFO. Please note that a press release regarding our third quarter fiscal 2023 financial results was issued earlier this morning and is available at ntic.com. During today’s call we will review various key aspects of our fiscal 2023 third quarter financial results, provide a brief business update and then conclude with a question-and-answer session.

Record top line sales for our ZERUST industrial, ZERUST oil and gas and Natur-Tec segments in turn pushed total sales for the third quarter to a new quarterly record as well. It would appear, therefore that our strong third quarter performance not only revalidates the efficacy of our long-term growth strategies, but also the value that our corrosion inhibiting products and services and bioplastics solutions provide to our growing customer base. I’m proud of these results as they show that our team members and joint venture partners have been working hard to support the complex needs of our global customers, while also navigating extremely dynamic occurrence.

As planned, we also made considerable progress rebuilding our gross margins and controlling operating expenses this period. Our third quarter gross margin of 36.7%, marks a significant improvement on both a sequential and year-over-year basis. This primarily reflects the positive impact of the countermeasures, we put in place against supply chain issues, significant raw material cost increases and challenges across our European and Asian markets.

As we look to the fourth quarter and beyond. Momentum in our business remains positive. We believe NTIC China sales will improve in the fourth quarter and into fiscal 2024, now that the Chinese economy finally has the opportunity to start rebounding from its exceptionally long self-imposed pandemic freeze. ZERUST oil and gas and Natur-Tec are both expected to continue to benefit from new customer relationships and incremental orders from existing customers. Therefore, we believe we are well positioned for a strong finish to fiscal 2023 and believe fiscal 2024 will also enjoy good growth and higher profitability.

So with this overview, let’s examine the drivers for the third quarter in more detail. For the third quarter ended May 31, 2023, our total consolidated net sales increased 10.6% to a quarterly record of $21 million as compared to the third quarter ended May 31, 2022. Broken down by business units, this included a 32.7% increase in ZERUST oil and gas net sales, a 9% increase in ZERUST industrial net sales, and 7.8% increase in Natur-Tec net sales.

Total net sales for the fiscal 2023 third quarter by our joint ventures, which we do not consolidate in our financial statements decreased year-over-year by 1.1% to $26.3 million, but were up 3.3% on a sequential basis. A slight year-over-year decline was due primarily to softer demand across the territories serviced by our global joint ventures and currency exchange rate fluctuations. Fiscal 2023 third quarter net sales by our wholly-owned NTIC China subsidiary decreased by 8.4% to $3.3 million, due to weaker economic conditions on a year-over-year basis. On a sequential basis, NTIC China sales were up 15.6%, which we believe reflects stabilizing demand trends and we continue to expect demands to improve throughout the remainder of this fiscal year. We remain committed to the Chinese market and the long-term opportunities it represents for NTIC. We continue to take steps to enhance and protect our Chinese operations and we continue to believe China will likely become our largest geographic market in the future.

Now moving on to ZERUST oil and gas. The fiscal 2023 third quarter was the strongest quarter we have ever had for ZERUST oil and gas, and sales increased 32.7% to a record $2 million. The third quarter of fiscal 2023 is also the fifth consecutive quarter of ZERUST oil and gas sales over $1.5 million and on a trailing 12 month basis, we have reported nearly $7 million of oil and gas sales. We believe these positive trends reflect accelerating momentum within our oil and gas business. Interest continues to grow from new and existing customers for our ZERUST oil and gas solutions, which include applications to protect above ground oil storage tanks and pipeline casings from corrosion. The expanding adoption of our ZERUST oil and gas solutions within the oil and gas industry is supporting bigger opportunities for our ZERUST oil and gas products and technologies. As a result we believe that fiscal 2023 will be a transformative year for ZERUST oil and gas as we expect this business to scale and continue to contribute to profitability.

Turning to our Natur-Tec bioplastics business. As expected, Natur-Tec sales growth re-accelerated in the third quarter. After seasonality and the timing of both shipments and orders impacted Natur-Tec sales in our second quarter. Fiscal 2023 third quarter, Natur-Tec sales were a record. $4.9 million, a 7.8% increase over the prior fiscal year period. We expect to Natur-Tec sales growth will remain strong in the fourth quarter, supported by favorable demand in North America and India and significant new customer wins and orders in these geographies. Globally, we continue to see growing market demand for new applications of certified compostable plastic products and resin compounds. As well as increased interest in commercial and municipal programs that use certified compostable plastics as alternatives to conventional plastics. As a result, we believe we are well positioned for long-term sustainable growth within our Natur-Tec bioplastics business.

As you can see our third quarter performance reflects the progress we are making to profitably grow our business and create significant value for our shareholders. This is a testament to the leading solutions we have created, the valuable services we provide, and the strength of our team members and joint ventures. With this overview, let me now turn the call over to Matt Wolsfeld to summarize our financial results for the fiscal 2023 third quarter.

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

Thanks, Patrick. Compared to the prior fiscal year period, NTIC’s consolidated net sales increased 10.6% in the fiscal 2023 third quarter to a quarterly record. This growth was driven by the positive trends Patrick reviewed in his prepared remarks. Actions to improve gross margin successfully offset a 1.1% decrease in third quarter sales across our joint ventures to drive a 1.5% increase in third quarter joint venture operating income compared to the prior fiscal year period.

Total operating expenses for fiscal 2023 third quarter were $8 million, 12.8% increase over the prior fiscal year period, which was primarily due to increased personnel expenses and expenses incurred during the current fiscal year period in connection with the startup of a new indirect majority owned subsidiary formed to assume the operations of a former joint venture in Taiwan. Operating expenses as a percentage of net sales were 38.3%, compared to 37.5% for the prior fiscal year period.

Gross profit as a percentage of net sales increased 36.7% [Phonetic] during the three months ended May 31, 2023 compared to 32.9% during the same period last fiscal year. The 380 basis point improvement was primarily a result of successful actions taken by the company to address inflationary pressures and the increased sales of higher gross margin ZERUST oil and gas solutions.

NTIC’s reported net income increased 52.5% to $1.5 million or $0.16 per diluted share for the fiscal 2023 third quarter compared to $1 million or $0.11 per diluted share for the fiscal 2022 third quarter. NTIC’s non-GAAP net income adjusted for amortization expense was $1.6 million or $0.17 per diluted share compared to $1.1 million or $0.12 per diluted share for the fiscal 2022 third quarter. A reconciliation of GAAP to non-GAAP financial measures is available in our third quarter earnings press release that was issued this morning.

As of May 31, 2023, working capital was $23.7 million including $6.2 million in cash and cash equivalents compared to $23.2 million, including $5.3 million in cash and cash equivalents as of August 31, 2022. As of May 31, 2023 we had outstanding debt of $8 million. This included $5.2 million in borrowings under our existing revolving line of credit compared to $7.1 million as of February 28, 2023. During the fiscal 2023 third quarter, the company’s wholly-owned subsidiary in China, NTIC China, entered into two term loan agreements. Both loan agreements have an annual interest rate of 3.5% and the total outstanding balance was $12.8 million as of May 31, 2023. The proceeds of these term loans were used to pay-off intercompany loans that NTIC China had with NTIC.

We generated $3.5 million in operating cash flows for the nine months ended May 31, 2023 including $1.3 million in the third quarter, which was driven primarily by stronger profitability and waning inventory levels. On May 31, 2023 the company had $22.9 million of investments in joint ventures, of which approximately 53.2% or $12.1 million was in cash, with the remaining balance primarily invested in other working capital.

During the fiscal 2023 third quarter, NTIC’s Board of Directors declared a quarterly cash dividend of $0.07 per common share, that was payable on May 17, 2023 to stockholders of record on May 3, 2023.

To conclude, our third quarter and year-to-date financial results demonstrate the continued progress we have made to increase sales across our diverse end-markets and geographies. And the success of our near term initiatives to improve profitability. I’m encouraged by the direction we’re headed and while the economic environment remains extremely fluid, we continue to believe fiscal 2023 will be another good year of sales and profitability at NTIC.

With this overview, Patrick and I, are happy to take your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]

G. Patrick Lynch — President and Chief Executive Officer

I also like to mention that Vineet Dalal is joining us this morning. So if you have any questions regarding Natur-Tec.

Operator

One moment for our first question. And our first question coming from the line of Timothy Clarkson with Van Clemens. Your line is open.

Timothy Clarkson — Van Clemens — Analyst

Hey, so I’ve got a few questions here. Just on a big picture basis, what’s the impact of this trend towards electric cars? Does it change need for rust corrosion products is? Is electric car versus a gas car?

G. Patrick Lynch — President and Chief Executive Officer

It will because there is simply fewer parts in electric vehicles than they are in ICE engine.

Timothy Clarkson — Van Clemens — Analyst

Okay.

G. Patrick Lynch — President and Chief Executive Officer

We have not seen yet, and actually we’re doing some — where our sales are growing into the EV market as we speak. But we do ultimately expect that there will be some transition as the industry moves more towards the EV vehicles.

Timothy Clarkson — Van Clemens — Analyst

Okay. Wanted to ask about on the compostable, and again, what’s — what would you say is one, we got the expert there. What would you say is the differentiating factors on Natur-Tec compostable products versus other competitors?

G. Patrick Lynch — President and Chief Executive Officer

I think we just — we make products that are easier to process on conventional plastics equipment, cheaper and better properties. We are kind of unique in the fact that we are based material agnostic. So we work with PLAs, PHAs, PBATs. We work with the brand to understand their packaging requirements and then based on those packaging requirements, we actually engineer a solution that meets the requirements at a affordable price.

Timothy Clarkson — Van Clemens — Analyst

Okay. At what point does the typical McDonalds or the typical fast food restaurants start to be using these kinds of products. I know they use them in the airports, but at what point does it become kind of a standard?

G. Patrick Lynch — President and Chief Executive Officer

I think — I think it’s a function of regulation, obviously a lot of the QSRs are price conscious. So widespread adoption is still further out, but in those areas where by law they are required to use compostable products, we are seeing adoption happening.

Timothy Clarkson — Van Clemens — Analyst

What’s — what would be the typical extra expense on a compostable packaging versus conventional packaging?

G. Patrick Lynch — President and Chief Executive Officer

It depends on the type of product, it could be anywhere from let’s say a 10% to 20% premium to maybe 2 times or 3 times.

Timothy Clarkson — Van Clemens — Analyst

Okay, alright. Okay, and then just another question here in — on the oil business, I mean how — how big is that market versus the legacy market?

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

Well, we think that — that the oil and gas market has more potential than everything we’ve done in ZERUST so far.

Timothy Clarkson — Van Clemens — Analyst

Okay. Now when those products, I always tell my customers that for essentially about 1% costs, you can extend the life of these tanks from 10 years to 30 years. Are those kinds of payoffs actually occurring in the field?

G. Patrick Lynch — President and Chief Executive Officer

Yes, we’ve seen the evidence in the — in the installations we’ve done. We’ve proven it to our customers that the solutions work in that manner, yes.

Timothy Clarkson — Van Clemens — Analyst

Right, right. And it’s not just replacing the tank, it’s all the problems with leaking oil and EPA and production problems that are associated with that, if the tank start — start leaking obviously.

G. Patrick Lynch — President and Chief Executive Officer

There’s a huge incentive by the tank farm owners to implement solution like we are offering.

Timothy Clarkson — Van Clemens — Analyst

Right. You guys haven’t talked anything about Brazil. Is there anything new going on in Brazil?

G. Patrick Lynch — President and Chief Executive Officer

Nothing worth mentioning on this call today.

Timothy Clarkson — Van Clemens — Analyst

Okay, all right. Well those are — that’s my questions. Great quarter. Good to see the profitability come back. Thanks.

G. Patrick Lynch — President and Chief Executive Officer

Thanks, Tim.

Operator

Thank you. And our next question coming from the line of Gus Richard with Northland Capital Markets. Your line is open.

Gus Richard — Northland Capital Markets — Analyst

Yes. Thanks for taking my question. I was just wondering if you could add a little color on — you mentioned sort of new customers in Natur-Tec, both North America and India. I was wondering if you could — is that for garment bags in India or compostable for consumer products. Just any color on that pipeline? What’s going on in North America as well?

G. Patrick Lynch — President and Chief Executive Officer

Sure Gus. In North America, we’ve expanded our distribution network. We are starting to see some market-share pickup. So hopefully over the next few quarters we will be able to — that should add to the sales of the finished products that we sell in North America. Our traditional kind of resin sales for food service their demand is consistent, but we expect some additional pickup of sales in Asia. We are seeing some new customers in the garment space in Asia, in South Asia, for example, where we’ve had some good wins. So I think overall, we are starting to see new customers come in, some of the — we’ve got a good pipeline of opportunities and especially as things kind of calm down and the supply chain challenges ebb, we’re seeing some of these customers starting to adopt our solutions.

Gus Richard — Northland Capital Markets — Analyst

Got it. And then sort of a similar question for oil and gas. Just wondering, you got a lot of work in Caspian Sea, you know, you talk about sort of additional orders from existing customers and new customers coming in. Can you give a little bit of color on that — that pipeline as well?

G. Patrick Lynch — President and Chief Executive Officer

We are getting repeat orders from existing customers and bringing in new customers on regular basis. So as we speak, our market continues to grow. [Speech Overlap]

Gus Richard — Northland Capital Markets — Analyst

Okay, got it. And then just switching over to the cost side. Energy prices have been fluctuating. I would expect even the heat waves and whatnot that natural gas prices would increase. You know sort of how are you positioned on cost escalators, how are the commodities impacting sort of the gross margin line currently or is it just a mix issue that’s going to drive upside going-forward?

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

Well, if you kind of, Gus, this is Matt. If you kind of take a look back over the past nine months, obviously before we started this year, we are really high commodity prices for a lot of our base material. Over the past nine months, we have seen that come down to a much more reasonable level, and that’s one of the things that fuel rebound in the gross margin is kind of back to meeting what our — what our typical gross margins were before we saw the spiking of raw material pricing. I would say even right now from a natural gas standpoint and the derivative resin pricing, we’re still seeing relatively low levels. So we’re not seeing this at this point in time or have an expectation that the raw materials or specifically the resins are going to be increasing anytime soon. So right now we’re continuing to see that rebound in gross margin as we see it flow through all of our existing inventory and the pricing that we’re giving to our customers.

Gus Richard — Northland Capital Markets — Analyst

Got it. And in sort of your long term contracts, am I correct in assuming that there is sort of escalators, if there is a spike in raw material?

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

Yeah, I mean there are. And obviously in most situations we’re doing spot pricing. In about 70% of our business, we’re doing spot pricing based on the price of raw material at that time. The other 30%, somebody is just purchasing of our stock inventory, which we can control, but it takes longer for us to adjust that pricing and then have that flow through the inventory we have on hand. A small portion of our total business, our blanket orders for a full-year, for a longer period of time, that tends to be a situation where we potentially could get caught with either negative or positive impacts on margins. So we think we have a much better handle on where we are right now from a pricing standpoint. And I think we are positioning ourselves now to act quicker than we did 12 to 15 months ago, when we saw some of the volatility that we’ve talked about over the past five quarters.

Gus Richard — Northland Capital Markets — Analyst

Got it, got it. And then just flipping over to China, there’s been a lot of commentary in the press about the strength and duration, the recovery. Just any comments on kind of what you have been seeing over the last quarter in terms of the trajectories, is it stabilized, is it improving, is it moving on beyond auto. Any help there?

G. Patrick Lynch — President and Chief Executive Officer

It’s difficult for us to say exactly where it’s heading and what’s going on from a sales standpoint in China. It is existing customers that are ordering — that are ordering less, it is what we’re seeing. So there’s just kind of a general slowdown compared to when I look at like the revenues that we achieved in all of our fiscal 2021 and the first half of our fiscal 2022. We’re simply at lower — lower sales level and not seeing the recovery and the rebound that we expected to see. We did have better sales in Q3 than in Q2, but we’re still $0.5 million to $1 million off on a quarterly basis, where we were through the majority of our fiscal 2021. So what we’re looking to see kind of that — that recovery take place to get back to that level and then ultimately grow — grow the markets in China beyond that. It still is a large — very large potential market for us and obviously it’s a bit of a headwind given that we are basically hovering right at breakeven point on that subsidiary.

Gus Richard — Northland Capital Markets — Analyst

Got it. And then last one from me, you mentioned sort of FX impact on the JVs. You know, is that a dollar-euro impact or — any color on that one? And that’s it from me.

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

The majority of it — there’s two key — there’s two key — or really three key exchange rates that we deal with. Obviously the euro from a JV standpoint, which has been relatively stable between 1.07 and 1.1 for the past few quarters, part of the — part of the secondary impacts would be in India. And that appears to be kind of a consistent increase in the exchange rate, which had some issues from the standpoint of if they’re paying us for resin, if they’re paying us for their receivables, that’s just a little bit of a headwind and it’s going to be a push on overall revenues. Thirdly, and obviously there is chances that they are a little bit more is in China. One of the things that we’ve done in China kind of mitigate some of the exchange — exchange fluctuation was to move the debt that we had at NTIC China from a loan to NTIC in North America to be localized in China. And so our Chinese entity took out a little over $2 million in — right on $2 million in term loans and then repaid that amount to NTIC in North America. That helps little bit with the currency, the currency volatility there, but you still have fluctuation with the — with currency in China, given the sales and given the overall profitability that they have.

Gus Richard — Northland Capital Markets — Analyst

Got it, got it. Very helpful appreciate it. That’s it from me.

G. Patrick Lynch — President and Chief Executive Officer

Great, thanks Gus.

Operator

Thank you. And our next question coming from the line of Richard Hillman [Phonetic], a Private Investor. Your line is open.

Richard Hillman — Investor — Analyst

Yeah, good morning gentlemen. Yeah, I had two questions. First thing was about, I guess the sales cycle in oil and gas, what it was before and what it is now to sign-up a new customer. And basically — and also, how did you get to the inflection point you’re at right now, was there some sort of industry accreditation for those products? Can you just talk about that a little bit please?

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

I think what we’re seeing is — we’ve talked before about some of the difficulties in oil and gas being the volatility and not having kind of a baseline level of sales. And what we’re finally starting to see is more of a consistent amount of ordering coming in. So that we can kind of have a base level of sales. We can kind of count on a quarterly basis. And so if I look back at the past five quarters, it’s been nice growth from the standpoint of if I go back to like Q3 last year, $1.5 million to $1.6 million, to a little over $1.6 million to $1.8 million and now up to $2 million, we’re seeing a nice level of growth. The one thing that you do have with oil and gas, is it is a much longer sales cycle, it takes much longer to become integrated with the customers for them to test out the product, for them to understand the return that it will give them and the benefits that it will have to the overall infrastructure and just historically, the oil and gas market is a slower market to adopt new technology. But what we’re happy with is that the sales that we have now and that we’ve seen over the past — as I said, four, five quarters are coming from a wide number of customers in a lot of different applications, meaning that the opportunity inside of each of those customers are significantly bigger, you’re not talking about selling one tank or selling one casing to a customer and then that customer goes away, you’re talking about selling one or two tanks to a customer when they potentially have 10’s or hundreds of sales opportunities or infrastructure issues. And so that’s one of the reasons why we are excited about the oil and gas space, it’s just because and you get integrated with these customers and you show the potential return, the opportunity is huge multiples compared to a situation where you would just have a one-off sale and then you move on.

Richard Hillman — Investor — Analyst

Okay. And then also I wanted to ask you about R&D across the company. Basically, what do you — do you consider yourself to be a specialty chemical company? And also what are you doing to improve your R&D effort on the divisional level for your companies in your joint ventures and also with universities or outside partners?

Matthew C. Wolsfeld — Chief Financial Officer and Corporate Secretary

Sure. Well, I think what I’ll do is. I mean I can touch a little bit in R&D from a — from the ZERUST standpoint and I’ll let Vineet touch on the R&D aspect from the from the Natur-Tec standpoint. But from ZERUST standpoint, you obviously see what we’re doing. As I just kind of explained in oil and gas, as far as how we’ve transitioned a lot of the work over the past — really the past decade from being research to more development, to be more integrated with — and building sales, we really seen that transition happen. We don’t partner as much from a industrial standpoint with universities, the development that we do is typically in our R&D facility here or in our R&D facility that we have with EXCOR in Germany. Typically, a lot of that development has to do with tweaking existing products, coming up with new formulations to potentially sell or new products to sell to existing customers and potentially new markets. And that’s how we’ve gotten into some of the new markets over the past — look over the past five or 10 years, some of the new markets that we’ve got into have dealt with a lot of new products that were — that we did develop internally and are selling. So the R&D capability from a ZERUST standpoint is much more internally focused and geared towards selling and providing products to the existing markets that we’re currently serving.

Vineet Dalal — Vice President Natur-Tec

Yeah, and from — from a Natur-Tec perspective, we do have a good strong core R&D group here in Minnesota. But we also have R&D labs in India and some R&D going on in China. On the Natur-Tec side, we also partner very heavily with Michigan State University, which is probably one of the leading biomaterials program in the world. And then we do have some arrangements with Clemson University for usage of testing capabilities and some specific advance development capabilities. So we do work with universities also in India to kind of develop specific aspects of new product development that we are engaged in those areas, but in general a lot of that strategic direction in terms of R&D is driven out of the US here.

Richard Hillman — Investor — Analyst

Okay. Okay, then in terms of Natur-Tec, what are other areas are you going into besides just compostable materials?

G. Patrick Lynch — President and Chief Executive Officer

So I mean, the Natur-Tec business is focused more on compostable and biomaterials. So we are looking at bio-based products, we are looking at multi-layered structures for packaging, consumer packaging, food packaging. And then on the longer-term, we are also looking at fibers, especially for textiles.

Richard Hillman — Investor — Analyst

Compostable fibers?

G. Patrick Lynch — President and Chief Executive Officer

Yeah, bio-based compostable fibers.

Richard Hillman — Investor — Analyst

Okay. Okay, thanks very much.

Operator

Thank you. And our next question coming from the line of Gregory Weaver with Invicta Capital management. Your line is open.

Gregory Weaver — Invicta Capital Mnagement — Analyst

Yeah, hi, good morning gentlemen. Thanks for taking my questions here. And glad to have Vineet on the call. I guess I’ll start with Vineet. Has there been any go to market changes for Natur-Tec here over the recent timeframe in terms of some of the traction you’re seeing?

Vineet Dalal — Vice President Natur-Tec

Not — nothing significant. I think we’re just executing to kind of our strategic plan and Just I think getting over the supply-chain challenges of last year was critical because that meant raw material was widely available. We’re also executing better on some of the opportunities that we had in our pipeline.

Gregory Weaver — Invicta Capital Mnagement — Analyst

And how is it going with bulk resin sales?

Vineet Dalal — Vice President Natur-Tec

We don’t sell bulk resin. We sell our compounds, and those are growing very nicely.

Gregory Weaver — Invicta Capital Mnagement — Analyst

Okay, I thought there was some opportunity maybe — it must have taken years back in Europe when they were passing some of those bag laws for what characterized I thought it was bulk resin, I guess I was mistaken. And I guess just, Patrick, I’ve known you since day one here at heading the company and I have never heard you this bold up. So I mean people have pressed you on some of the oil and gas stuff, but I’m super happy to see it and I guess kind of — I’ll try to get little more color again here. Is it just that the phones ringing now as opposed to you out there, beating the pavement as part of your excitement?

G. Patrick Lynch — President and Chief Executive Officer

Yes. I mean we’re getting — the phone is ringing repeatedly from the same sources. We’re also finding new applications and expanding into new market segments, so geographically. So things are really coming on — almost across the board.

Gregory Weaver — Invicta Capital Mnagement — Analyst

And in terms of the base level of sales that Matt was talking about, I mean, that doesn’t really have much Petrobras these days in it. This is just onesie, twosies from a lot of guys. And I don’t know if that big BP job has started to roll in yet or not, but –?

G. Patrick Lynch — President and Chief Executive Officer

We are delivering on the BP job and we are also selling to Petrobras. But we have not been working with Petrobras — we’re still working on Petrobras, they have not buy any of the tank bottom solutions from us yet. But that certainly is a technology that they’re currently looking at.

Gregory Weaver — Invicta Capital Mnagement — Analyst

Okay. All right. Well, super excited to hear the enthusiasm here on oil and gas, because given the margin structure there, it seems like it could do wonders for the overall business. So keep up the good work, and thank you.

G. Patrick Lynch — President and Chief Executive Officer

Appreciate it, thanks.

Operator

Thank you. And I’m showing we have a follow-up question from Gus Richard with Northland Capital. Your line is now open.

Gus Richard — Northland Capital Markets — Analyst

Yes, thanks for taking additional questions. Just based on some of your comments, I’m wondering, are you guys starting to work on recyclable products for tetra packs?

Vineet Dalal — Vice President Natur-Tec

Gus, we’re not working on recycling, but we are looking at compostable versions of those multi-layer structures. There’s an increasing demand from brands for fully compostable versions of those solutions, but there are some specific barrier requirements. So it’s still in development for us.

Gus Richard — Northland Capital Markets — Analyst

Okay. But I’m assuming that given the ability to recycle those products, that there’s an increasing desire to do so.

Vineet Dalal — Vice President Natur-Tec

Yes, absolutely.

Gus Richard — Northland Capital Markets — Analyst

And you’re working on the development of that, and that could be an incremental market for you down the road?

Vineet Dalal — Vice President Natur-Tec

Yes, potentially.

Gus Richard — Northland Capital Markets — Analyst

Got it, got it. Thank you.

Operator

Thank you. And our next question coming from the line of Don Julio [Phonetic]. Your line is open.

Don Julio — — Analyst

Hello, was that me? I’m not sure.

Operator

Don Julio [Phonetic], your line is open.

Don Julio — — Analyst

Just one question. Do you have an inclination to buy out to get 100% ownership in some of your joint ventures? And are there opportunities to do so? Is that a possibility going forward? And is it desirable? I’m not –?

G. Patrick Lynch — President and Chief Executive Officer

As you saw, we bought out India a little bit over a year ago.

Don Julio — — Analyst

Yes.

G. Patrick Lynch — President and Chief Executive Officer

Yeah, I believe we are looking at buying out joint ventures as — if and as they become available and if that’s the right decision to make at that time. So it’s — there’s nothing right now on our radar to do buy anymore. But if an opportunity presents itself and it makes sense to us, we will be looking into acquiring them.

Don Julio — — Analyst

All right. Thank you.

Operator

Thank you. And I see no further questions in the Q&A queue at this time. I will now turn the call back over to Mr. Patrick Lynch for any closing remarks.

G. Patrick Lynch — President and Chief Executive Officer

Just want to thank everybody for their interest in NTIC this morning, and wish you all a good day.

Operator

[Operator Closing Remarks]